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Sunday, September 16, 2007

Faith Based Investing

Now that my 2nd investment in CXTI has gone bad, and CFRI is down by about 50%, and Strathmore is down (but admittedly still up over 50% from where I bought it*), there's really no evidence on this blog that my investing is successful and any assumptions that I'm any good at this are an exercise in faith and not empirical evidence. Keep that in mind.

Despite all that, I'm actually optimistic based on what is happening with the business I currently own. I've rolled the remaining cash I have into NICK. I went back and looked at CEDA since it's a Chinese reverse merger (I've now seen too many of these go bad). I'm still OK with it. I also looked at Conforce again; I hadn't posted anything about the Q2 results, which were ok. We should start hearing about the field trial results before long. CVU's results are still in a holding pattern: they've scaled up the operating capacity, but the business is scaling up more slowly. And I've never been more confident about Strathmore Minerals.

How about stocks that I dumped in the past?

LVWD: about the same at 55 cents (but that's after a quick 37% gain), losing money.
EPLN: down significantly from where I sold it. Results aren't very good.
YHGG: down significantly from where I sold it.
BOJF: down somewhat.
BKBO: as far as I'm concerned, the jury is still out on BakBone.
ETLT: you could argue that the jury is still out on this one as well, it's up slightly.

* I suppose since I'm leaving out lots of net gains from before the blog, that to be fair, I should actually claim a 100% gain on Strathmore from where I first mentioned it on the blog.

You run a very concentrated portfolio, and it's therefore only normal to expect some dry spells. I for one have been impressed with your insights and thorough analysis. I think you will do very well in the long term. You still have not really benefited from a "good long tail," but when that happens, it will more than make up for any past losers.
Thanks, anonymous person. I've done well before the blog and I strongly believe I will do well with the stocks I've picked on this blog (plus I think several of the ones I nearly picked will do well, also). However, the empirical evidence is very important to me. No matter how much I might think I'm doing well with the analysis and such, the actual results are what counts. Whenever I've faced harsh reality directly, it has always done me well, regardless of any disillusionment. That's why I'm quick to point out failures, mistakes, and lousy results I might have. I believe what separates long term success from failure is often recognizing and fixing things that aren't working.
Hey Bruce,

Tough break on the CXTI lately. I watched that stock go from $0.50 in summer 2005 all the way to $8 and then back again. I never owned it although I did contemplate it heavily more that a couple of times. In the end I was never really convinced that their business model was sustainable, but that wasn't even what ruined them in the end, go figure.

I think you are probably the best and most thorough investment blogger out there, regardless of what your performance has been lately, and I respect and value your due diligence on these under-the-radar stocks.

We've looked at a lot of the same stocks at similar times, but you've usually opted not to invest in some that I have made my biggest holdings: ADY at 6.5ish, HRBN at 4.5ish, CHBT at 8ish. The only company that we have both invested in is ETLT, which we both ditched at a later date.

I'm not sure why you focus on OTCBB and Pinksheets companies, as opposed to simple smallcaps, and therein might lie your problem. Personally I have focused on Chinese reverse mergers and I view the OTCBB as a neccessary evil for an initial listing and private placement, since shells here are much cheaper than IPOing on Nasdaq or Amex. Still, I am not interested in any company which is not seriously looking to upgrade to a major exchange within 12-18 months.

I have also tended to steer clear of Chinese companies which rely too much on human capital such as CXTI and CEDA as opposed to manufacturing type companies. Could just be my own bias, but I always feel more comfortable with companies that have serious bricks and mortar assets, rather than service companies. I am probably missing out on some great opportunities, but I have also saved myself from some disasters. Mind you, I lost some money on CESV and I lost a large amount on BBC, now BBCZ.pk. Another problem may be the concentration of your asset base. I personally try to diversify my Chinese holdings alone, which are about 60% of my portfolio, into at least 10-15 companies. Chinese investing is the like the wild west and you are bound to run into some fool's gold, it is just a matter of having more good ones than bad ones.

You should take a look at SDTH and CCGY.ob. I like these companies a lot and I think that you would be very interested in them. SDTH is on the nasdaq though, recently graduated from the OTCBB, so not sure if this goes against your investing rules or something...

Anyway good luck and keep up the good work, I really appreciate it anyway.

Alex Harbin

CXTI was tough, but I made money on it overall.

Thanks for the compliment, although I certainly don't feel like a very good investor right now. Hehe.

ADY and HRBN made a lot of sense as investments. I was looking for stuff that was a lot more obviously cheap, but in hindsight, I'm not so sure that was the best approach, ending up with stuff like ETLT and CXTI. I'm glad I missed out on CESV and BBC.

I'm re-thinking CEDA lately.

I jumped into the OTC and pink sheets because it seemed like the best place to be looking for stuff. Perhaps it's a good idea to look for stuff elsewhere as well.

I'll take a look at SDTH and CCGY.
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