2 years from now, investors on the sideline or who had this stock on their watchlist will be kicking themselves.
Expect to hear a lot of this: "I remember when XIN was $3 bucks cause everyone was scared of Chinese stocks. Man, I shoulda bought XIN then. The signs were so obvious that they were legit."
Hindsight is 20/20. An opportunity like this doesn't last for ever. With dividend payments and investments in the US, XIN's window is getting smaller and smaller as investors realize this is not only a legitimate company, but a growth story too.
You may call this hype, but XIN deserves the hype, doncha think?
Happy investing to all.
Sentiment: Strong Buy
It is one possible scenario. There are other scenarios. Scenario 1, XIN dropped to $2.50 with no reason, and management throws out a 20% premium offer of $3.00 per share. Given the CEO controls the company and no law protects minority Chinese ADR holders, the CEO steals the company.
Scenario 2, China's economy crashed because of a unsuccessful leadership transition. The country is in a mess. Real estate prices and sales plunges, resulting huge losses for XIN. Because of over expanding, XIN is facing liquidity issue. The company eventually fails.
Scenario 3, XIN is found overstating its accounting numbers. Although it is not a complete fraud, shareholders dump its shares because of distrust.
All longs have to prepare for these negative scenarios. As long as these scenarios do not happen, longs are going to enjoy XIN's upside risk.
GV, why would you view Scenario 1 as a "steal"?
I can't imagine ever being offered a one day, 20% profit that I wouldn't completely support. There's always more companies to buy.
I'm too far removed from Chinese politics to be able to #$%$ # 2, but that won't stop my from rooting against it.
# 3's interesting and you and I and the market hold similar views, but our majority view outside this board is very much a minority view inside it.
Growth.Value, I'm going to stay open minded and consider your analysis. Before I counterpoint each scenario, I want you to keep in mind each of these scenarios where already present before a lot of long term hold investors jumped on board. All of these were risks when I first invested July of 2011, but I thought the positives coupled with the high upside potential was worth the risk. This was before the dividend. Now I get paid while I wait for XIN's value to be realized.
Let me address each Scenario
Scenario #1 - I'm going to make an assumption here and say that most longs here bought at 3 or below. And hopefully others who are still holding average down to around 3. This Scenario is a sad case, but isn't that bad since you don't lose your capital. Owning XIN and getting the dividend is worth the risk since that possibility leaves you with capital plus dividends. That said, the longer this company grows while the stock is still on NYSE, the lower the odds of this actually happening, since this gives the company more time to scoop more institutional investors, more individual investors, and more market makers. The more investors, the higher the price. The higher the price, the lower the odds of privitization. Time is on our side for this scenario.
Scenario #2 - We've already had a real estate crash in the states and guess what? Not all developers went belly up. The developers with the strong balance sheets survived while the ones teetering on the edge went bankrupt. This Scenario is linked to Scenario #3, but as long as you respect the auditing skills of E&S, their highly respected award winning fortune 500 accountants, then you know XIN's balance sheet is trumpt tight and one of the reasons why value investors are drawn to the stock in the first place. Yes, some developers would go out of business. But with XIN's balance sheet, they are built to survive and actually prosper if this were to happen.
Scenario #3 - This is really based on how an individual views the facts, but to me - E&S as their accountants, NYSE application without doing a RSO, quarterly dividend payments, stock share buybacks, and NOW investing in America in Wall Street's backyard in NY is reason enough to trust the numbers. A fraud can't AFFORD all of these things while still having the stock at such a low price with nothing to show for ALL THAT CASH OUTFLOW. If you look at it logically and see that a fraud would have nothing to gain when the stock price hasn't moved, you come to the conclusion that this is a legitimate company in which management is fully invested for themselves and shareholders for the long haul.
Whew. That's a lot of writing, but I hope it was worth the reading. Happy Stock Hunting To All!
Sentiment: Strong Buy
And you even use the taking-private scenario to scare people. People are afraid of being taking private at $3, and so they will not buy at $2.70.
Disclaimer: I am not pumping or bashing. I do not value my shares using the PPS.