“Profit with the Coming Chinese Tech Boom”

By Travis Johnson, Stock Gumshoe, April 4, 2007

I just received a forwarded email from Skousen Hedge Fund Trader that invites us to

“PROFIT FROM THE LATEST TECHNOLOGY WITH THIS ASIAN GAMING STOCK.”

I’ve never heard of Skousen, but he purports to use a hedge fund strategy that will provide good results in all markets — just like hedge funds used to be designed to do. I don’t know if he’s been successful or not.

And he passes on the advice he most frequently gets, which is to “buy China stocks.”

I think most of us have probably heard that one before, eh?

In his words, “the Chinese consumer market is in the hot zone… particularly the software market.”

So as you might imagine, the stock he teases is a software company in China.

He calls this company a “powerful player” in their niche.

And gives a few specifics:

“This well-managed company has already shown an impressive 300% earnings growth and destroyed the S&P by rising 88.79% in the past year, but with 4 new products being added to its lineup, great debt management, and expansion into the lucrative Australian gaming market, I think it has a lot further to go.”

A few other tips:

They might sell off their gaming operations this year.

They recently invested in “a big league South Korean gaming company responsible for one of the biggest blockbuster hit games in China right now.”

So if you don’t want to “miss the chance for extraordinary profits from China!” — where do you turn? You can sign up for Skousen Hedge Fund Trader …

… or you can come to the Gumshoe.

The stock being teased here, according to the careful processing of the Gumshoe Cogitationizer, is …

CDC (CHINA)

You’ve probably heard of this one — it’s the old “China.com”, which spelled out is acronymized to CDC.

And they did recently make an investment in MGame, the South Korean game developer whose Yulgang game they had previously licensed in China.

And they also just last month agreed to invest in Auran, the biggest Australian game developer.

And they are at roughly double the share price they had a year ago, so the 89% figure matches (I didn’t see the original email, so I’m not sure exactly what day it was sent).

Probably not bad moves for a company that has seen gaming provide much of the punch in their earnings — though they still have higher sales from corporate software sales. I don’t know much else about the company, other than the fact that they appear to be a serial acquirer and, based on just a glance at Yahoo Finance, there must be some analysts who predict bang-up growth, because the trailing PE is about 136 but hte forward PE is 13.

The Chinese gaming market is tough and very competitive, as I learned from some good and bad experiences investing in NetEase and Shanda over the years, and some dalliances with Tencent and others. I like to think of it as a little bit like Hollywood — very much hit driven for the big players, so good luck predicting the hits.

OK, the Gumshoe got you over the first step — now it’s your turn. Enjoy.


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