No. of Recommendations: 3
I think Tim, Nate and company have done an excellent job of giving us a variety of investment ideas and also good thoughts about how to handle our portfolios.

Recent (in my mind over-stated) concerns about AOB and CHBT, and Starrob's spirited defenses of Chinese stocks, have caused me to reflect on my investment philosophy concerning small cap Chinese stocks. Possibly these reflections will be useful to others; in any event, I would appreciate reactions and criticisms, so that I can improve my portfolio-building skills.

I currently have two categories of small-cap Chinese stocks: (i) "investments" and (ii) "basket cases." Here I feel free to make liberal and flexible use of the phrases "small cap" and "Chinese." (And I guess my use of "basket case" is a little different than the usual usage as well -- at least I hope so!)

I take a full position in the "investments," and also opportunistically take a trading position in "investments." My current small cap Chinese investments are: CGA; AOB; MPEL; and CMFO. I will happily increase my holdings of CGA and AOB at good opportunities; I am still waiting to get a better understanding of CMFO before increasing my stake; and I am treating MPEL as a "hold."

I buy smaller positions of my "basket-case" stocks and put them in baskets (well, figuratively, not literally). Here are my baskets in order of investment size per stock (small to smallest):

CHBT;CKGT; CAGC
GIGM; JRJC; FMCN
YGYB; YSYB; ABAT
BITB

GSI was in the basket with YGYB, etc., but I sold it today after its recent run-up in price. I will buy it again if the price goes back down. I have been selling covered calls against FMCN, trying to get rid of it, for 6 months now. I think finally the calls will be assigned this weekend, so it will be gone from its basket (forever, probably).

People are currently nervous about CHBT, but I think it has a very respectable place in a basket. In fact, I recently sold it on a major spike, and re-bought it two days later at a much lower price. I suspect the price spike occurred because an institutional investor took a position, which may augur well for increased checks on any "Aubrey McClendon"-type management adventures.

I treat my "basket-case" positions like quasi-trading positions: if I see a sudden, sharp, illogical run-up in price, I will sell and hope to rebuy at a better price. CHBT and YGYB are on the verge of graduating to "investment" status, where I would always maintain a core position.

BITB is listed as a basket case because my daughters insisted I belong there.

Any thoughts?

Rich
BITB
who has a number of additional basket-case stocks on his watch list
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement