Tuesday, August 11, 2009

Bookkeeping: Beginning Placeholder Stake with AsiaInfo Holdings (ASIA)

I am beginning a very minor position (0.1% exposure) in a name we discussed last Friday - AsiaInfo Holdings (ASIA) [Aug 7, 2009: Niche Play on China Telecom - AsiaInfo Holdings]

I've had AsiaInfo Holdings (ASIA) on 1 of my "to do" lists to research for 6 months now and only in the past 2 weeks have created some time to actually dig into it. This is a $800M market cap company, growing at a stellar rate, profitable, no debt, reasonably valued unlike much of the nonsense being run up at 50, 60, 80x forward estimates. Their website is here, and a good overview of the company via .pdf file can be found here. Specific info on their product lines here.

With the caveats that I've turned very cautious on (a) the markets and (b) Asia specifically, I still want to get this off my watch lists and into a place I'll pay more attention to it. As I said in the piece Friday at heart I prefer to have long term core positions I can keep, and then trade around as they ebb and flow. This market has not favored that sort of strategy - its been a "everything is good" or "everything is terrible" market for the better part of 18 months.

At heart I enjoy finding longer term secular growth stories and investing accordingly; unfortunately the world is not exactly awash with them since most developed countries seem to be relying on bubble creation for prosperity, rather than actual paradigm changing innovations. Plus with almost every stock moving together in "student body" left trading for the better part of 18 months individual stock selection has meant little. However if we ever return to a more normal market, something that is catching the fancy is the mobile internet - which we've been talking about for quite a while. Basically repeating the late 90s thesis, but "in the air" rather than "by landline"- hopefully without Pets.com v2.0. A related secular growth story is the telecom buildout & modernization in China. Even as I am wary of the conditions created by the massive loan growth in that country - which are affecting real estate, stock market, and commodities; I think the telecom modernization is the real deal. Now if China corrects seriously will this secular growth story matter? No - not one bit... student body trading morphs into "baby out with the bathwater" once the music stops.

So if China and/or the markets in general has a correction everything will be sold as the student body stampedes out the same narrow door. Hence we are just putting a very small position on and will look to add if the price goes lower. The chart is quite poor actually - a double top (bearish) followed by a breakdown below the 200 day moving average - I assume I'll buy some at the 50 day moving average but if that breaks it could fall much farther. But this will be part of a core holding group built on mobile Internet and telecom modernization until / unless I see anything company specific that leads me to believe AsiaInfo Holdings is not worthy.

We put our toe in the sand today around $17 as the stock is down 17% in 5 sessions... I'd like to be a buyer of scale lower OR on higher on a recapture of the 50 day moving average. For now it is in no man's land technically - how it acts if and when it rallies back to low $18s is the near term tell. It *is* filling an early July gap below $17 as I type this.

Long AsiaInfo Holdings in fund; no personal position

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