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I know a lot of you like Citron Research...



August 27, 2009 – Comments (16) | RELATED TICKERS: EDU

So I just want to ask how this one has turned out: Citron Research Reports on New Oriental Education and Technology (NYSE:EDU)

EDU price on April 16: $50.45
EDU price on August 27: $72.00

That wouldn't have been a fun short. Wish somebody could have warned you.

Now, Citron does a lot of good work, but when it comes to investing internationally, you can get burned applying the same methods you would to U.S. stocks to foreign stocks.

16 Comments – Post Your Own

#1) On August 27, 2009 at 1:44 PM, kdakota630 (28.79) wrote:

Just goes to show that no matter how good someone's track record is, they can always be wrong, especially in the short-term.

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#2) On August 27, 2009 at 2:09 PM, goldminingXpert (28.62) wrote:

just goes to show that you can buy any stock during a 52% runup on the S&P and make money. Heck, if FRE, FNM, C, and AIG are going up any day, you can buy ANYTHING and get away with it. On a valuation basis, EDU is a $25 stock once (if ever) the market goes back to trading on reality. Citron is never wrong for long.

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#3) On August 27, 2009 at 2:12 PM, goldminingXpert (28.62) wrote:

Actually, $25 is still too high as that is a P/S over 3 and a P/B of 2.5, but I'll be generous and say they should trade at $25 during optimistic times. Easily could be valued as low as $18 on a more conservative basis. $71 is Yahoo! circa Feb. 2000 sort of valuation.

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#4) On August 27, 2009 at 2:21 PM, JakilaTheHun (99.92) wrote:

I was somewhat critical of Citron on EDU.  I really see no great evidence that it was significantly overvalued.  Their entire case revolves around other competition moving in and undermining EDU, but they didn't seem to consider that the industry itself could grow rather quickly and offset that for quite awhile. 

Citron was also dead wrong on Lifetime Fitness (LTM).  I saw almost all the top CAPS players pile on that one, but I stayed a mile away.  I actually thought it looked like it could be worth $40 - $60 easily!  Citron made a huge deal about Bally's going bankrupt and the fact that LTM didn't have long-term contracts.  Well, (a) LTM isn't Bally's, so that's sorta irrelevant, and (b) the no long-term contracts is a huge selling point in the worst economic crisis since the Great Depression.  Does anyone want to own a 2-yr gym membership right now?  Or would people rather pay month-to-month if they can?  Gee ... I wonder. 

My only regret is that I didn't have the guts to green thumb LTM back when Citron dissed it.  I thought about it when it was under $8, but never quite had the confidence to go through with it back then.  I learned my lesson.

That said, I like Citron and I feel like they normally do a pretty good job.  Just feel like some of the people here mindlessly follow them without examining the companies for themselves.  

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#5) On August 27, 2009 at 2:39 PM, OldEnglish (27.32) wrote:

Citron is right. LTM will collapse in the next few years. Period. There were run ups on GM right until the end as well.

It can take years for fundamentally unsound companies to collapse due to lines of credit and secondary offerings. Worldcom, Enron, Repros pharmaceuticals... There is no way AXL can mathematically avoid bankruptcy in the next two years, short of aliens landing, yet it is over $6 right now.

Because of the obtuse accounting of foreign stocks EDU may be a bad call but we'll see.

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#6) On August 27, 2009 at 2:52 PM, TMFMmbop (28.03) wrote:

I sense a StockLemon shill. Think for yourself, big guy, and know that valuation is more than multiplying TTM sales or earnings by a multiple of you're choosing. That ain't an Xpert approach.

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#7) On August 27, 2009 at 3:14 PM, goldminingXpert (28.62) wrote:

Buying puts on Citron picks has made me too much money over the years for me NOT to take a high view of them. The scores I've made off of AMSC in particular, but also APOL, ARTC, and EMKR make me biased, I'm not going to lie. If Citron-"shilling" is an issue, than you better sharpen the long knives for other Citron touts such as EverydayInvestor. Clearly that dude doesn't know anything either!

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#8) On August 27, 2009 at 3:16 PM, goldminingXpert (28.62) wrote:

Think for yourself, big guy, and know that valuation is more than multiplying TTM sales or earnings by a multiple of you're choosing

Actually, I'm quite sure this is how Graham and Dodd did things--you know, Buffet's inspiration. However, I may be wrong. I remember back in 1999 lots of people were saying valuation didn't matter either, and from what I heard, those investors all got RICH!

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#9) On August 27, 2009 at 3:30 PM, TMFMmbop (28.03) wrote:

I love it when people take things you didn't say (like "valuation doesn't matter"), pretend you did say them, and then make snarky comments about how you said it. What I meant to say was: I don't think your (goldminingXprt's) valuation skills as evidenced in this example are all that sophisticated and thus lead you to arrive at answers that are incorrect or incomplete.

As for Graham and Dodd, no, they didn't just mulitply sales by 3. But if they did, holy cow would that make Security Analysis easier to read.

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#10) On August 27, 2009 at 3:32 PM, TMFMmbop (28.03) wrote:

By the way, though I appreciate the comment padding, if you could keep all of your thoughts in one post rather than two consecutive posts, I'd appreciate it. TIA. :-)*

*Yes, the irony here is intentional.

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#11) On August 27, 2009 at 3:53 PM, goldminingXpert (28.62) wrote:

I'm familiar with something like this: If earnings growth continues at 40-something % a year for long, then the valuation is perhaps justifiable, if gravity hits the earnings growth rate, then you better hope that the bond yield remains VERY low or the P/E is unjustifiable.

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#12) On August 27, 2009 at 4:20 PM, TSIF (99.98) wrote:

I'm not sure if some of the tongue in check is being taken too serously or not. Having blog battles usually generates more confusion and further mis-interpretation.  However, what I gather from this, taking one example and bashing Critron or GMX, (recession or not) is NOT very professional.  Did your valuation model work with Shanda Interactive???  Seems your valuation criteria:

"Not impressed by our visit to their Shanghai HQ. Beautiful, palatial compound that was half-empty. That set off warning signals to my mind. "

Of how full the building is and how pretty the grounds are, doesn't work very well either.  I believe SNDA  is almost exactly a 2-bagger since your down call.

Fortuantely I don't judge a player, news source, publication, or other finacial source by one call. I do, however, pick the ones that work for me and use them.


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#13) On August 27, 2009 at 4:30 PM, TMFMmbop (28.03) wrote:

Just havin' some fun. Let's all be friends again. Virtual mojitos all around on me.

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#14) On August 27, 2009 at 4:43 PM, TSIF (99.98) wrote:

In Caps, we are pretty much family, but careful,  picking on one person's investment style, criteria, or methods of investing, especially in this 'hear recession,  is war in some parts of the world.... it's suppose to be a marathon.....

Better have a ton of data, taken over a long window of time if you go that route, and even then life's too short to worry about what method to use.

How about some of that Chinggis Khaan beer to go with the mojitos and you've got a deal.

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#15) On August 27, 2009 at 4:45 PM, goldminingXpert (28.62) wrote:

alright, let's all have a drink and relax. Sounds good.

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#16) On August 28, 2009 at 12:51 PM, dragonLZ (91.29) wrote:

OK, let's all be friends again... right after I say that MmBoP's style is not in style... his score is poor too (should be much better for an expert, especially a bullish one in a bull market). Have a little class, Bmpop...and GMX, have a little understanding that what worked in 2008 won't necessarily (or for sure) work in 2009...

Let's all hug now... :)

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