stlplaceI think for small investors like me, one common mistake is “diversify”. Wait, isn’t “diversify” the first lesson we are taught to reduce risk? Yes, but as Peter Lynch said, “diversify” could mean “diworsify” too.
For example, I have 6 stocks in my portfolio now: CROX, HMIN, MR, GSIT, NINE and SBUX. Some are winners (CROX), some are losers (NINE). Had I hold all in CROX, my return would be much better. Of course you would say I had more risk too.
I mean the stocks (SBUX), not the latte. I believe the “so-so” same store sales number for the Q1 is the main reason for the recent drop. The stock is still not cheap by looking at PE (37), with projected rev/earning growth at about 20%. But this is Starbucks, normally they don’t go on sale. Near term, I believe SBUX is very much relying on the developed countries (a.k.a, US) for most of its revenue. For instance, in last 6 months I saw they opening up some new stores (some with drive through) in St. Louis and other midwest cities.
I watched an interview on China-CBN last night, the guest is a guy from McKinsey, and he is familar with the consumer trend in China. Some interesting points I took down here:
1) China is the No 4. in the world in terms of GDP; I believe China is No. 1 or 2 receipent of foreign investments. But China is about the size of Italy (No. 8 economy in the world?) in terms of consumer spending.
2) The consuming is speeding up as goverment realized this is good for the economy, as the health care and social insurance system undergoing reform, as the young generation and emering middle class realize “life is more than work and saving”, etc. He mentioned 2015 maybe a turning point.
3) Many foreign companies tend to under-estimate or over-estimate the market potential of China from time to time.
The bubble is continuing to build up. This afternoon I received a call from people try to selling me stocks “We are an investment company. Have you heard about the stocks lately?” Anyone who has not heard stocks must live in the vaccum or Tibet. Stocks are talked in every gathering. I heard people become restless during the 7 days break because the market was closed. The No. 1 the question is: when will the market correct?
I sold all the remaining HLYS shares on Monday May 7 (before the Q1 earning announcement). While I enjoyed my Heelys shoes, the stock (HLYS) did not turn out to be as good as I expected. The main reason is I jumped too early (I bought it in on its IPO debut at 35 and 32). By doing this I have more downside than upside. The stock will under pressure short term because of its so-so guidance and the secondary offering.
Long term, I think Crocs (CROX) will be better investment than Heelys (HLYS). I saw more and more Crocs in Shanghai stores. While the sales in China is not significant at this time, as I said before, Crocs has wider appeal than Heelys and Under Armor (UA). Like Starbucks, eventually China market will grow and have meaningful impact to the company.
I visited Lan’xi, a small city in western part of Zhejiang Province during the holiday. Lan’xi is famous for “Zhu Ge Cun”, cement plants, Lan Jiang, and a lot agricultural produce. In the old days Lan’xi proudly claimed it as “little Shanghai”, but these days it’s lagging behind neigbouring counties Yi Wu and Pu Jiang on the economy development. It reminds me of Cai Qiao, my maternal grand parents’ hometown, and it was “little Ningbo” when I was little.
Anyway, I saw both the urban and rural sides of the Lan’xi, here are some pictures:
I was on the train from Shanghai to Lan’xi today. The train station was crowded, reminding me of my college days: at one time I was so afraid of stuck in the train during winter break, I told my mom I would stay in the campus.
I saw lots of leisure travellers on the train, some are “stand room only”. Hangzhou and Jinghua are two popular places for leisure travellers. I talked to a family from Tianjin: they took the train to Jinghua. They regret not taking the plane now because the train is so crowded. The difference between air ticket and train ticket is about 1000 Yuan. I heard the airlines lowered some tickets this time due to the launch of the “bullet train” on April 18.
It’s the so called “golden week” here, it’s also my first time spending the golden week in China (we did not have this kind of long holidays back in middle 1990s). I will spend some time with my family and friends. No more stocks. No more computers (if I can accomplish that), and I can not promise I will write blogs in next week (May 1 to 7).
Happy holidays !!!
This is a too big question. But I have thought this thing for quite a while, and want to share my thoughts. A few weeks ago I was watching the “Boss Town” program at China-CBN, the host posed this exact question to the founder of Qiao Xing (Nasdaq: XING), Mr. Wu Ruiling: why do you go to Nasdaq considering the overhead of compliance (Sarbane-Oxly etc.)?
Fair question. Mr. Wu shared one reason: when a company grows to a certain stage, it’s better to have more than one boss (owner): other minority owners can contribute to the development of the company.
I think besides “better corporate governance/management”, there are at least two reasons: 1) To raise the money (capital), 2) To raise the company profile. These two reasons fit well with the recent Chinese IPOs in last Fall: New Oriental (EDU), Home Inns (HMIN), and Mindray (MR). Let’s explain one by one.
