SNDA: Latest Data

Here are some new data related to Shanda (SNDA), which last week reported above-consensus earning. Other data I've found include a recent interview transcript of its CFO, a speech by CEO Chen TianQiao and an interview of a VC who happens to be a lead investor when SNDA went public. All things considered, the company is in good shape and its share value should recover.

#1: Short Interest Decreased

Aug. 15, 2006 4,786,613
Jul. 14, 2006 5,246,709
Jun. 15, 2006 3,874,942
May 15, 2006 4,905,655

#2: Q2 results comparison of top online game companies:

#3: Poll Result: SNDA rated the favorite Chinese game company.
Source: China Game News, 8/17/2006

#4: Poll Result: SNDA is the company that users like to host the new version of "UO" game
Source: http://vote.17173.com. Caution: my own testing showed that the site allows multiple clicks by one user. So the results can be manipulated.

[See Also]

• Q2 earning conference call transcript, especially on the "free-to-play and pay-for-virtual-items" model.
  
• Previous Posts:

• Shanda Entertainment (SNDA) Now A Turnaround Play?
• Shanda: A Nice Case Study

UTSI: Recovery In Progress

[Originally posted on August 11th, 2006] The share price of UTStarcom (UTSI) went up 13% today to $7.47, following its Q2 earning report. Prior to that, the price had dropped from $8+ to mid-6s on a downgrade ("underperform") from a Bear Stern analyst, who stated that UTSI's high margin bussiness, PAS infrastructure and handset, will drop to insignificant level within a couple of years. In the mean time, the Yahoo! message board was filled with negative "assessments" by fundamental and technical analysts with allegedly good track records. Lessons learned here:

1. BS's downgrade, either the motive or his judgement, just before the Q2 report while the price was recovering was clearly questionable. This just adds to my long-time suspicion about the trustworthy of the whole financial "news" industry, which in my opinion is corrupt. [The same guy downgraded China Mobile a couple of years ago when CHL was priced $16. CHL now trades at $33.]
2. All the analyses by BS as well as other online commentators clearly missed the very important point: valuation. UTSI's Price/Revenue of 0.3 is the lowest in telecome industry, which averages above 1. The company has over $600 mil cash balance and has had five consecutive quarters in which the operating cash flow was positive. Even if the entire PAS revenue (30%?) disappears, its other divisions (broadband, PCD, IPTV, etc.) are worth something. Before UTSI had its PAS business prior to 2002, its share price were rarely below $12!
3. Contrary to hangman's TA analysis on the Yahoo board, which said that UTSI was technically in a downtrend, I believed the otherwise. The MA alignment is perfectly positive. In fact the recent pullback is almost necessary so that the weekly relative strength retouch the 20-period MA, which has turned up during last couple of months. UTSI formed a double-top breakout pattern recently and it's still valid.
4. Almost all of the UTSI-related news and articles found online recently had a negative tone, questioning UTSI's very survival and offering analyses of why it had "failed" as a company. This reminds me of early 2004, when every report about the Company was rosy. At the height of it, the Company was featured in a cover story on BusinessWeek and named the Best Employer of the Year by another news organization. Recently the Company has been labelled one of "the ten worst managed tech companies in US" on Seeking Alpha. In both times, the contrarian approach seemed working well.
5. It pays off to follow a company very closely and for many years. Doing so has, up to now at least, made me a better analyst than some of those working for big financial institutions. Theoretically the process can last forever and one can make money from the same company forever as long as it is publically traded and that its business, hence the share price, fluctuates.

In summary, my hypothesis is that UTSI will stay in an uptrend from now on, with its customary volatility expected along the way. The next quarter is a slow one and the real breakout may be six month away - when the Company reports positive earning for the first time in a long time. Any new contracts (IPTV in China/India/LatAm/Europe) or a PCD aliance with a tier-1 telecom in US) could cause spikes in price. Exit Strategy: Sell if price breaks below 5.9, which is the support for the recent double top breakout.

Access From China and Migration to Google

To my surprise, I am able to access Blogger today from China. I hope this is permenant.

I also found out that, hopefully in a few weeks, I will be able to migrate to a new blog system created by Google, which acquired Blogger several months back. It's still in beta version, but there seem to be a lot of features that I could use (such as dividing posts into categories, allowing access controls, spelling check and a graphical layout manager).

In the meantime, I will still maintain my WordPress-based blogs on my own computer and gradually move some of the old posts to Blogger.

Link: China's Economy: Out of Control

Jim Jubak's column in TheStreet.com: China's Economy: Out of Control. What's said in the article is unfortunately true.

Stock Investing as a Zero-sum Game?

While doing research on machine learning and data mining, I encountered an online discussion on whether or not stock investing, as well as computer-assisted stock picking, is a zero-sum game.
The discussions were initiated because of a New York Times article "How a Computer Knows What Many Managers Don't". There are quite a few good and informative points raised by contributors that are on either side of the debate.

My personal answer to the debate is: it depends. It depends on the type of the investors concerned (speculators, manipulators, serious value investors, etc.) and investing time-frame (day-trader, short- and long-term traders). When a company continues to provide goods or services that the world needs, its value (and the stock price) increases over time and everyone could be a winner, though a better investor would win more. One such example is BHP over last three years. Almost everyone has been making money from BHP not because other people have "lost" money, but rather because the Company's value has increased due to the world's demand for its products.

Even if a trade is zero-sum, as it seems so on a short term basis, the trade increases the liquidity for the market, which is positive for the whole system.

One may compare stock-trading to sports. Each of individual games in a sports competition seems a zero-sum game: one side wins and the other loss, even though the outcome is not zero-sum for the players: the winers takes more home than what the losers loss. For the rest of the world, it provides entertainment value and, arguably, improves the health and well-being of human kind. Stock trading is a competition, participated by millions of people worldwide. Even though each trade may seem a zero-sum game, the system rewards hard-working, highly-motivated people and with better skills or tools, machine-learning tools included. In addition to liquidity, a trade, zero-sum or not, provides entertainment for everyone (that's what you are doing anyway when you watch CNBC), and rewards managers and company employees that work in the company and, hopefully, offers incentives for them to develop even better products and services for the rest of the world.

The debate will never ends, but in the mean time, let's work hard and try to stay on the positive side of the game.