Updates

Time to update some of my positions, first up Gold!

Gold

May 17, 2010 I posted the expectation of gold reaching $1300 for 2010 and it has blasted through that mark recently. If you have been in gold long enough to catch a double it is time to take some profits at these levels. Diversification is the key to long term investing so if you had 10-20% of your portfolio in gold as I have,it will have swollen to 20-40%!! Always re balance as portions of your portfolio need it. The cash raised from profit taking in gold can be used for equities if our stock market makes it's way back down to the bottom of the range it has been trading in the past year or so. Personally I am selling a little at this level to raise cash levels.

American Dairy (ADY)

If you took my August 18, 2010 research and opinion to "double down" on ADY at the $7 level then the 40% run up the stock has had the past month and a half was good for us both. I do still have ITM options $10 and $12.50 expiring this month but I can take a few shares off the table at a 28% profit to roll the options forward while we await the next ER. We do need to watch this one closely as there may be another short attack of the stock and unfounded fraud news from traders trying to make a buck as we saw with ONP. If you are ahead after this last run up just take your profits now and work on the next move.

Veolia Environment (VE)

All of the long term holdings I posted about on June 23, 2010 have had a good run since then except VE. It has been flat trading in a narrow range which is great for options selling, but as a long term holding we expect to see a little upward trend over the period. I still like VE and it will maintain a place in my long term holding portfolio, but need to up my selling of options on this one!

Orient Paper (ONP)

This one is a thorn in my side right now. Even though I have made good money on this one and believe the company to be in good standing it's recent performance has been lackluster to say the least. I have learned that thinly traded, small cap, foreign stocks can be manipulated by rouge traders rather easily so I must keep an eye on all of my holdings that fit this bill and watch the short positions to try and spot the news/trade coming.


China State Construction International Holdings Ltd (CCOHF.PK)

I haven't posted about this one, although I did give this one to a few friends in conversation. The reason for not posting this one is simple; It's a very risky, thinly traded, Chinese construction stock. Information is very difficult to get for this one as well. This post will be informational about my position and trades for those that may have bought after I mentioned to them or to show how risky these are to trade. Having accumulated 5000 shares over a period of time at an average cost of .385/share (yes it trades three decimal places at times) and seeing the stocks volume start to pick up I set a limit sell order at .70 for 1000 shares and sure enough the stock started rising the very next day going from .62 to .66 and finally .70 today and my order filled. Not sure who is accumulating the shares at the moment, but the volume and activity has increased substantially in the past two weeks so if you are holding and have a profit it may be time to cash some in.

ADY

American Dairy (ADY) has hit the skids recently so it is time to assess our position and try to see where the stock is headed. I still have a small stock position in my investment account with shares dating back as far as my original purchase in July of '08 at a cost of $7.08/share. These shares were free as the stock quadrupled I sold most in stages along the way to lock in gains and kept a small position as a trophy and to try and keep abreast of the stock with annual reports in case I begin considering a position again. This, in addition to my analysis of the stock in its current state, should help give us a good gauge on how to go forward with this one.

My most recent re-position in ADY with my options trading account has me into 100 share at a total cost of $11.35/share and an ITM put option at $12.50. With the stock breaking it's 52 week low (closing as low as $7.69) nearly everyday it's time to decide if I should "double down" or cut my losses. My original position 2 years ago committed me to the stock only about 7% lower than where we are currently at and I believed that was a great bargain at the time so let's look at what state the company is in today as compared to then.

In 2008 ADY was coming off a tough year with EPS down quite similar to what they are in now. Price to book was about 2 for the year also similar to now. Gross profit is double what it was then and I believe the total year earnings will continue to the positive side as the people owning a majority of the shares also run the company and therefore have a vested interest in see the share price recover.

If we adjust for the Milk scare that happened in China that significantly affected ADY's revenues and earnings positively they have made a nice steady increase in revenue over the years and it looks like they are setting up for that to continue. The negative earnings report this past quarter was all due to increased expense or more specifically spending on further increasing capacity, quality, and advertising. One third of the increase was basically marketing so they are obviously trying hard to build demand since they upgraded capacity in 2009. Their raw milk costs also increased due to their maintaining quality as they made big money for having high quality product when all the others had tainted milk before in the last scare.

Bottom line is I don't foresee the negative earnings to continue through the year let alone the next quarter. Estimates are -.04, but I am betting on a positive number by next quarter. I am looking to double down at this point ahead of the next Q EPS report and if it comes back positive as I expect then I will add to the position again. If it reports negative again then I might start considering an exit at that time.