What to do?

[admin]

The graph went parabolic, all technical indicators known to men are in red hot territory. No things go up in a straight line forever, so consolidation should be expected any time. However:

• The stock is still dirt cheap
• It's cash flow positive
• It has no debt and $200M+ in the bank
• It's fast growing, the number of beats and raise, as well as the newsfeed, is pretty awesome
• There are probably still a good deal of shorts trapped in the stock, by now they're twisting and turning in the wind

Ergo, any consolidation/pullback is likely to be brief and should be aggressively bought. With the growth of the company, time is on your side.

[ArtM72]

Does anyone know what the short interest was in this stock before the rise?

[admin]

Art, I don't know the exact figures (as I believe this was mostly done in Asia), but it was substantial and they were making a lot of noise. You can see how they took the price down (before this epic rally started) to levels where the valuation was really nonsensical ($5-6).

It was the only thing that I was slightly worried about, having some IOC experience under my belt. However, the stuff they were saying about bogus sales in China started to melt once serious people started to do serious DD. Doublebagger went to China, for instance and he didn't only speak with the company. There are really thorough SA articles written, and we've published research reports here as well basically blasting the short thesis away. The growth and deals and above expectations delivery of figures simply continued, so something had to give sooner or later..

[BUYIOC]

NQ falls sharply on negative report from JCapital makes rounds. Says fair market value is $4.80. Posted on Schwab at 3:37 pm

[admin]

And who the ** is JCapital? The Asian branch of Minkow?

It's up 6%, if that is a sharp fall..

[admin]

Actually this is a good sign, it means that not all the shorts got out, more gains likely.

[BUYIOC]

JCapital per the internet search is a self-appointed guardian looking for stocks that are over or under market value. Schwab always posts this kind of negative info but neglects the positives.
I suppose the shorts call Schwab and the longs don't bother.

[admin]

Well, we advice to exercise some caution until the smoke clears. Better safe than sorry.

[tradestar2012]

I skimmed through the report. Its got a lot of problems to it. Poor journalism and even worse understanding of finance and accounting.

1. neither of the authors have formal backgrounds in finance or accounting. http://www.jcapitalresearch.com/about-us.html stevenson-yang is a journalist by trade and Kroeber is fresh out of undergrad with a major in history. They mess up on their understanding of term deposits = cash and how AR/DSO's rise with fast growing revenues. Not to mention trying to value a tech company on a trailing P/E basis.. Shoddy work.

2. Their estimates of the chinese markets seem way smaller than any other research report you can see on google. just google for china mobile internet or smart phone. Only 100m mobile internet users in china in 2011? Seriously?

3. A lot of their evidence is based on interviews with employees. Uh.. I'm sure a low level employee knows exactly how the company is structured, the revenues per division and the overall strategic rational for transactions/partnership, etc.

Truth be told, I hope this report pushes the stock down for a few days so I can add more.

[admin]

Thanks for that. I don't have an accountancy background, so I have a habit of not forming iron clad opinions on these matters, but it seems to me that there have been many notable parties doing solid DD on this company (the Atlantis fund, for one), it's somewhat curious that only JCapital, a fairly small boutique, would find these glaring problems.

But where I can't form a more solid opinion I advice caution as a matter of policy.