Friday, March 17, 2006

CNTF: at play again?

I have made some money in the past after buying CNTF around 10$. I took my profits as the stock steadily came off in the past couple months.

As the stock kept falling in the last a few weeks, it has come into my sight again. I revisited what I believed before and checked all available public information of this Chinese handset design firm, I found my old thesis to aggressively buy this stock at low teens still holds. Given this, I am buying now around 12$ a share. I speculate that after next Monday's earning report, if nothing seriously wrong with future business guidance, the stock may be in play again.

A few other recent developments have strengthened my confidence in such a short term speculation.

First, recently I noticed the market condition for Chinese ADRs are quite good. There were a few star performers, including NTES,CTRP,VIMC. in particular, VIMC is truly remarkable. I liked the company, but did not think the move could be so violent, given my thought that this stock was pretty fairly valued in low teens.

Second, peers of CNTF have been doing very well in other markets:
2000 HK more than doubled in past three months.
LHL SP more than doubled in past three months as well .
This looks to me that the general perception on these handset design firms is turning more positive, as a result, valuation standards (in terms of P/E for instance) is moving up to match those of other Chinese technology companies.

All I said so far is nothing more than short term speculations based on events and market observations. In the long run, I think this business model works given my belief a marriage of technology and Chinese low cost labor seldom fails.

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