Wednesday, March 17, 2010

A Long Buy for Core Holdings

In the spirit of the ever-increasing optimism towards China, I'm picking up a decent chunk of shares in a small cellular phone producer trading on the Amex.  It's trading at extremely low multiples to earnings and sales, as well as its price to book ratio.

Here's the breakdown on the valuations:

  • P/E is 1.40
  • PEG is 0.35
  • Price to NAV Ratio is 0.29
  • Price to Sales is 0.17
  • Debt to Equity is 0.18
This is a low-debt, nimble little company who have produced some award winning cell phones that have been quite popular in Asia.  They are working on expanding their smart-phone line to include low, medium, and high end units which should open up their market base.

Furthermore, the chart is showing a continual weakening during longer periods of selling and what could be a reversal in price.  This is a core holding so most like a 6 month + holding, and could also offer buyout potential if any of their designs hit it big in the coming year or so.

Take a look at the chart:

I'll probably be pulling the trigger on this one tomorrow or Friday, and will post the entry price once the trade has been executed.  The price may take a dip a few percent lower, compared to recent similar price action, so I'll be looking to get in on a down-day.

Chinese stocks might see another blow-off similar to 2008, although the fundamentals down there are getting pretty shaky (despite what many claim, even though the Chinese government is using cash and not debt to finance its stimulus, it is still over 400% greater relative to GDP than the spendthrift US Government, and it is all on the capacity side and certainly not market driven.) - positive psychology can extend out to amazing lengths and we could see the Chinese exchanges making new highs.

Have a great night.


Trigger pulled today @ .52 for a small holding of 5,000 shares.

Step set just below recent support at $0.42


Banco Santander has broken to the downside after three attempts at pushing through the $14.31 mark, forming a triple top.  Support at $13.90 was just violated and the stock is picking up the pace to the downside.  We should see an accelerated drop over the next several weeks taking the stock to new lows.  We still have 50% of our original trade open from the $17.20 entry (the other was clocked out at $12.50 which was our originally cited first target (12.20 - 12.60).


  1. don't let this guy snooker you again - check out the SEC 10-Q on this company for yourself - it's a dog with dropping revenue and accounts receivable that - ahem - aren't being received

  2. Derek,

    I had high respect for your analysis and I'm a regular visitor of your blog (potentially interested in subscribing). However this here has the potential to destory your track record and reputation once and forever. You pick a penny stock company, which latest financials published on their website are those from 2006 (!!). Either - what I hope - you have some kind of insider information, or you're smoking something really dangerous. Even if this stock doubles for whatever reason, this post lowers your profile and as a consequence the potential economic success of your future subscriber website tremendously. If you're serious about your website, I recommend you to take this post off as soon as possible.


  3. Individual stock picking is very risky. You want to pick a basket of stocks to keep your reputation in tack. If you've got one major call on the crash turn against you, don't overcompensate by grasping at more risk. Play the probabilities.

    Derek wrote:
    "Chinese government is using cash and not debt to finance its stimulus, it is still over 400% greater relative to GDP than the spendthrift US Government"

    But their capacity for compounded growth is much more than 400% higher than the USA, because the USA is in negative real growth.

    No doubt that China is building excess capacity that can not be absorbed by the world, nor probably domestically. But the implosion of this can come much later. The key is inflation, which is already skyhigh on big city housing, but not yet apparently on food. Again watch the yield curves (interest rates) world wide to see when the mis-allocation is real the moment-of-truth, which is when real interest rates turn positive. Real interests can also turn positive if there is a near total shutdown of the banking system, as then even 0% is positive interest rate. but that will be a very short-term event, followed either by reflation or chaos if reflation can't be achieved. Either case is bullish for gold after any turbulence. And I really don't think the world can chart any course that does not involve continual reflations that ultimately end in chaos failed fiat/banking system. Maybe only a technology revolution (nanotechnology?) could alter this outcome.

    Refer to my prior post:


  4. these orsus guys have a total of $32,000 yes that is thirty-two thousand US dollars cash in their account, after claiming to have sold 1.5 million phones. something is really rotten here.

  5. Interesting,

    I wonder if "Derek" is no longer the old "Derek". Where did the original "Derek" goto?


    PS: To busy designing the new subscriber service???

  6. A wakeup call for you readers about what is coming:

  7. You guys don't get it. This is a trade based on technicals and Derek is risking 20% (i.e. stop-loss) for potential 200%+ (i.e. NAV) return. Obviously the penny stock share status already reflects the cash flow constrained state of the company and the associated risks of being a small player among giants in the mobile phone market.

    But from a trading perspective it could become a fantastic trade with regards to risk:reward and favourable technicals.

  8. Yeah but my point was that such homerun trades are very noisy, and thus you can possibly lose 20% a few times before you hit 200%. So you need a basket of them to prevent your performance from (temporarily) looking potentially horrible.


  9. Absolutely right, this could potentially make +200% or -100% (or -20% if you want...however your stop-loss will not work if the company goes bust).

    However if this is going to be a penny stock blog going forward, I'm gone.


  10. Just sit back and reflect on how many are holding these shares just hoping for the opportunity to get out.

    (They got in at the climb high and when volumes were much higher, How do you think they are feeling?))

    If it really started to move up a little it would bring out those 'hopefuls' trying to recoup those losses.

    How many could you buy at these prices to make it worth your while to take the risk, and with such low volumes to find buyers if you have, or want, to get out.

    There are more, though for the astute, they should be enough.

    But you may think 'nothing ventured. nothing gained'. Then BON CHANCE!

    Those current holders will love you, and welocme you.

  11. Through thick and thin, through good times and bad, through the rough and the smooth - so history has told,

    There's always a ready buyer for that ' barbaric relic' called GOLD!

    Enjoy your weekend. It's a;ways later than we think

  12. I used to take an interest in Steve Kaplan's website 'The True Contrarian'.

    He used to update reguarly, at least once a week

    His last update was January 24th.

    That should tell you something.

    Like, it's hard trying to be a contrarian when everyone else is trying to be one.

    Or, TIMING is everything.

    When it's 'picnic time for little teddy bears' you have just got to get rid of those pesky 'critturs'. They mess things up so you can't see the wood for the trees.

    You have to wait till they burn themselve out, throw in the towel, and go home to bed.

    Then you can have YOUR party.