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ETFsRule (< 20)

Another blog 'bout China



May 24, 2011 – Comments (47) | RELATED TICKERS: CNTF , CBPO , KH.DL

I just came across another approach towards Chinese stocks.

I was looking through some filings of my favorite Chinese stock (CNTF) and I found a Chinese venture capital firm that looks very interesting.

The firm is IDG Capital Partners, and you can see a list of their funds here.

This firm is on the ground in China, researching companies in rigorous detail, and investing in them even before they are publicly traded. After doing some very brief research, I am 99.99% sure that none of their investments has ever been accused of fraud. Basically, I think I have found the jackpot of non-fraudulent Chinese companies.

You can learn more about the IDG funds here and here.

These are some of their holdings, which I've found through their SEC filings. If any of these turn out to be frauds I will be VERY surprised:








I'll post an update in a few months to see how these stocks are doing.

47 Comments – Post Your Own

#1) On May 25, 2011 at 3:32 PM, ETFsRule (< 20) wrote:

IDG's Pat McGovern on Investing in China - TheStreet

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#2) On May 25, 2011 at 6:51 PM, ETFsRule (< 20) wrote:

Here's a more complete list.

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#3) On June 03, 2011 at 10:57 PM, ETFsRule (< 20) wrote:

One last thing: when you invest on the same side as the IDG China funds, you're investing with one of the greatest venture capitalists who ever lived: Jim Breyer of Accel Partners.

And if this wasn't enough China stocks for you, I found another VC firm with a track record that seems on par with IDG's. That firm is Sequoia Capital. You can learn about them at these links:


SEC filings

They came in at #2 on the Forbes "Midas List".

Some of their Chinese investments are:


There have been some reports of dishonesty at MOBI according to Citron Research, but, let's just say I found those reports to be very unconvincing.

I haven't seen a single negative report on any other company that IDG or Sequoia has put money into.

Good luck everybody.

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#4) On June 04, 2011 at 10:54 AM, ETFsRule (< 20) wrote:

One more VC firm: Shenzhen Capital Group

Their average annual investment rate of return (IRR) is 36%. They list their portfolio on the site, and if you go to "milestones" they show when some of their investments went public (although most of them are only traded on Asian exchanges).

Some of their holdings include JKS, CNTF, and MY.

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#5) On June 06, 2011 at 4:53 PM, ETFsRule (< 20) wrote:

If anyone is wondering about today's drop in CNTF and some other China stocks, it was due to increased margin requirements going into effect today. Apparently this was announced last Friday evening... so investors had no time to prepare for it.

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#6) On July 24, 2011 at 12:24 PM, ursemm (< 20) wrote:

Hi there

I'm new to the Fool. I'm interested to know how CNTF is likely to perform, in your opinion, after the great bashing its stocks got after mid-May. 

Are there any news to be expected anytime soon?

Thanks for any informations or thoughts.

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#7) On July 24, 2011 at 2:03 PM, ETFsRule (< 20) wrote:

I think CNTF will do great - in my opinion this is the best stock in the world. Their CEO recently bought more shares, they've released a ton of great new products this year, they made the recent deal with Qualcomm, they have great fundamentals, a high growth rate, they trade for barely more than their cash balance, they're in a fast-growing market, short interest is just a little over 1% of outstanding shares, they were recently added to the Russell global index. The list of positives is seemingly endless, and there really hasn't been any bad news at all.

I guess people are still too risk-averse to buy this kind of stock right now. Maybe investors will rush into Chinese small caps after the debt ceiling gets raised (ha!).

Their next quarterly report is due on August 16th... that could potentially be a catalyst for the stock to start moving.

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#8) On July 25, 2011 at 6:09 AM, ursemm (< 20) wrote:

Hi ETFsRule

Thank you very much; this is very useful to me.

 Kind regards 

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#9) On July 26, 2011 at 12:02 AM, ETFsRule (< 20) wrote:


SOKF.OB is going private! Woohoo!

And yes, they might be getting sued, but it's not for the usual reasons - it's for going private at too low of a price ;-)

I wonder which of these stocks will be the next buyout... maybe DANG...

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#10) On August 19, 2011 at 6:31 PM, ETFsRule (< 20) wrote:

I'm not sure if anyone is still interested in this blog, but I'm going to keep updating it from time to time. So, follow along if you feel like it.

It looks like Alfred Little is barking up the wrong tree this time. He's accused SinoTech Energy (CTE) of fraud, even after they filed their 2010 annual report earlier this year, audited by Ernst & Young.

Not only that, but Nasdaq had halted the stock to request information from CTE. Really interesting stuff. CTE maintains their innocence of course.

The thing is, Sequoia Capital owns over 5 million shares of CTE - and their due diligence is second to none. As I mentioned earlier, neither Sequoia nor IDG has ever invested their money in a fraud. So if there really does turn out to be evidence of fraud, this will be a real game changer.

On a side note: CNTF has really gotten hammered lately, for no apparent reason. Short interest remains very low, so it looks like it's just a lot of panic-selling and generally low interest in the company. CNTF is not followed by any analysts, so I don't think many investors outside of China are familiar with them.

Anyway, I'm not discouraged. I've taken this opportunity to buy a lot more shares and lower my cost basis... CNTF is now 22% of my real life portfolio. Their fundamentals are incredibly strong and they have over $4/share in cash.

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#11) On August 20, 2011 at 10:01 AM, ETFsRule (< 20) wrote:

The investment in CTE by Sequoia was based on the work of two of their analysts: Neil Shen and George Xu. Neil is a Founding Managing Partner of Sequoia Capital China, and George is a Vice President of Sequoia Capital China.

This article points out that, "Neil Shen, photographed, has been spearheading the firm’s charge into China."

Another article points out that Neil Shen was named the #1 venture capitalist in China for 2010. It also mentions the lawsuits against Mecox Lane (MCOX), an investment that Shen worked on personally. The lawsuits alledge that MCOX "didn’t come clean with investors about its prospects."

Even if MCOX was overly optimistic in some of its estimates, I'm sure a lot of US companies could be accused of the same thing... these are much less serious charges than the ones against CTE, which basically say that the company is a complete fraud.

For now, I'm actually avoiding Sequoia's investments until I see how things shake out with CTE. Neil Shen is the #1 guy at Sequoia, so if these charges are true, then Sequoia's reputation is pretty much completely ruined. I don't think that will be the case, but for now I am sticking with IDG's portfolio. IDG seems like the safer bet, and they are not having any of these issues.

As for CNTF, there is plenty of due diligence on them - you can find videos, commercials, and demonstrations of their products all over the internet. Here's a video game world champion using their new game console. Techfaith is mentioned a few times in this book. I could go on, but it's not necessary.

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#12) On August 21, 2011 at 9:49 AM, ETFsRule (< 20) wrote:

Andrew Left Loses His Mind

The widely-respected John Hempton of Bronte Capital gives his 2 cents, in his usual blunt fashion.

Regarding Chinese stocks: many of them are frauds, and many short-sellers (like Carson Block and John Hempton) have done a good job of exposing some of those frauds.

But that doesn't mean that all short sellers are worth your time. Keep this in mind the next time a crook like Andrew Left starts making accusations.

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#13) On September 04, 2011 at 9:44 AM, ETFsRule (< 20) wrote:

I finally got my $4.50/share from the SOKF.OB sale, and put it all into another Chinese small cap: Bosideng International Holdings (BSDGF.PK), for $0.23/share.

Bosideng sells very fashionable winter coats, a segment which should do well as the Chinese consumer market continues to grow. Also, they are now starting to get into the non-seasonal apparel business.

Some facts about Bosideng:

-They were founded in 1975 and own many of the top winter apparel brands in China. Source. (I know Wikipedia is a lame source to use, but this is widely available information).

-Their 2010 annual report was audited by KPGM, a top-4 auditor. Source.

-They have an agreement to manufacture and distribute the fast-growing Rocawear brand in China. Yes, that Rocawear.

-IDG owns 2.5M shares, or 2.8% of the company. Source.

-At their current price ($0.23/share) they trade for these multiples:

Market Cap: 1.8B

PE: 9.69

Price/Sales: 1.76x

Price/Book: 1.8x

Price/Cash Flow (ttm): 9.28x

Dividend Yield: 9.06%

Note: Their dividend was a bit higher than normal last year, due to a special, one-time dividend. But they have consistantly paid a high dividend for years.

These numbers are straight from my brokerage (TD Ameritrade). You won't be able to find accurate numbers for a stock like this from a source like Yahoo... so, trust your brokerage when dealing with thinly-traded ADR and pink sheet stocks.

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#14) On October 06, 2011 at 11:08 PM, ETFsRule (< 20) wrote:

Well, based on this and other recent news, it looks like I was wrong about CTE. Alfred Little appears to be right, and I was completely, utterly wrong on this one. Luckily I didn't have any money in CTE.

We already know that the top-four auditors have a poor track record among Chinese small-caps... and, most banks, underwriters, and major investors haven't faired very well either. I thought Sequoia's due diligence was good enough, but obviously I was wrong. And considering that this investment was personally researched by some very high-ranking people at Sequoia, I have lost all faith in the firm.

Amidst all the carnage and the blood in the streets, IDG is the only one left standing. IDG has invested in dozens of Chinese small-caps, and there is not even a hint of fraud among any of them. I will continue to invest in their portfolio with full confidence.

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#15) On January 25, 2012 at 2:28 PM, ETFsRule (< 20) wrote:

Well, Sinotech Energy (formerly CTE) has officially been de-listed and now trades as CTESY.PK.

Sequoia Capital, meanwhile, has removed all references to their investment in this company, without any explanation. Before, you could see it listed on the pages of Neil Shen and George Xu, as mentioned earlier - as well as in their portfolio of energy investments.

I guess they are hoping that if they just pretend this whole thing never happened, they won't lose any credibility. Good luck with that. It's not hard to find evidence that they owned over 5 million shares of this company.

Regarding China stocks, I own the following: MY, CNTF, MEMS, JRJC, and BSDGF.PK. So far, they are off to a good start for 2012. The past couple years have been brutal for this sector, but I think investor sentiment is finally starting to turn around, and I predict a very strong year for Chinese small-caps.

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#16) On February 10, 2012 at 6:40 PM, ETFsRule (< 20) wrote:

If anyone finds my reliance on IDG to be a questionable strategy, then a quick look at the registration statement for a company called "Facebook" might change your mind.

From the management section of that same filing, there is a nice bio of Jim Breyer, who I mentioned earlier:

James W. Breyer has served as a member of our board of directors since April 2005. Mr. Breyer has been a Partner of Accel Partners, a venture capital firm, since 1987. Mr. Breyer is also the founder and has been the Chief Executive Officer of Breyer Capital, an investment firm, since July 2006. Mr. Breyer is also a co-founder and has been co-lead on the strategic investment committee since inception of the IDG-Accel China Funds. In addition to serving on our board of directors, Mr. Breyer currently serves as a member of the boards of directors of Dell, Inc., News Corporation, Prosper Marketplace, Inc., and Wal-Mart Stores, Inc., where he is the lead/presiding independent director. Mr. Breyer previously served as a member of the board of directors of Marvel Entertainment Inc. from June 2006 to December 2009 and RealNetworks, Inc. from October 1995 to June 2008. Mr. Breyer holds a B.S. in interdisciplinary studies from Stanford University and an M.B.A. from Harvard University. We believe that Mr. Breyer should serve as a member of our board of directors due to his extensive experience with social media and technology companies, as a venture capitalist, and as one of our early investors.

From the ownership section, we can see that Mr. Breyer controls 11.4% of the shares of Facebook. Not too shabby for one of the early investors in the company.

The point of this post isn't to brag on behalf of someone else. I just think it's important to realize that Jim Breyer is the real deal, and IDG-Accel is the real deal. They have never been burned by a Chinese fraud before, and I don't think they are about to start now.

My plan is to continue piggybacking off IDG-Accel's Chinese investments; this includes micro-cap, pink-sheet stocks that no one has ever heard of. In fact, those are the companies that I prefer to invest in (ie: Soko Fitness). And I sleep very well at night.

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#17) On March 27, 2012 at 1:47 AM, jsch08 (33.85) wrote:

Hi ETF. This is my first blog post on Fool, but I've found your blog very insightful! I'm still a neophyte investor, but this particular blog post got me interested enough to dip my toe in the pool of fool blog posting, so to speak.


What are your updated thoughts on CNTF? The company is trading at a massive discount to cash with no debt and seems too good to be true. Their doesn't seem to be a justification to these prices at the moment.

 If everyone is so hesistant of China, maybe this is the year to start picking up massive value plays.


What are some good articles you've read about this company and their plans for expansion?

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#18) On April 08, 2012 at 9:15 AM, ETFsRule (< 20) wrote:

Hi jsch08. Thanks for the comment.

CNTF recently posted some negative guidance for Q1 2012, including a big decline in revenue. They will probably post a loss for the quarter, once the financials are officially announced. Maybe some larger investors knew this was coming, which could explain why the shares have gone so low.

CNTF has some very impressive and unique cell phones, but the demand for them has been disappointing so far. There is a lot of tough competition in the cell phone business. But once the Chinese economy starts to pick up steam again, I think we will see this stock recover and reach a more reasonable share price. And there is definitely the potential for them to go private because they are trading at such a discount right now.

For the future, I think the gaming business will be their biggest area of growth. There hasn't been much written about them, but there is a lot of info in this company presentation:

(it might take a minute to load)

Here is the recent negative guidance:

First Quarter 2012 Outlook

The following forecast reflects the expected material impact of seasonality in the first quarter of 2012. The forecast is TechFaith's current and preliminary view, which is subject to change. TechFaith currently expects total revenue for its ODP, branded and gaming businesses to be in the range of US$41 million to US$45 million in the first quarter of 2012. The anticipated decline from the fourth quarter of 2011 and recent revenue levels is driven primarily by the expected material impact of seasonality in the first quarter, combined with higher competition and expected lower overall demand for its ODP and branded mobile phone business.

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#19) On October 30, 2012 at 1:08 PM, ETFsRule (< 20) wrote:

Just a quick update to mention that there still has not been a single instance of fraud in any IDG-invested Chinese companies. The method appears to be sound.

IDG-invested China Kanghui (KH) is being taken private. Unfortunately I did not have a position in KH.

CNTF is suing Samsung for patent infringement. This comes not long after Apple won an enormous from Samsung. It should be interesting to see how this unfolds. The patent can be seen here.

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#20) On November 21, 2012 at 10:48 AM, ETFsRule (< 20) wrote:

Finally, patience pays off  :-)

MEMS is a relatively small part of my portfolio, but it's nice to see another of my IDG-invested companies going private (after SOKF.OB, mentioned earlier). My cost basis for MEMS was $2.65/share.

Out of the 7 companies from the original blog post, 3 have already gone private (MEMS, KH, SOKF.OB).

At $4 per share, this purchase price represents:

1.1 x book value

1.7 x cash

1.4 x sales

They weren't making a profit, so I won't calculate the PE multiple :-)

Based on the multiples above, I would say that if CNTF were taken private, it would probably be for around $6/share.

The reason I always focus on CNTF is because it accounts for something like 20% of my portfolio.

Happy trading and happy thanksgiving, everyone!

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#21) On November 21, 2012 at 5:35 PM, ETFsRule (< 20) wrote:

Apparently MEMS was not halted after the buyout proposal was announced. I was able to buy some more shares for $3 at 3:30 today. I intend to pick up more of this free money on Friday, if the stock is still trading.

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#22) On November 24, 2012 at 10:11 AM, ETFsRule (< 20) wrote:

There are at least 20 Chinese companies that have gone private this year, have received a bid to go private, or are currently in the process of going private:

UTSI   FSIN   ASIA (note: status of the bid is unclear for ASIA)   SHP   YTEC   NKBP   CMM   CTFO   HOGS   FMCN   NINE   SVN   SSRX   SYSW   YONG   KH   SOKF.OB   MEMS   WWIN   TBOW

Thanks to Markus Aarnio on Seeking Alpha for collecting many of these names.

2011 was the year that Chinese small caps got wiped out, but 2012 has given investors plenty of opportunities to get that money back. My understanding is that many of these companies are going private with the intention of re-listing on Asian exchanges, where they will trade at higher multiples.

To me, the best bets are IDG-invested companies with low valuations. My favorites are MEMS (still trading at a 33% discount to the offer), CNTF, JRJC, CEDU, KONG, and RDA.

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#23) On November 25, 2012 at 9:44 AM, ETFsRule (< 20) wrote:

4 more China stocks going private this year: SGTI, ADY, ALN, JADE

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#24) On February 28, 2013 at 8:28 PM, ETFsRule (< 20) wrote:

Big day for CEDU (+30%).

I'm still patiently waiting for CNTF to pay off (and I believe it will, in a big way).

Overall the strategy has been a big success so far. I've had some losses in JRJC and CNTF, but these are more than offset by huge gains in SOKF, CEDU, MEMS, and BSDGF.

There still hasn't been a single case of fraud in any company that Accel or IDG has a stake in.

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#25) On April 23, 2013 at 11:00 AM, ETFsRule (< 20) wrote:

Big news: the MEMS bid was accepted, and the stock is +50% today.

Hilariously, this comes less than one month after The Street downgraded MEMS, citing "disappointing historical performance in the stock itself". In other words they are advocating a "buy high, sell low" approach to investing.

To make today's news even sweeter, the original bid was apparently negotiated up to $4.225 from $4. I hope you were all able to load up on MEMS in the $2.70 - $3.30 range after the bid was announced a few months ago. If so, congratulations!

After the payout comes through I will probably roll most of the money into RDA, which is another undervalued, Chinese, IDG-invested semiconductor stock. Happy trading, everybody!

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#26) On May 15, 2013 at 11:25 PM, ETFsRule (< 20) wrote:

Big drop in BSDGF today! Apparently there was some kind of unflattering article about them published in Hong Kong. I haven't looked into that yet, but after reading Bosideng's response, I can pretty much see what it was about (much ado about nothing).

I've heard about short-sellers like Muddy Waters moving to Hong Kong exchanges, because all the Chinese frauds (on US exchanges) have already been exposed. These short sellers need to keep themselves busy somehow, I guess.

Anyway, Bosideng's stock has fluctuated between roughly $0.22 and $0.30 for the past couple years, so the recent drop isn't very unusual.

Bosideng is one of the top clothing brands in China, they are very well known, their clothes are all over the place, they have an endorsement deal with Jay-Z (mentioned earlier). And IDG owns part of the company.

And if that weren't enough, I have already been collecting a dividend of more than 7% from them for the past couple years - so I have absolutely nothing to doubt about them. The company is solid, their cash is real, and their business is growing.

Their dividend yield is now over 10%, so I plan to add to my position ASAP. And I expect BSDGF to bounce back up to the $0.27 - $0.32 range before long.

While I wouldn't call any investment a "can't-miss"... BSDGF at $0.22 is the sort of buying opportunity that really gets me excited as an investor.

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#27) On June 04, 2013 at 1:05 PM, ETFsRule (< 20) wrote:

Nice recovery in Bosideng yesterday (+28% back up to 0.27). Patting myself on the back for seeing that coming. I couldn't buy any at $0.21 - $0.22 though - no one was selling. The listed prices aren't very meaningful for such thinly-traded stocks. Oh well. I'm trying to buy it now at $0.27, but it looks like there's still no one selling.

Other news: ASIA is being taken private. It seems like all these IDG-invested Chinese companies are going private, and there haven't been many new IPO's to replace them. That's why I don't want to waste this opportunity - it's important to make money in stocks like CNTF, RDA, CEDU, etc, while I still can.

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#28) On June 14, 2013 at 6:52 PM, ETFsRule (< 20) wrote:

Sometimes truth is stranger than fiction. Sinotech energy (formerly CTE and CTESY) has just agreed to pay a settlement of $20 million to shareholders of the company. I've written about Sinotech in some previous comments on this blog.

This news is truly bizarre - and unique. Many other Chinese companies have been exposed as frauds, but most of them just "go silent". They keep their ill-gotten gains, in China, where American agencies are powerless to go after them. I've never heard of another fraud that agreed to such a settlement.

So why has Sinotech agreed to this? And will they really pay it? What will happen to the stock?

Yahoo still shows CTESY, currently trading at $0.018 / share. But the stock doesn't show up on most stock sites or brokerages. I haven't verified this yet, but I would guess that there is probably a global halt in place on the stock. That is what happened to CCME - if you have CCME stock in your brokerage account, you are stuck with it. You're not allowed to trade it. You can't even give it away for nothing.

So, presumably, there are still people out there with CTESY stock that might get some money out of this. I wonder - was the company real all along, or partially real? The CEO may have stolen $40 million from shareholders - but that doesn't mean that the company doesn't really exist. Perhaps management is trying to settle this lawsuit so that they can then take the company private at this incredibly low price.

I've heard analysts talk about frauds that actually became profitable companies later on, because they hid their money in Chinese property which then appreciated in value considerably. Even if the company is 90% fraudulent, there could still be a lot of money to be made, when the stock is trading (or not trading) at 2 cents per share.

Oh well, that's just my 2 cents. It's interesting to follow stocks like this to see what develops. If anyone reading this owns CTESY, I hope you'll post some an update. Especially if you receive a settlement.

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#29) On June 20, 2013 at 10:03 AM, ETFsRule (< 20) wrote:

The hits keep coming! CEDU, another IDG-invested Chinese small-cap, just received a going-private offer. It's roughly a 20% premium to the current stock price... not bad, but hopefully the offer gets bid up a little higher, as was the case with MEMS.

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#30) On June 23, 2013 at 9:55 PM, ETFsRule (< 20) wrote:

I'll probably put some money into CBPO, SFUN, and/or CYOU after I get the cash from the MEMS deal (and with other cash lying around).

SFUN is probably the least likely of the bunch to be taken private, with a market cap over $2 billion. So I feel like I could wait a bit longer on that one without missing out.

CYOU is an interesting case. They were spun off from SOHU, which still has a large stake in the company. The question is: what was the point of spinning it off? At a PE under 6, it's obvious that US investors aren't paying fair value for this stock. I think there's a good chance that SOHU buys them out to regain 100% ownership in the company. Or, they could partner with someone, maybe IDG, to facilitate a buyout. This is a safe, proven company, which is incredibly undervalued right now.

CBPO is one that I haven't looked at very closely. I know there were some minor regulatory issues a year or 2 ago. The Chinese gov't forced them to close a facility somewhere. But that seems very minor with respect to the entire operation of the company. They look like a strong buy to me.

There is something weird going on with a sale of some CBPO stock. This is the first I've seen of it, so I'll have to take a closer look at some point. But really, it doesn't matter. I already know that IDG invested in this company, so there is no need to do much due diligence beyond that. The stock looks very strong and undervalued, and it is one of the best bargains of any IDG-China stocks that I do not yet own.

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#31) On August 14, 2013 at 8:00 PM, ETFsRule (< 20) wrote:

Great couple of weeks for CNTF. The stock is up ~60%, and has finally risen above my cost basis of $1.64. The volume has also spiked, on no news at all... today's volume was an impressive 2.7 million shares.

Someone must have come to their senses and realized that a stock with $5/share in cash should not be trading for $1. There is still plenty of upside & it will be fun to see what happens from here. 2013 continues to be a great year for Chinese small caps.

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#32) On October 16, 2013 at 10:52 AM, ETFsRule (< 20) wrote:

Since the last update:

-got the money from the MEMS buyout

-bought some RDA (another IDG stock), which almost immediately got a buyout offer of $15.50. That same day it went above $15.50, so I sold for something like $15.52 rather than wait for the buyout to work itself out. It has since dropped back down to $15.19, so I feel pretty good about my decision to sell.

-CEDU adopted a shareholder rights plan. It's a little complicated, but what I gather is that I will get some discounted shares or extra money, in the event that they do get bought out.

-Bought some HTHT (IDG-invested Chinese hotel company). It has had some nice gains already. Another similar option is HMIN, but I went with HTHT because it looks cheaper.

-CNTF has had some huge gains recently on huge volume. Blasted through my cost basis of $1.64 today, and is now trading around $1.90. Hopefully this momentum will carry it all the way above $5, but we'll see.

-Still weighing what my next IDG tag-along investment will be. If HTHT gets bought out, I would probably move that money into HMIN. Otherwise, I'm not sure. But there are still some good options out there like SFUN, CBPO, CYOU, DANG, RENN, SOHU, YOKU, VNET, and ASIA. Overall the strategy has been working incredibly well. I just need to be careful not to get greedy or start overpaying for any of these stocks.

-There is now just 1 of my IDG investments that is in the red, and that is a relatively small position in JRJC. They have shown some life recently, so this one may still pan out in the end. If they can show a profit, I'll add to the position. Much like CNTF, JRJC is still trading for less than its cash balance.

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#33) On December 08, 2013 at 3:12 PM, ETFsRule (< 20) wrote:

Testing, testing.

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#34) On January 03, 2014 at 11:40 AM, ETFsRule (< 20) wrote:

Let's see if this works - I haven't had much luck posting comments as of late. All of my IDG investments are now in positive territory, as JRJC has been on fire lately. I bought it in mid-2011 for around $4, held it when it dropped to around $1, and now my position is up by 65% (today it reached $6.78). Patience pays off!

And I think the environment looks good for them - their asset management division is doing well, and the Chinese stock market looks ready to bounce back, as it has performed terribly for the past few years and now trades for a very low multiple. An improvement in China's stock market performance would be a huge boost for JRJC's business.

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#35) On January 22, 2014 at 10:33 AM, ETFsRule (< 20) wrote:

Sold my JRJC this morning at $8.02 for a 96% profit. At this price I think the stock is too speculative. They are still slightly unprofitable, p/b is around 2.25 and p/s is over 5. I would invest again if the price drops or fundamentals improve.

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#36) On February 28, 2014 at 10:40 AM, ETFsRule (< 20) wrote:

CNTF has been on a great run lately, up more than 20% this week alone. It's now up to ~25% of my portfolio, but it's way too early to start selling any shares. The stock still needs to double from here to reach a reasonable value.

3 Stocks With Potential To Triple In 2014

China Telecom's $400mm Medical Smartphone Agreement Is Great News For China Techfaith Wireless

5 Stocks Under $10 Set to Soar

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#37) On August 18, 2014 at 2:13 PM, ETFsRule (< 20) wrote:

A great year for Chinese small-caps continues!

After selling my JRJC (post 35 above), I re-bought the stock, taking a much larger position at $2.88/share on 5/15/14. With today's 33% gain, this position is now up more than 100%!

JRJC is up today on the launch of their new integrated web-based trading platform. They are China's premier stock-trading portal, and with today's huge volume, some large investors have clearly taken notice.

JRJC is only marginally profitable right now, but they are growing like crazy and their future looks very bright as China's middle class continues to grow. Shares are still very cheap in terms of p/s , p/b and p/cash. I would not be surprised to see this hit $10  or higher in the coming months.

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#38) On August 18, 2014 at 4:02 PM, ETFsRule (< 20) wrote:

It just keeps going up... now up more than 70% for the day. It goes to show, the experts don't know what they're talking about (except IDG/Accel). This was a D+ rated stock on The Street. When you know you have a winning bet, make it a big bet.

Just sold 20% of the position for $7.85. JRJC had become almost 12% of my portfolio which is a little too much for any 1 stock. Nothing wrong with taking a little profit. Still very bullish for the 80% that I am holding on to.

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#39) On August 18, 2014 at 7:09 PM, ETFsRule (< 20) wrote:

OMG it's up another 20% after hours

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#40) On September 10, 2014 at 12:59 PM, ETFsRule (< 20) wrote:

Interesting day for VNET. Apparently some short-sellers had puts in this stock which were set to expire on 9/14 as described in this post from last week.

Today the anonymous short seller posted a ridiculous claim of fraud at VNET with a hilarious price target of $0, driving the price down by as much as 25%. They probably closed the short position, because VNET has mostly recovered, and is currently only down 3% for the day.

I wanted to buy some shares at the daily low but unfortunately I am at work, and did not have cash available, so I missed out. Very frustrating! VNET is of course a very legitimate and well-known company and was invested in by IDG. The short seller's claims are nonsense.

VNET is a very solid company with consistent, strong revenue growth. I might buy it at some point, but I don't have a position at the moment. Forward earnings are tough to predict and they are currently unprofitable.

I think I will buy some GOMO, another IDG stock. They had an earnings miss this quarter and sentiment is incredibly low right now, which is usually the best time to buy. This stock was over $30 last year and is now under $8. GOMO is profitable with a forward PE just under 10. They develop Chinese mobile apps.

As for my larger stock positions, I am still celebrating JRJC which has more than tripled since I bought it. My overall portfolio is up 30% YTD, and up 50% for the past 12 months.

For the next month I am going to try a strategy of selling 25% of my shares whenever JRJC reaches $9.25, and re-buying at $8.40. It seems to be stuck in that range for now.

With CNTF I am going to try the same thing for the range of $1.30 - $1.50.

Normally I am just a buy and hold investor but I think it is worthwhile to give this idea a try. It seems to be the way to go for these types of small-cap stocks that are volatile, but still range-bound.

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#41) On September 10, 2014 at 5:08 PM, ETFsRule (< 20) wrote:

I picked up a pretty large position today in GOMO for $7.67. The same anonymous short seller who bashed VNET also bashed GOMO, and actually reading through their website gave me the idea to buy some shares. The short seller's comments on GOMO were ridiculous.

GOMO looks like an incredible value buy at this price, and due diligence is not hard to do. They are IDG-invested and use a top-4 auditor. Also, in the products section of their website they include links to the Google Play store where you can buy their apps. Their apps have millions of downloads & are highly rated in the Play store. So, transparency is very high. Their future looks very bright.

They are not a 1-hit wonder, either. So it's not like you are investing in the developers who made Candy Crush. Instead, GOMO has a diverse set of functional apps that basically act like an operating system, and let you customize the way your entire phone works (for Android phones). Pretty neat stuff. Their products can be seen here.

GOMO is a potential multi-bagger from current levels, and they are a very attractive acquisition target.

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#42) On September 11, 2014 at 12:55 PM, ETFsRule (< 20) wrote:

Long VNET today @ $16.50. Earnings for 2014 should be ~$2/share, and higher next year.

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#43) On September 12, 2014 at 12:12 PM, ETFsRule (< 20) wrote:

Sold VNET today for $18 like an idiot, now it's at $19.50. Oh well, I'll buy more if it drops again. 9% profit in 1 day still ain't bad.

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#44) On June 11, 2015 at 2:03 PM, ETFsRule (< 20) wrote:

I will probably keep updating this blog, albeit less frequently. Maybe once or twice a year.

The strategy continues to work well. Still no frauds among IDG-invested companies. Making pretty good profits as well.

Looks like there is another wave of buyouts. At $4.90 I will lose money on GOMO, so hopefully the offer will get turned down by shareholders. If the price gets negotiated up to $6.00 or higher I will be happy.

VNET is also set to go private, at $23. I stand to make a decent profit here. After my previous posts, I ended up buying more shares at around $19 in late 2014.

China stocks across the board are up this month. FENG and DANG are doing very well.

RENN is also going private, although I had no position.

CBPO has been ridiculously hot, reaching nearly $110. I bought some shares a couple years ago for around $30, and ended up selling them last year for around $55. If the price drops, I could see myself buying it again, but I don't think the fundamentals support this price.

CYOU has done very well. I bought some shares near the bottom, for ~$18. With the recent surge in China, the shares are now up to $32. I may sell these shares soon.

I am watching a few others very closely, such as SFUN, SOKU, YOKU. No positions yet - waiting for a better valuation. And for SFUN, the housing market in China worries me.

Pretty soon there will be none of these companies left, after they all leave the US to re-list in China. I am continuing to invest in this sector while I still have the option.

I am sticking to the stocks mentioned in this thread... there aren't any others to add. IDG still invests in Chinese co's, but unfortunately most of those companies are choosing not to list on US exchanges.

JRJC and CNTF are always interesting. Lots of ups and downs. JRJC is up dramatically today, but I am waiting for it to hit $10 before I sell any shares. For CNTF, my target price is $6.

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#45) On June 11, 2015 at 3:42 PM, ETFsRule (< 20) wrote:

^^^ And of course, I meant SOHU not "SOKU".

TEDU looks like a strong buy. XNET looks interesting.

The hotel stocks, HTHT and HMIN, are too expensive for my liking. Same is true of CTRP.

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#46) On July 09, 2015 at 7:40 PM, ETFsRule (< 20) wrote:

Very eventful day today, with buyout offers for DANG and YY. 

The buyouts keep coming all across the board, and many companies still trade at a significant discount to the amounts being offered. In pretty much every case, this discount is unwarranted - there is a lot of free money out there.

There are some great articles out there such as this one:

Bear in mind, a lot of the stock prices have moved significantly, even over the last 24 hours. So some of the spreads are smaller than what is shown in their table.

I am taking advantage of the situation as much as possible, favoring IDG investments of course. The only non-IDG stock that I bought today was MOMO, because of the large spread and the fact that Sequioa is one of the bidders - meaning the bid is almost certainly legitimate.

I would probably not buy a going-private stock where the bidder is the CEO, without any other partners that you trust. The CEO could make a fake offer to manipulate the stock price (I have seen this happen once or twice among non-IDG stocks).

Anyway, my favorites in terms of risk/reward are:


I own each of those now, except for RENN. I actually sold some GOMO even though they are going private. Their discount is roughly 10%, compared to MOMO which has a discount of 24%. GOMO I believe is the first or 2nd of these stocks that I have taken a loss on.

Most of these going-private deals take about 9 months, from the day of the first offer to the payout to shareholders.

I think a lot of these large discounts are due to fears about the financing falling through. But if the buyer is a large investment firm, then you have little to worry about.

VIMC and DSKY are very interesting too, trading at huge discounts to the offer prices - but these are non-IDG stocks, and I have no way of knowing if their management, or the potential buyers, are trustworthy. CNIT appears to be a delisted company since 2012, so I don't trust them at all. Who knows, maybe the buyout is real, but it would take a lot more research to figure that one out.

I took some very large positions today, and now almost 60% of my net worth is tied up in small-cap Chinese stocks. And I couldn't be happier :-)

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#47) On April 11, 2016 at 6:54 PM, ETFsRule (< 20) wrote:

Well, the strategy is still working. My recommendation list is pretty much the same as in the previous post. QIHU will go private soon.

Deals keep getting done, although things are slowing down because there just aren't as many of these stocks around anymore. There is more activity now from activist investors, negotiating higher buyout prices. RENN looks strong. JRJC is on the rise, too. They had very strong earnings today and are up ~9% after hours.

I'm still holding MOMO, DANG, RENN, CNTF, KZ, JRJC, VNET. The only one I'm losing faith in is BSDGF. They're not falling apart or anything, just very stagnant. 

In non-IDG investments, I was fortunate enough to buy VA two months ago - that position is up 77% after the buyout offer.

And in non-IDG China stocks, I took the plunge today and bought CO. This one is very interesting. They run a blood bank, and they have the only license to run blood banks in 3 provinces in China. They are in a very highly-regulated industry, which greatly reduces the chances that they are some kind of fraud. And these licenses are very hard to get, which makes them valuable.

They have received 2 buyout offers so far, so it is basically a bidding war involving management on one side, and a department store on the other. Ok, the department store is owned by an investment firm that also runs healthcare companies that would benefit from CO's technology for preserving stem cells, etc.

The risk/reward looks great. They are trading slightly below the lowball offer of $6.40, but it's more likely that the higher offer will be accepted, which is somewhere north of $9 or even $11-15, in some combination of stock & cash. There are clearly a lot of unknowns here, but I don't think the lowball offer will be accepted as that would result in a lot of class action lawsuits, etc.

There is also a very outspoken activist investor who owns 5% of the company, and he will do everything he can to force the buyout price as high as possible. Here is his open letter which spells out a lot of the details:

So, I think they are an absolute steal at the current price of $6.21.

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