Margin of Safety

Blue Gold

2007-12-11T06:22:00.000-08:00

There have been many touts in the past 7 years regarding what's known as "Blue Gold". With out the mystery the 'liquid' investment is - water. There are several types of investments for this market sector ranging from utilities, water filtration, pumps & valves to infrastructure build outs.

A company that has recently entered the market sector of water purification & filtration for on site solutions is Basin Water. (BWTR)Originally subscribed at it's IPO to range between $8-$10 per share it oversubscribed an went out at the $18 range - from there it 'plunged' and after bouncing around the $6-$7 range it began again to trade up. After a market rise to above $13 per share negative earnings took this high flier down a second time.

Heres the company blurb:

"Basin Water, Inc. engages in the design, building, and implementation of systems for the treatment of contaminated groundwater. The company offers ion-exchange treatment system that reduces groundwater contaminant levels. Its system is installed at the site of the well to treat varying volumes of water. The company serves utilities, municipalities, special districts, real estate developers, and other organizations that supply water for use in treating groundwater sources"

At a 160 Million market Cap this new beginner seems to be positioning its self for some potentially big gains. Look for buying opportunities under $8. Regards.

Trying A New Investment Platform

2007-11-27T08:06:00.000-08:00

Here is something to consider and a referral request by the Blog Author. If you've thought about joining or enjoy trying new trading platform consider joining ZECCO Trading. An option for $0 dollar trades with an account balance of $2500.00. For smaller accounts trading costs are at $4.50 per trade.

Note: By clicking on the above referral and opening an account you help defer the cost of maintaining the expense of operations for this web log at no cost to you the reader. Thank you in advance for joining!

Regards.

Discussions

2007-10-14T20:24:00.000-07:00

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

2007-10-12T18:19:00.000-07:00

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

2007-10-10T20:41:00.000-07:00

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

2007-10-09T04:11:00.000-07:00

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

2007-10-08T12:52:00.000-07:00

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

2007-10-03T16:32:00.000-07:00

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.

E-House News Update

2007-09-29T22:07:00.000-07:00

An interesting ancillary article from a reader was forwarded to us this weekend. Although we don't make investment decisions based upon outside firms opinions, research or news letters, it is interesting none the less to see what others are thinking regarding our investments.

There are many positive informational points and analysis throughout this article. One in particular is this tidbit here:

“Chinese laws require that homebuyers put up a 20% to 30% down payment, but a whopping 83% of all homes in China were purchase with all cash. That may sound impossible, but not in a country that has a 20%-plus savings rate."

That in our books is what Margin of Safety investors like to read about and what helps provide a cushion is a cautious market. As a Chinese investor might say, it's like backing a real "Black Horse" (Beating Expectations) Have a good weekend.

R&R

2007-09-29T17:15:00.000-07:00

Some weekend R&R: Reading & Research turns up this interesting commentary on a rather 'boring' company - Nordson. (NDSN) As a general rule of thumb, we like boring companies. Strong earners that don't need front page headlines to move share price or "add" share value.

Article Quotes:

"Chances are also good that you've never heard of this company, which is based in America's heartland and traces its roots to the automotive industry at the beginning of the 20th century.

Nordson, with annual sales of nearly $1 billion, makes precision dispensing systems for applying adhesives, coatings and sealants in a wide range of industries. It also makes testing and inspection equipment for electronic components and adhesive systems and other products for the life-sciences industry."

Also noted in the article, it holds leading market shares in its main businesses, and with 70% of its revenues coming from overseas, it is well-cushioned from economic deceleration in the U.S. The weak dollar is an added boon. Comforting words to a worried investor in jittery or uncertain markets.

Share price is down on news of a recent acquisition, some analyst thinking they paid a bit too much. Researching relevant data says no. We would look for the stock to retrace some of it's recent lows. A share bellow $48.00 right now looks attractive. Given a market downturn or substantial weakness, we would look to buy in on a broad market sell off.

Here is a brief blurb on the company:

Nordson Corporation produces precision dispensing equipment that applies adhesives, sealants and coatings to a range of consumer and industrial products during manufacturing operations. The Company also produces technology-based systems for curing and surface treatment processes, as well as life sciences applications. Its products are used around the world in the appliance, automotive, bookbinding, container, converting, electronics, food and beverage, furniture, life sciences, medical, metal finishing, nonwovens, packaging, semiconductor and other industries. Nordson markets its products in the United States and 57 other countries. It operates in three business segments: adhesive dispensing systems, advanced technology systems, and finishing and coating systems. In October 2006, the Company sold its Fiber Systems Group to Saurer Ltd.'s business unit, Neumag. In May 2007, it acquired YESTech Inc. and PICO Dosiertechnik. In August 2007, the Company acquired TAH Industries.

Article Source: Barron's Online

E-House

2007-09-26T17:14:00.000-07:00

Helping Chinese people live better. ~Mr. Xin Zhou, Chairman, Chief Executive Officer, E-House (China) Holdings Limited

That's the message. The promotion could be anything from "fast growing"new IPO, Chinese Bull in the right market with all eyes on China.

Here's where my focus differs:
(From the Web Site)

CFO Mr. Li-Lan Cheng has served as our chief financial officer since November 2006. Prior to joining us, Mr. Cheng served from 2005 to 2006 as the chief financial officer of SouFun Holdings Limited, China’s leading real estate Internet company. He was a partner at China Real Estate Investment and Management Co., Ltd. from 2004 to 2005. From 2002 to 2004, Mr. Cheng served as an executive director and the chief financial officer of SOHO China Limited, a real estate developer in Beijing. Mr. Cheng was an assistant director and the head of Asian transportation sector investment banking group of ABN AMRO Asia from 1997-2002. Mr. Cheng received a bachelor’s degree in Economics from Swarthmore College and a Ph.D. degree in Economics from the Massachusetts Institute of Technology. Mr. Cheng is a chartered financial analyst.

Looking at the line up of management, the market sector they serve and the growth services of real estate holdings in China this is an easy valuation. A conservative estimate says this company will out preform in the 2008 first quarters.

Midterm, later half of 2008 we are looking for a pull back in Chinese investments across the broad market. Long term the growth story in Asia remains intact. Numbers matter and as a American adage once promoted "Location, Location, Location......". This is a real estate operation in the right location, with the right management team in place. A "Margin of Safety" in a somewhat overvalued Chinese Market.

The amount of recommendations for Chinese investments on this web site is expected to be few. Although subject to change, the valuations for the Chinese Market, it's recent (2 year) bull run and relative valuations make recommending relatively safe investments extremely difficult at this time.

Please note, all investments, conservative, "risky", small cap/large cap, liquid or thinly traded all carry a measure of risk and can lose value over time. Make investment decisions wisely and after considering all your options. As one friend once put it, "Responsible investments don't happen on the golf course." Do your own due diligence before considering any recommendations, suggestions, opinions or ideas and take ownership for your actions. This is the first step in responsible investing and long term will lead you to successful investing.

OUR BUY: Under $23.00
OUR SELL: $31.50 or better

Liquidation of position if it drops bellow $18

Regards & happy Trading!

Ivanhoe Energy (IVAN)

2007-09-19T09:43:00.000-07:00

Something that we have been considering is an investment in Ivanhoe Energy. The recent down cycle in the stock coupled with the (non) reaction of the market after the Fed cut makes this as attractive opportunity for a price bottom.

Our attractive price buy in is under $2 a share to sell if it drops below $1.25. The going forward catalyst for this company is in it's recent shift from development & testing to production & implementation of build out projects.

The story here is short. They take a lower worth asset of heavy crude to a higher grade value of light crude at a higher market pricing. The return value of offset components is compelling because it attributes to cost of operation. The production facilities are scalable, and the focus up north should prove to be a profitable commercialization aspect. Long term the shark has jumped on this stock and it's technology.

The partner process and banking investment should prove out in the next 30 days. We will monitor the developments going forward, and update the process.

Keeping with our focus & thesis, this stock is undervalued and meets the criteria set forward in our original statement of undervalued assets.

Regards.

As We Start

2007-09-16T08:16:00.000-07:00

Only three types of investments exist -

1. Under priced,
2. Fairly priced, and
3. Overpriced.

This is the concept of this site. Make sure your investment starts at one or two. How you do that and considerations for gaining value is this sites purpose. We look long term, with short term trades to work our capital along. Place your money on value, it pays off.