China

Changyou.com (CYOU) – A value buy with potential near term earning catalyst

taovalue China, Investing, Technology , , , , , , , , , ,

So here is how I came across this name. As I mentioned in my old post “A Part Time Investor’s Investment Process”, I didn’t have a systematic way of sourcing idea, thus usually leaving the portfolio under-invested. More recently, I started playing around with some quantitative funds’ strategy selection criteria, and found LSV’s fit my style pretty well. It goes by two parts: 1) identify value opportunities, by looking at some traditional ratios including EPS, current P/B, current P/CF and current P/S, if any of the ratios is lower than industry median, keep them for step 2; and 2) eliminate “value traps” by examining the recent momentum (e.g. Relative Price Strength over past 26 weeks >=0 & Relative Price Strength over past 13 week is larger than that of past 26 weeks. What is does is basically to look for cheap stocks in a turnaround story, the idea being if the market recently recognize a name, it usually is not a value trap. For further information about LSV, you could visit http://lsvasset.com/research/ for further research done by them.

CYOU came out from these filters and happened to be a Chinese ADR, which I thought I may be able to gain some informational edge by researching in its local language. First, still need to give credits to following posts provided me some directions. By the way, their timings are much better as the stock price already went up 40% from the price level they posted their ideas. However, without the recent price surge, it possibly won’t go through the step 2 of momentum checking, meaning I wouldn’t be able to see it until the name started to rebound anyway.

https://www.valueinvestorsclub.com/idea/CHANGYOU.COM_LTD/137906

http://seekingalpha.com/article/3962034-changyou-extremely-undervalued-possible-privatization-candidate

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What do you need to know about Internet Finance in China

taovalue Business, China, Internet Finance , , , , , , ,

You’ve heard “Internet Finance” is booming in China, but what exactly is it? It all began from the inception of Alibaba’s Yu’E Bao (literally means balance treasure) in 2013. Metaphorically speaking, it’s like your Paypal account balance which is as liquid as your checking account, but EBay is paying you 5% interest yearly. Wait, what?! I know what you are thinking, no, I did NOT miss a decimal point. Since I was away from the country for years, I haven’t really paid close attention to this business model until recently.

It was about two months ago, one family friend from China asked me about investing in real estate in US. A REIT name – Inland Real Estate Corporation [NYSE: IRC] looked very attractive to me then and I recommended it to him (see my older post here). The company then hit the 52 week low at around $8 with yield of 6~% and FFO multiple of 8, and seems to be oversold compared to its still solid property portfolio and operation. As we are speaking now, it was announced to be bought private by DRA Advisor in a $2.3 million deal, paying $10.6 per share. However, my friend decided to pass on this would-be 20+% in two months opportunity because he wasn’t interested in investing in a non-principal-guaranteed asset for 6% yield. “I’d better off put my money in my XX Bao, which gives me up to 10%.” he said. Well, that is very impressive, especially they “guarantee” principal, so basically making it a “risk free” investment. I then asked two question: who are they, and what type of asset they have to invest in to give you that return? “I don’t know, why do I care when they guarantee my principal?” replied my friend.

After some research, I think I find some clue.

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REITs （房地产投资信托）简介

taovalue China, Investing, REITs , ,

This is an article I wrote in Chinese for introducing REITs investing to retail investors. I had a friend of a family member asking about income assets. I provided this as an educational piece and recommended IRC who yields 6~% and has 8~ FFO multiple currently.

If you can read Chinese, keep reading.

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Deadly Loans: Why China’s ‘Shadow’ Capital Market Persists

taovalue Business, China

[From TeaLeafNation]

Zeng Chengjie, a Chinese businessman from Hunan province sentenced to death for charges of illegal fundraising, was recently executed without authorities notifying his family, a lapse which sparked considerable backlash among Chinese Internet users. Zeng was not the first entrepreneur to receive a death sentence for financial crimes: Wu Ying, a businesswoman from Zhejiang province, was sentenced to death for defrauding investors of over 300 million RMB (about US$49 million) just several years ago. Unlike Zeng, her sentence was commuted to ‘death with a two-year reprieve,’ which in China’s judicial system is usually then commuted to a life sentence after two years. Yet both cases show that harsh sentences often await those convicted of economic crimes in China, without regard to the flaws in the system that have led to their actions in the first place.

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