Monday, May 30, 2011

Why I bailed on China

Can you trust that Chinese company whose stock you own?
Are you sure?
Read this story from The New York Times and ask yourself that question again.
I'd trusted China, too. But not any more. Or at least, not anytime soon.
When the short-sellers beat down Chinese fertilizer supplier Yongye International a few months back, my initial instinct was to hunker down. I'd done my research. The company's financials looked good. It had great growth in an industry that seemed poised for a lot more to come. It was selling at a bargain.
The company was one of the few with a major Western auditing firm minding its books.
It had the blessing of the Motley Fool's Global Gains investing team. They'd visited the company, met with its principals.
Weeks passed. The stock went nowhere but down.
That would have indicated a great buying opportunity with most stocks I held. Load up the truck.
But with Yongye, I wasn't able to pull the trigger. There were simply too many stories about fraudulent Chinese companies whose stock was now worthless. And as it was with Longtop, from the NYT article, having a big, Western auditor didn't seem to ensure anything.
So, I asked myself again, "Can you trust this company?"
The answer was no.
I wanted to. But wanting to isn't good enough.
With Yongye, I wasn't investing. I was gambling.  Just rolling the dice, and hoping they land on "books not cooked."
If I'm going to do that, I'd rather put some cash on the Phillies to win the World Series this fall.
I want to believe that's going to happen, too.

Read my follow on this China story here.

1 comment:

  1. I guess I saw a comment of yours in a Fool thread, then peeked over here on your blog, and finding that the NYT story confirmed my long-held thoughts about China, went to read the article. Of course, they now want you to pay, which I can't afford. So I searchengined for it and found it pasted into a forum, where some dolt posted something so stupid I just had to rant a lengthy response.