Friday, July 20, 2007
China Expert Technology (CXTI) CFO resigns
collected CXTI links
I just happened to noticed today that the CXTI CFO resigned. "Personal reasons". What happens if someone really does resign for personal reasons? Does the press announcement say "this time we really do mean personal reasons, unlike when it's usually a scandal or essentially a firing."
I've been following CXTI somewhat since selling it and I've been watching the price drop, waiting for a possible chance to get back in. I sold it earlier this year at a lower price, but still for an excellent gain.
I'm back in. I just finished buying about a third of what I'd normally buy for a full investment. Yes, there could be more bad stuff to follow, I don't know for certain. I expect to post more this weekend.
UPDATE 11:19 AM same day:
Just bought more, now I'm up to about a half-investment.
UPDATE Tues, July 24, 2007:
Bought more today. I'm wondering just how low the CXTI stock price can go. Perhaps back down to 85 cents? Here's an interesting thought: If you had bought 3/4 of a full position in a stock and you could wave a magic wand and make the price drop by 75% for say 4 months, would you do it?
I've been selling CVU, BKBO, and even a small amount of Strathmore in order to buy CXTI. But selling Strathmore for CXTI isn't very compelling at these prices.
UPDATE Wed, July 25, 2007:
Bought more again today. In terms of blogging, I've cheated on this one: going through the key parts of the financial statements and SEC docs without taking notes. That makes it unpleasant to go back and do it in detail here on the blog. Plus I'm going to have to re-install Linux on my machine. It's going to take a while before I post the notes on CXTI's recent SEC filings.
CXTI is having a conference call on Friday morning EDT where they'll presumably claim the CFO is leaving due to not wanting to move out of Hong Kong. The real reason is possibly due to tectonic shifts between management and the hedge funds (I'd give that a 50% chance).
Meanwhile, the stock of Strathmore and the other uranium juniors continues falling. My thinking is that demand dried up because the hedge funds are loaning uranium to the buyers (we've already seen that from a company that claimed they were going to increase their uranium loans). The spot price dropped and will probably continue dropping, but it was ridiculously high anyway. The market has a bad case of anchoring. When the spot price jumped up to $75 at the end of January, the crowd went wild and uranium stocks took off (Strathmore jumped up above C$4). When the spot price drops to $120, the crowd goes into a panic and Strathmore falls to C$3.33. Hehe. I doubt it has much to do with the Fission Energy shares that spun off. I'd be surprised if they trade above 30 cents.
I just happened to noticed today that the CXTI CFO resigned. "Personal reasons". What happens if someone really does resign for personal reasons? Does the press announcement say "this time we really do mean personal reasons, unlike when it's usually a scandal or essentially a firing."
I've been following CXTI somewhat since selling it and I've been watching the price drop, waiting for a possible chance to get back in. I sold it earlier this year at a lower price, but still for an excellent gain.
I'm back in. I just finished buying about a third of what I'd normally buy for a full investment. Yes, there could be more bad stuff to follow, I don't know for certain. I expect to post more this weekend.
UPDATE 11:19 AM same day:
Just bought more, now I'm up to about a half-investment.
UPDATE Tues, July 24, 2007:
Bought more today. I'm wondering just how low the CXTI stock price can go. Perhaps back down to 85 cents? Here's an interesting thought: If you had bought 3/4 of a full position in a stock and you could wave a magic wand and make the price drop by 75% for say 4 months, would you do it?
I've been selling CVU, BKBO, and even a small amount of Strathmore in order to buy CXTI. But selling Strathmore for CXTI isn't very compelling at these prices.
UPDATE Wed, July 25, 2007:
Bought more again today. In terms of blogging, I've cheated on this one: going through the key parts of the financial statements and SEC docs without taking notes. That makes it unpleasant to go back and do it in detail here on the blog. Plus I'm going to have to re-install Linux on my machine. It's going to take a while before I post the notes on CXTI's recent SEC filings.
CXTI is having a conference call on Friday morning EDT where they'll presumably claim the CFO is leaving due to not wanting to move out of Hong Kong. The real reason is possibly due to tectonic shifts between management and the hedge funds (I'd give that a 50% chance).
Meanwhile, the stock of Strathmore and the other uranium juniors continues falling. My thinking is that demand dried up because the hedge funds are loaning uranium to the buyers (we've already seen that from a company that claimed they were going to increase their uranium loans). The spot price dropped and will probably continue dropping, but it was ridiculously high anyway. The market has a bad case of anchoring. When the spot price jumped up to $75 at the end of January, the crowd went wild and uranium stocks took off (Strathmore jumped up above C$4). When the spot price drops to $120, the crowd goes into a panic and Strathmore falls to C$3.33. Hehe. I doubt it has much to do with the Fission Energy shares that spun off. I'd be surprised if they trade above 30 cents.
// posted by Bruce @ 10:41 AM 
Comments:
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Bruce, are you comfortable that the CFO resignation does not signify that something bigger may be amiss with CXTI? Their cash flows have not always kept up with their earnings, and I'm wondering if there could be any accounting issues. Thanks.
# posted by 
: 1:20 PM, July 20, 2007
: 1:20 PM, July 20, 2007
No, I'm not comfortable assuming that there's nothing else wrong. I believe I understand their cash flows fairly well. And regarding accounting issues, they've certainly had some of those and will probably have more.
But considering everything, I decided to pull the trigger today.
I hope to post more this weekend, but I'm working on installing SuSE 10.2 Linux on a new PC and that's always a time consuming activity. Fortunately, I have all the devices working (except audio which I don't care so much about).
But considering everything, I decided to pull the trigger today.
I hope to post more this weekend, but I'm working on installing SuSE 10.2 Linux on a new PC and that's always a time consuming activity. Fortunately, I have all the devices working (except audio which I don't care so much about).
Cash flows tend to lag earnings because the company is dealing with govt entities that take a long time to pay. It was THE reason the company had to rely on the cds in the first place!
Cash flow was slightly negative in FY06 and FY05, and is up strongly ytd through Q1 2007. Part of the normal cycle of payment which occurs when they finish contracts. I think earnings (esp pretax) are a better indicator of performance here.
Cash flow was slightly negative in FY06 and FY05, and is up strongly ytd through Q1 2007. Part of the normal cycle of payment which occurs when they finish contracts. I think earnings (esp pretax) are a better indicator of performance here.
# posted by : 10:15 AM, July 22, 2007
: 10:15 AM, July 22, 2007
I increased my position on Friday. An executive with Wu's resume is probably in hot demand, and people to move for a variety of reasons. Don't know his salary, but he reported 204,000 shares. don't know if he leaves with all the stock or if they were restricted. Wu did a great job of making himself available to Wall Street. hope his successor will be as shareholder friendly.
# posted by : 12:24 PM, July 22, 2007
: 12:24 PM, July 22, 2007
I figure the recent dip in Strathmore was due to the spinoff of Fission Energy Corp. But now I think there is some baked in Chicken Little pessimism due to dropping U308 spot prices. The DOE auction should ease pressures, but it doesn't seem like enough to correct the larger imbalance
Regarding your magic wand question, it'd be great for lowering your average cost, however, psychological pain is tough to ignore.
Regarding your magic wand question, it'd be great for lowering your average cost, however, psychological pain is tough to ignore.
I agree about the psychological pain, but it greatly helps to focus on the fact that you're owning a slice of the business and that prices always return to something close to value over the long run (Buffett stuff). I've never seen a case where a stock in a good business stayed cheap for more than 5 years, usually a lot less.
My cost basis in CXTI is now $4.80 and I have something close to a full investment in it.
Regarding Strathmore, Fission Energy is probably only going to sell for 30 cents or less. That's my guess. All of the uranium stocks have been going down. Check out StockInterview.com.
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My cost basis in CXTI is now $4.80 and I have something close to a full investment in it.
Regarding Strathmore, Fission Energy is probably only going to sell for 30 cents or less. That's my guess. All of the uranium stocks have been going down. Check out StockInterview.com.
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