Discussions

There are times in any investor's trades, sells & purchases for a valuations assessment. A marked pause to survey the landscape, sharpen the saw and box the compass. There are so many opportunities on the market these days - good companies and reasonable valuations. Making the right decisions at such times means making no movements, but taking account of one's portfolio - it's balance, make up, sectors and markets.

Without waxing too philosophical or poetic, learning to ask questions helps build discipline. Instead or asking which stock to buy now? An exercise we'll refer to as "The Mirror Test" is to ask, Who's going to be successful in the next 18 months. Often we look for key holdings to go 3 years or longer but valuations can dynamically change in a company over the course of 18 months. The markets are moving faster theses days, but to take advantage of large market trends it is better to see the landscape from the looking glass than the microscope. Save the science for balance sheet forensics!

From a valuation stand point a better question for one to ask is, What is the (known) worst that could happen to this stock? (insert company here) Then, What effect to this portfolio will that produce?

No one can "know the unknown" market psychics and ball gazers are the antics of charlatans and the undisciplined. Successful market investments that produce stable long term gains requires the discipline to think, evaluate and calculate risk and valuations using known quantiles available at the time.

Regards.

Ps. This clip for your amusement is to remind you to laugh, think outside the box and see the "bigger picture". Enjoy!

Taking Off the Trade

Friday we stopped out of (LDK) remaining unemotional regarding our trades becomes difficult at times and is the reason we use stops and stick to our fundamentals. Preservation of capital becomes of greater importance than risk vs. reward in a particular trade or stock. Though long term we perceive (LDK) to be of interest and value we will "sit this one out". As market risk and fundamentals removed us from the trade, we can not see chasing or reentering a position that is now give heavenly over to emotional market sentiment, reporting delays beyond our expected time frame and high valuations coupled with instability (short term) in the Chinese market sector.

We will continue to monitor the new coming forth on (LDK) and wish them well in their future business endeavors.

Wild Bill Alpert

This is what the fuss is all about?............ could have doubts that he believes his own story, you decide. Note (LDK) up again on volume. Reports suggest that third party accounting could be released before close of business Friday.

Ahead of the Bell

After scouring the web, for news & information to bring to readers and counter some of the "Yellow Crayon" journalism of the recent Barron's article here is some additional perspective(s), facts and clarity from Greentech. As well you can check in on some discussions here at The Lion.

Here is another financial blogger's take on the issue facing LDK as well. Also, this perspective is added as well to give investors a rational approach to consider before making their own investing choices. Happy Trading!


Note: Please take the time to register your vote here at the site to give us and the community your perspective on the potential out come of the LDK Inventory Call. The voting poll is to your bottom right of the blog roll. Thanks.

LDK Solar

Black Clouds over a Chinese maker of solar cells that has seen its stock tumble on reports of an inventory discrepancy, could provide momentous profitable gains in the coming days with audited disclosure of accurate inventory.

The recent bad news for (LDK) has seen it's share price halved due to market uncertainty over recent allegations that the company has overstated silicone reserves. With a recent article from Barron's the stocks share price dropped 25% today alone.

Depending on which news source you read or believe, Charley Situ, former financial controller at LDK sent a parting email to auditors, the SEC and various investment advisers. AP sources state that Mr. Situ was fired in late September, and at the early outset this looks to be a case of "Sour Grapes". Other sources state that Mr. Situ left the company, leaving investors to believe he departed on the "Moral High Ground" on ethical considerations. Whom (or what) to believe?

Key Catalyst:

LDK responded that management's own inventory count found no grounds for the allegations. The company also said an independent auditing firm is working on a separate count, although Lai declined to name that firm. LDK's regular external auditor is KPMG.

KPMG is a conservative, well managed & reputable firm. A report from them would be a "Blue Seal" of approval to the street and analyst that the allegations were misplaced and unwarranted. Such a report would send share of LDK back to trading at record highs in a very short time frame.

A negative report or a change in auditing firms would be seen as a potential and warranted lack of full disclosure and would likely cause share price in the near term to be halved again.

"IF YOU UNDERSTOOD a business perfectly and the future of the business, you would need very little in the way of a margin of safety," ~ Warren Buffett at Berkshire Hathaway's annual meeting in 1997.

In the 12 to 18 month time frame even a negtive report such as this would be priced in to shares providing a measured growth going forward. A strong, clear and comprehensive report would provide a strong catalyst for increase share price valuation.

We have taken a strong position that recent reports of fiduciary malfeasance is misguided and will provide a position of value for our portfolio.

(WX) Wuxi Pharmatech Cayman Inc

Founded in December 2000 and based in Shanghai, WuXi (pronounced Woo-See) PharmaTech is the leading China-based pharmaceutical and biotechnology R&D outsourcing company. WuXi PharmaTech offers global pharmaceutical and biotechnology companies a broad and integrated portfolio of laboratory and manufacturing services ranging from discovery chemistry to biological services and manufacturing of APIs for R&D use.

WuXi PharmaTech assists its global partners in shortening the cycle and lowering the cost of drug discovery and development by providing cost-effective and efficient outsourcing solutions. The management team consists of Western-trained Ph.D.s and MBAs with experience in drug R&D methodologies and Western-style business practices. Collectively, senior management has more than 100 patents pending or granted, published more than 500 publications and has an average of 10 years of experience working in major international pharmaceutical and biotechnology companies.

With over 1,300 scientific staff members, a 630,000 sq. ft. Shanghai Waigaoqiao Free Trade Zone research facility, a 220,000 sq. ft. cGMP-quality manufacturing plant in Jinshan District, Shanghai, and a new 130,000 sq. ft. Tianjin research facility, WuXi PharmaTech is well-positioned to offer its customers high quality services along the drug discovery value chain. In 2006, WuXi PharmaTech's customers included 9 of the top 10 pharmaceutical companies in the world, as measured by 2006 total revenues.

That's the blurb. Listing on the NYSE August 9th 2007 this company is the latest entry in to the round of "Stocks Gone Wild" emanating from China. Our position in this company is "as listed" a short term trading play, and as the stock advances we will be using a 20% trailing stop to minimize our risk and remove emotion. This gives us the greatest potential for upside movement while minimizing our short term risks and preserving capital assets. With the latest run up in investments in the far east, a declining dollar at home and the crunch of a slowing economy we see natural money flows heading toward these types of speculative risks based investments.

With recent news stories such as Piper Jaffray comments on LDK Solar (LDK) the concerns of valuation and accounting standards in the course of the next 6-8 months will grow exponentially as we reached the touted date of 8-8-8. What appears to be lining up as a classic value trap for date setting on investments. the smart money will be exiting possibly 3 to 4 months early. We do not plan on being invested then either, as the safe money will take profits and seek investments in safer harbors.

Declines in this type of investment of newly funded, foreign market momentum trades are likely to loose value. As a responsible individual and not an investment adviser I would leave you with this word of

CAUTION: Investments in this type of stock can be hazardous to your wealth. We recommend consulting a certified or professional investment adviser before executing trades or considering a position in any form of financial instrument. There is no substitute for through research and analysis. As your mother may have told you "Do Your homework" life is a continuous learning lesson.