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Update EFUT: accumulate

May 9th, 2008 · No Comments

Weak markets. No surprise there, we’ve been saying numerous times here we don’t trust the markets. The Dow within 1500 point of all-time high with all that credit and housing troubles, collapsing dollar, well.. we’re not sure about that, to say the least. However, some of our featured companies are getting cheaper again. Is it time to buy?

First, on a more general note. Timing is about the most difficult aspects of investing. One really shouldn’t expect to buy on the lows and sell on the highs on any consistent basis. Not even the best can pull off that one.

However, a little less challenging is to find good companies with solid growth outlooks, defensible markets and some hard to assail competitive advantage, in short, companies that dance to the beat of our smallcaps imperative.

We’re pretty sure that eFuture, our Chinese supply-chain management software producer dances just nicely to that tune. It’s also getting cheaper as the markets fall. As we have mentioned before, this is a stock that correlates with the general markets, only to have a big lurch when some news is out or some large investor takes a position.

Since these events are pretty unpredictable, picking some up on a market slide is a good strategy. We are also nearing a support, the 200 day moving average, see chart below:

There is no guarantee that this support will hold if the markets go down further, but on the other hand, EFUT is a very solid company that is very reasonably priced at these levels, so we cannot really see a whole lot of downside even in those circumstances (bar some kind of catastrophe).

We think there is every chance this company will be higher, significantly higher in a year and the downward risk is pretty limited, so picking up some more is wise from a risk-reward point of view. So, we advise accumulation on weakness, like the one today which brought it under $16.

Tags: EFUT