3SOF

QuoteThe two legacy games are aging. FWJ's server utilization levels for April and May show a decline from the levels registered during the first quarter.

Furthermore, Tianxia II, the most anticipated game in the company's pipeline failed to capture gamers' interest. Netease was forced to postpone the game's release and send the game back to the development department. In an already crowded Chinese gaming market this is definitely not positive.

Absence of any positive new developments, and given the current lack of visibility into the company's future earnings growth, I don't expect the stock to resume its upward trend anytime soon.

NTES    $ 17.05
Netease.com Inc.   -0.20
Shares Short   5,874,000
Days to Cover (Short Ratio)   6.4
Short % of Float   8.55 %
Shares Short - Prior   5,024,500
Short % Increase / Decrease   16.91 %

This is a valid way to see things yukiii. And the market seems to agree with you, at least for now. But, considering the valuation of the company (15 times trailing earnings) and the cash it has in its balance sheet ($520 M), I would say that the bearish perspective is already priced in.

Unless there's really an earnings debacle going forward. I'm starting to think that a very high net profit margin works both ways. If revenue grows EPS grows a lot. But if revenue shrinks it also has a massive effect on EPS.

Moreover, maybe NTES has such a high net profit margin (57% in fiscal 2006) because it didn't invest in R&D as much as it should. Well, but R&D spending has been moving up, it was $1 M in 2002, $2 M in 2003, $4 M in 2004, $11 M in 2005 and $19 M in 2006. Let me compare R&D spending with SNDA, NCTY and GIGM, for example. In 2006 SNDA spent $21 M, NCTY spent $3 M and GIGM spent $5 M. So, no, one can't say that NTES has been investing less than competitors in its future. It's just that its investments don't seem as productive as the other's investments, at least at the current moment.

Technically the stock closed below its long term ascending trendline, which is a negative sign.
I'm losing 8.77% on NTES and ... well, I must say that I'm starting to open my mind to being wrong here. My hands are weakening, because I'm afraid that the older games start losing gamers and if the new game isn't appealing enough, EPS can go down. If that happens, EPS multiple will go up even as the stock goes down.

However, I've taken four losses in a row here at the Main Portfolio and I know nobody likes losses. But that shouldn't be an input to the decision making process. Of course, I could also take 4 profits or more in a row if I were to sell out my winners, but I don't want to.

I already have SNDA and GIGM in the online gaming space. NTES is the market leader, but it seems it is about to lose that status. I have doubts, but I opt to limit the loss at 8-9% and move on to find more attractive picks.

The trading plan for NTES is SELL.

Quote from: David Randolph on June 22, 2007, 06:30:48 AM

QuoteThe two legacy games are aging. FWJ's server utilization levels for April and May show a decline from the levels registered during the first quarter.

Furthermore, Tianxia II, the most anticipated game in the company's pipeline failed to capture gamers' interest. Netease was forced to postpone the game's release and send the game back to the development department. In an already crowded Chinese gaming market this is definitely not positive.

Absence of any positive new developments, and given the current lack of visibility into the company's future earnings growth, I don't expect the stock to resume its upward trend anytime soon.

NTES    $ 17.05
Netease.com Inc.   -0.20
Shares Short   5,874,000
Days to Cover (Short Ratio)   6.4
Short % of Float   8.55 %
Shares Short - Prior   5,024,500
Short % Increase / Decrease   16.91 %

This is a valid way to see things yukiii. And the market seems to agree with you, at least for now. But, considering the valuation of the company (15 times trailing earnings) and the cash it has in its balance sheet ($520 M), I would say that the bearish perspective is already priced in.

Unless there's really an earnings debacle going forward. I'm starting to think that a very high net profit margin works both ways. If revenue grows EPS grows a lot. But if revenue shrinks it also has a massive effect on EPS.

Moreover, maybe NTES has such a high net profit margin (57% in fiscal 2006) because it didn't invest in R&D as much as it should. Well, but R&D spending has been moving up, it was $1 M in 2002, $2 M in 2003, $4 M in 2004, $11 M in 2005 and $19 M in 2006. Let me compare R&D spending with SNDA, NCTY and GIGM, for example. In 2006 SNDA spent $21 M, NCTY spent $3 M and GIGM spent $5 M. So, no, one can't say that NTES has been investing less than competitors in its future. It's just that its investments don't seem as productive as the other's investments, at least at the current moment.

Technically the stock closed below its long term ascending trendline, which is a negative sign.
I'm losing 8.77% on NTES and ... well, I must say that I'm starting to open my mind to being wrong here. My hands are weakening, because I'm afraid that the older games start losing gamers and if the new game isn't appealing enough, EPS can go down. If that happens, EPS multiple will go up even as the stock goes down.

However, I've taken four losses in a row here at the Main Portfolio and I know nobody likes losses. But that shouldn't be an input to the decision making process. Of course, I could also take 4 profits or more in a row if I were to sell out my winners, but I don't want to.

I already have SNDA and GIGM in the online gaming space. NTES is the market leader, but it seems it is about to lose that status. I have doubts, but I opt to limit the loss at 8-9% and move on to find more attractive picks.

The trading plan for NTES is SELL.

Hmmm... Looks to me like the 16.90 to 17.00 area should be very strong support. You may be right to sell but it seems strange to me to sell right in that area without any further breakdown, unless you need the funds for better prospects.

Are there more stocks in the portfolio where you're hands are not really near as strong as you have led us to believe?

QuoteHmmm... Looks to me like the 16.90 to 17.00 area should be very strong support. You may be right to sell but it seems strange to me to sell right in that area without any further breakdown, unless you need the funds for better prospects.

I saw the break of the long term ascending trendline as technically significant. I guess the experience with VPHM, where I've waited for more and more confirmation and ended up losing more than I should also played a factor here.

QuoteAre there more stocks in the portfolio where you're hands are not really near as strong as you have led us to believe?

I believe in everything I write at the moment I write it. But when the positive information is obvious and yet the market refuses to react accordingly, I start opening my mind to other possibilities. I was disappointed by the failure of the inverted head and shoulders formation. Then I got more disappointed by the breakdown below the long term ascending trendline. And yukiii wrote a bear case that made sense to me.

Anyway, maybe this was just another case of "weak hands" and the stock will go up.

As for other stocks, each case is a specific case, in some holdings my hands are stronger than others. I write about them everyday at their specific threads. Fundamentals may change and my ideas about fundamentals may also change. That's why I keep updating the initial analysis, or else I would just have an idea and close my mind to incoming information. I don't think that would be the right course of action.

Thanks for your question BigSully1, good luck

Buyback announced.

http://biz.yahoo.com/prnews/070702/lnm501.html?.v=10

back above the 50 AND the 200 MA's now.

I'm still holding. That was welcomed news this morning. I want to think this is a cheap stock that is suddenly way under valued. I hope that's how the market sees things in the weeks ahead.But what's a realistic price target? $20? $30? We,ll see.

Quote from: soxguy on July 02, 2007, 08:48:59 PM
I'm still holding. That was welcomed news this morning. I want to think this is a cheap stock that is suddenly way under valued. I hope that's how the market sees things in the weeks ahead.But what's a realistic price target? $20? $30? We,ll see.

I agree.
I'm not even going to try to put a ST price target on it at this time. I feel very comfortable holding for now. They did the right thing postponing Tianxia II until all refinements and testing are done, so when it is finally released it has a real chance at a blockbuster for several years. Tuck it away  and who knows, might still be holding this 3 years from now, with very nice gains.

"Netease (NTES - Cramer's Take - Stockpickr - Rating): This stock fits all of the criteria, and it's an online gaming company (like Shanda). The company has $438 million in net cash. So with a $2.2 billion market cap and $200 million in cash flow, it trades at only nine times cash flows. Analysts expect earnings to go to $1.23 per share in 2008 from $1.15 in 2007.

Analysts have not been correct often in the past. Netease beat analysts' expectations the past four quarters in a row, and if it beats again in 2008, then the forward P/E will be 13, or even lower, which is why it is first on my list of Chinese Rocket Stocks. Netease is also on an interesting portfolio of the companies of young billionaires."

I sold (I guess, it was a mistake), but my wife is still holding - we trade separately to leverage out the emotions. NTES is a "hold" for now in my opinion.

Moving...

Moving today on good volume

New year high on good volume!    Still holding...

New 1 year high!

Two year high stands at $25.25

Anyone?

NTES has no trend and gaps wildly on news: