In our most recent quarterly letter we mentioned the subpar revenue growth for US based companies. This anemic revenue growth stood in stark contrast to many Emerging Market companies that have excellent top line growth.
One of our favorite purchases….the purchases that make you scratch your head as you just wonder how and why it became so cheap has been China Automotive Systes (CAAS).
CAAS just boosted revenue guidance to at least $195 million versus $163 million in 2008. Second quarter earnings came in at 21 cents versus the estimate of 12 cents which obviously means estimates for 2009 and probably 2010 are too low. The stock is now gapping higher to $9.45.
While we’ve pared off a small fraction of our shares into todays strength, the message to our clients has been that the gains to be made in Emerging Markets is substantial since many do not face the significant and non-traditional headwinds facing the US economy.
We’re not a buyer of CAAS at these levels but should the Chinese market pullback, possibly so.
RINO finally had some air taken out of its levitation yesterday, this is why we peel off shares into great strength from time to time. When stocks become beloved and traded by the Momentum crowd the slightest negative news can bring a torrent of selling as the Mo-Mo’s sell as blindly as they buy. The company missed its estimate (there was only a single analyst) by a couple of pennies but was otherwise a very solid quarter with substantial revenue growth. The stock is tempting under $14 which would be at just under 8x 2009 estimates.
Be careful out there.