Category: Stocks

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Stocks

Year End Reflections

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I don’t have to work these days. Besides reading the Peter Lynch’s book, checking out Crocs and Heelys in the stores, I also had a little time to review how I did with my 401K and taxable stock account. The good news is my 401K is getting a 18% gain, and for the first time in 3 years, I did not lose money in stocks. Of course for 401K one year’s gain does not mean too much, because we are looking at 20 or 30 years down the line. But I think I did one thing right: allocate my 55% contributions to value fund, and 30% to international (value) fund. In year 2006 international fund was a big winner partially due to the weakness of dollar. And from my observation value fund outperformed index fund and growth fund in most cases.  For the year 2007 I will boost the international value fund to 35% for the reasons I mentioned above. This way I am putting 60% in the value funds. The following are the mutual funds in my 401K account.

Fund Name            Fund Symbol  Price as of      Average Annual Return
                                                12/29/2006     1-Year 5-Year

Royce Total Return Serv*   RYTFX 6394  $13.61    13.53%   na 
Vanguard 500 Index Fund  VFINX 0040 $130.59    15.64%   6.07%  
Vanguard Explorer Fund     VEXPX 0024 $74.71      9.70%   8.21%  
Vanguard Windsor II Fun*  VWNFX 0073 $34.75    18.25%   10.12%  
Vanguard Intl Value Fun*   VTRIX 0046 $ 40.34     27.37%   17.21%  

*value fund

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China Stocks

Bubble in some China Stocks

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I am not good at predicting the top or bottom of stocks, so take it for what it worth…

First is the LFC, China Life Insurance, which went from 100 to 140 in a few days mainly due to the “back to China” IPO in Shanghai Stock Exchange. Note GSH and other China blue chip ADRs traded in NYSE also got a ride at the same time.

If you would argue blue chips are “safe”, here is the more speculative ones, FFHL, the little known Fuwei Film Holding from Shandong Province, went from 8.50 to 17 in a week. You could argue the stock was priced a bit low and I saw an article mentioned this. But this quick run-up of stock price reminds me of EFUT, another little known Chinese IT company.

I have neither of the above stocks. But today’s HMIN (home inns) 8% run-up after yesterday’s 6% up made me nervous: I did have positions in HMIN. I still believe this is a very good company but I decided to take some money off the table this morning. Just as you would expected (and this is one of Major’s rules): stock went up after I sold it @ 36.88, it passed 38 today.  

(29Dec06)PS, on second thought, I jumped into conclusion too fast on FFHL. I think it’s a better company than EFUT. Please read the article I mentioned and its S1 for more info.

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Stocks

A Good Personal Finance Blog

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I found out the Sun’s Financial Diary when I was doing Google search on LFC. The author is a China born Engineer currently working in the States. I liked this blog because it has lots of good stuff about personal finance, the author even put up the real number for his income, tax and investment, such as this one and this one, fascinating, although I won’t do it myself.

The most important “take away” I got is “patience” and “planning ahead”.

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China Stocks

LFC Shanghai IPO

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It’s priced at RMB 18.88 per share, and it will go out of gate on Jan 9, 2007 in Shanghai.

Today its US ADR LFC closed at $138.42. Note each ADR represents 40 shares of A share (in Shanghai). Consider today’s USD CNY conversion rate, 1 USD = 7.825 CNY.

138.42*7.825/40 = CNY 27.08

Assume this 138 price holds, from 18.88 to 27.08, it will have 50% jump on Jan 9, 2007. And its PE ratio will be in 90s. I feel this will very much like the New York Mercantile (NMX) recent IPO, i.e., it will jump to the target price as soon as it started trading. Ordinary investors won’t have much chances to make money on this one.

Yahoo finance has an interesting aritcle on LFC (in Chinese).

Categories
China Stocks

New Trend in the China Stock Market

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I did not realized the China Life Insurance (LFC) is going IPO in Shanghai Stock Exchange (A shares) until a few days ago. I did a little research on the web and found out there are quite a few big cap Chinese ADRs are going this route: Guangshen Railway (GSH) and Aluminum China (ACH) are another two. Here is an article I found on the web: besides those US ADRs, we have a few Hongkong listed companies such as Bank of China, China Industrial and Commercial Bank, PingAn Insurance, Air China, DaTang, etc.

So far the best performing stock is LFC; GSH also got a jump in past few days. Should have done research on this earlier: stock market is not like pursuing girl friends, besides being focused one should also be vigilant on new things.

Who is going to be the next one on the “back to China IPO”? I don’t know. But I believe the trend will continue, and one of the safe way to bet on this is investing through ETFs such as FXI. Sun’s Financial Diary has a very good analysis on this.

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Fun Stocks

Heelys Sold Out in Sports Authority?

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I went to the SA store at Brentwood, and I saw they emptied half of the shelf which was originally for Heelys (they put on some Under Armour socks instead). Is that a sign they are sold out? I don’t know. But one thing I do know SA usually have all the available shoes on the shelf, in other words, a customer can try the shoes without asking help from the associates. This is opposite to specialty stores such as Journeys: in Journeys a customer would tell the size he/she wants, and the associates will go back to the warehouse and bring up the shoes. I guess that’s one reason Journeys’ shoes are fully priced.

There are some negative comments on Heelys, both the shoes and the stock. Barron had this article on the weekend paper. It mentioned two things: Heelys is not only faddish but aimed at a notoriously fickle customer (kids); there is also product-liability risk (kids got hurt when skating on Heelys). While these are both legitimate concerns, here is a parent’s comment I saw from fatwallet “Kids crack their heads riding bikes, skateboards, and scooters. Kids crack their heads on the playground. Heelys get your kids to turn off the TV and be active and there are health benefits to that.”

While the stock could take a hit from the Barron article, I believe ultimately it’s the sales and profit number that will matter. Interestingly, when I was about to leave the SA store, I saw a guy bought not one, but two Heelys shoes for his kids. Maybe they are really sold out?

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Stocks

Heelys IPO Start Tomorrow Dec 8

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Obviously there is already a lot of excitement on this one, partly because of the success of similar plays such as UARM and CROX; partly because of Jim Cramer’s pump last night Dec 6, Jim did make a mistake saying it’s going out today (Dec 7), which is not true. It is going to be priced today and started trading tomorrow Dec 8, see this article from MarketWatch for more details.

(Update) Actually the HYLS was priced above the 16 to 18 range and went to 21, according to Reuters. Considering the 2006 earning of 1.00 (it already made 0.70 in first 9 months in 2006), and a PE ratio of 30 (which is reasonable), the stock could start at 30. This means a 50% jump from the IPO price. While this is not a record (compared to more than 100% jump of NMX), it will still be very nice. We can already see the action from today’s CSWC (it owns 35% of Heelys) stock, it went up 15%. 

Once again the bubble is building…stay tuned.

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Fun Stocks

Heelys is going IPO

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Heelys is the shoe can be used both for walk and skate, using the retractable wheel under the heel. It is most widely worn by kids and teenagers aged from 6 to 14, and from what I see from Zappos (the online shoe store), kids and parents are crazy about this.

Now the company is filing for IPO, here is the SEC S1 filing. I expect this to be a hot one because of recent success of footwear maker Crocs (CROX) and atheletic apparel maker UnderArmor (UARM). They both gained 100% after their recent IPO. This is partly due to the fashion craving and generous spending of American consumers: from iPod to Crocs, it’s not just the functionality, the fashion is more (if not less) important. 

While the proposed IPO stock to be priced between $16 and $18, I think it could open at $22 to $25. The proposed ticker symbol is HLYS on Nasdaq, it is set to debut on Friday Dec 8. If I make some profit on this one, maybe I can buy myself a pair of Heelys? I like skating (roller blading). Be aware skating is a dangerous sports, so wear your protective gears especially the helmet.      

Heelys shoes

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China Stocks

Checked in Home Inns Again

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I mean the stock (HMIN), not the motel because I am in the US now. I know it was a little speculative, but I think it’s ok to put 20% of my “mad money” into this even after the amazing run from $22 to as high as $34. I think there are many reasons account for this.

1) It has more than 100% year to year revenue growth; it’s opening new hotels like crazy. Initially I was a bit concerned with this kind of growth in China and I talked to a friend in 2nd tier city in China. My worry is the affordbility of RMB 180 room rate in 2nd tier or inland cities because the wages in coast cities are much higher than inland cities. It seems not a big problem. On the other hand, I think they (Rujia) got better rate for real estate and labor in those cities; in other words, I believe they can maintain the profit margin.

2) The analogy of China/US top chain hotel market share: top 10 US hotel chains have 60% US market share; currently top 10 China hotel chains have 6% of the China market share. This got many people excited about its potential growth. I noticed from Yahoo Finance that there are two articles on WSJ on this lately (although I have not read it). I heard about the following rule to spot the top of a stock: when a company (and its founders/CEO) is mentioned in all these business magzines, it may be at peak. But I think Home Inns is not there yet. Hotel is pretty boring concept in the US. Wall Street analysts just started to get excited on this.

3) From consumer point of view, I think it’s attracting people who used to stay at 3-star hotels (high end) and Zhao Dai Shuo (low end). 3-star hotels in China used to cost RMB400, but with promotion now you can get it for little more than 200. The Zhao Dai Shuo cost less than 150, but they don’t get private bathroom, free Internet…I think Home Inns got a lot business travellers from both of them.

In summary, I know I made a mistake by selling it too early, but it’s not too late to buy HMIN at its current price (32.50 to 33). Yes, from traditional valuation point of view, it’s insane to buy a stock with PE of 160 . But remember at one point, was Google a stock like that? The most important is, they need to deliver the growth as expected.

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Stocks

A Closer Look at Oralce of Omaha

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If you read my blog for a while, you know I am a fan of Warren Buffett. Not just because he is the second richest man in the world; it has more to do with his investment philosophy and the way he lives his life. Last night CNBC’s had an one hour show in which the reporter spend one day with Warren and I liked it very much; and I gurantee it’s much more insightful than Jim Cramer’s Mad Money show. One of the question people usually ask is “why does not Warren live in New York, the financial center of the world; and instead live in Omaha, a small boring city in Mid-west”. I know the answer because I heard it from my friend before. But Warren’s answer still left deep impression on me. He said “if I stayed in New York, I would get 100 good ideas (and get distracted). While in Omaha I can focus on one great idea”.

I think this “focus” thing is very important, be it in stock market, business, career or personal life. While I talked a lot about the mistakes I made in stock market in my “Stock Lessons” series, I think “lose the focus” is the main reason.

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