My experience has been similar. There have been a couple of losers for me in China Profit Strategy, but mostly serious gains so far, a few at 70 to 90%. I am very pleased and have made back the price of admission many times over. I also tried the $200 Asia Edge taste and decided not to pursue it--the picks didn't seem better than China Profit and as you said, were basically more of the same (longer term) but in other Asian countries. More fun to sleuth them out, anyway.

I am a member of china strategy and am impressed as well with most picks.
STP and MR both announced phenomenal earnings this week.

I am pretty ambivalent about it. From memory 2 of his monthly newsletter did not have new recommendation last year. One was a retireration to buy MR and the other was a general overview of the current portfolio. I am also slightly annoyed that he recommends Chinese stocks in Asia Edge that he won't recommend in China Strategy. For instance he recommended GSH and TSL in AE but not in CS. Luckily I bought GSH due to a recommendation from Asia Stock Alert and TSl since I keep an eye out for any Chinese IPO.

Maybe I expected to much but I was hoping for a newsletter that would guide you through the general China Market even if just to tell you to stay away from a certain IPO. On the other hand it was an extremly useful tool to dip my toes in the Chinese market. Can't decide if I'll renew or not.

What is his recommended entry and target price for LDK? I bought at 49 recently. This stock has so much volatility it's making me sick....

Thanks for the reply Gukdorak, would you happen to be a subscriber to the service? There are people on the yahoo LDK board, claiming that Robert has recommended to sell LDK because of the Barron's article...etc. Don't know if I should trust yahoo board, because the longs and shorts argue and post fake info there all day. So if anyone here is actual subscriber for the service, please let me know if that is true or not. Thank you for your help.

A note of possible interest is that (LDK) regular third party auditor is KPMG. From all accounts this company is AAA regarding integrity and oversight. Unless they've hid something they should be able to get ahead of this, if they go with an other third party auditor I'd say the chances of a quick recovery would be slim.

The stock is down another 5% in after market trading tonight after a 25% drop on the day. Buckle your seat belts, as it may be a wild ride or a horrible crash.

I posted a write up here: http://hexdek16.blogspot.com/2007/10/ldk-solar.html

I am a China Startegy member and I just got his flash to sell LDK. Here's the text:


Bad news about our solar wafer manufacturer LDK Solar (NYSE: LDK) keeps coming. Its share price fell sharply again today after a Barron’s article made additional negative allegation regarding LDK Solar’s financial controls and technology. Let’s go over the situation and I will tell you exactly what you should do with the stock.


Last week, I told you that a former LDK employee raised concerns about the company’s inventory. The stock dropped on the news as investors worried about the company’s future. At that time, China was in the midst of a national holiday and I was unable to contact company executives for direct questioning.


That is why I initially moved the stock to a hold. Based on our history with the company, I thought it was prudent to wait for more information before taking action. Today, Barron’s published an article with a strong bias against China’s solar industry. That has helped change my mind on LDK.


The article starts out describing China’s solar-power industry as a “red-hot bubble” and went on to describe conversations with an insider at LDK that pointed to serious manufacturing concerns. According to the article, “the company's silicon ingots were indeed so impure that a recent production run had produced tons of them that were too contaminated for technicians to even analyze with instruments.” This is pretty damaging for the company and I don’t think the stock will be able to bounce back to previous highs in a reasonable amount of time.


I’m still bullish on the solar industry as a whole, which offers an alternative source of clean and renewable energy. Solar energy is a viable technology, and there are still plenty of opportunities in this industry. Chinese solar companies have a cost advantage in this commodity product, and unless a non-Chinese firm develops a major technological advantage, Chinese firms will continue to gain market share in the industry. This is why we will continue to hold our investment in Suntech Power (NYSE: STP).


What to Do with LDK Now
In the article, the Barron’s writer questions the technology that LDK uses to produce wafers. Unlike the writer at Barron’s, I don’t want to speculate about this technology, which is mature and has been in use for years. The problem for us as China Strategy investors is LDK’s management.


This afternoon, LDK Solar addressed investors’ concerns, saying that it would soon report on its inventory levels. Chief Financial Officer Jack Lai said that the company would file a report with the SEC soon. This report will publish information reconciling data from a management assessment and independent auditing firm KPMG. It will make a final determination of LDK’s inventory of polysilicon.


Regardless of the investigation’s results, it is clear that LDK’s management dealt with this situation in an unsatisfactory manner. This makes me question the company’s management capabilities and financial controls. Though the company has responded to inventory allegations, I view its conference call and subsequent press releases as murky at best. As of today, LDK Solar’s management team still has yet to reply to the questions I sent them last week.


Although we do not know what the audit results will be, we do know that LDK’s management team does not have the required skills to handle crises effectively. Here at China Strategy, we only want to invest in top-tier companies with world-class potential. LDK’s upside potential from here is limited and I gave management a fair chance to address our concerns. Given the uncertainty surrounding the stock and the lack of clear leadership from the company’s management, we should exit our position. I want you to sell LDK now.

Here's the original Barrons article online http://online.barrons.com/article/SB119162915757750853-search.html?KEYWORDS=ldk&COLLECTION=barrons/6month

Complete text below in the 4 posts below including this one due to character limitations per posts. Just in case the above link doesn't work.

MONDAY, OCTOBER 8, 2007
China's Solar Boom Loses Its Luster
By BILL ALPERT

CHINA'S SOLAR-POWER STOCKS WERE a red-hot bubble until Wednesday. That's when investors learned that an accounting officer had quit one of the industry's hottest firms, the silicon-wafer maker LDK Solar (ticker: LDK), while alleging that LDK's warehouse and financial reports were loaded with junk. As its American depositary shares fell by nearly 30%, LDK defended its bookkeeping and assured shareholders that it has more than 1,000 metric tons of silicon material.

There may be good stuff in that pile of silicon, but that doesn't mean it's worth what LDK's balance sheet says. On Sept. 25, the Xinyu City, China, firm's financial controller, Charley Situ, sent e-mails to regulators, auditors and investment bankers saying that he had quit because his bosses refused to write off bad inventory. His allegations were disclosed, and largely dismissed, in a Wednesday note by LDK investment banker Piper Jaffray. Still, the news sent LDK's depositary shares reeling, from over $71 to 50.95 by Friday.

Even after that sickening dive, LDK's New York-listed shares go for nine times book value and over 40 times this year's forecast earnings-so investors should still care if the book value, and therefore its profit, is overstated. The inventory that makes up that book value may warrant concern. With the help of an interpreter, Barron's talked to someone with knowledge of LDK's manufacturing. That person said that the company's silicon ingots were indeed so impure that a recent production run had produced tons of them that were too contaminated for technicians to even analyze with instruments. The company says it knows of no such problems.

LDK isn't the only producer of solar silicon in China that uses low-paid workers to sort through scrap in search of some good enough to be melted into solar-cell wafers. Nor is it the only one with a high-priced stock, as you can see in the table. Investors in China and the U.S. have rushed into China's solar-cell stocks as rashly as investors jumped onto the Internet in the 1990s.

But a shortage of refined polysilicon has pinched solar-cell makers in the past few years. The raw material's price has gone from around $30 a kilogram to over $250 on the spot market, creating a windfall for producers like MEMC Electronic Materials (WFR). But the higher prices have hurt China's latest solar-cell contenders, which lack established supplier relationships-which helps explain the net losses at China-based Canadian Solar (CSIQ).

So firms like LDK and London-listed ReneSola (SOLA.UK) have developed recipes that use large portions of recycled silicon. LDK has more than 3,000 workers sorting and testing scrap the company obtains from broken wafers, semiconductor rejects and ingot sawdust. LDK brags that its secret recipe lets it make wafers with as little as 25% virgin polysilicon. Since silicon accounts for 75% of LDK's cost-of-goods-sold, the potential savings are a big deal.


And LDK's industry-leading profit margin of 29% would seem to validate the savings from the company's scrap recipe. But those savings may be a mirage, according to the allegations of ex-controller Situ and a person familiar with LDK's manufacturing.

Via a translator, Barron's learned that LDK's furnaces are often short of usable feedstock, even though the company's piles of silicon scrap keep growing. The factory's internal information is unreliable, with one record reportedly indicating that LDK's wafer-cutting saws had an impossible yield of 140%. Industry experts say that most wafer-cutting enterprises break even at 90% usable yields. Instead, according to the person knowledgeable about the manufacturing, LDK's wafering operation has yields that actually range from 55% to 70%. The company won't comment on its yields.

Low yields from LDK's production may stem from its practice of buying just about any scrap that has silicon in it, says this same person. Several months back, the company's furnaces produced a batch of several dozen 270-kilo ingots so motley that testing instruments couldn't even tell whether the resulting silicon was positively or negatively charged. The virgin-silicon supplier MEMC was so alarmed at the quality of wafers produced by LDK, says the source, that it stationed its own quality-control monitor at the LDK factory in China's Jiangxi province.

LDK's Chief Financial Officer Jack Lai says he knows nothing of such manufacturing problems and insists that the company is making its deliveries on time to satisfied customers. He says the company fired Situ, the controller, for absenteeism after Situ didn't come to work for eight days. Lai says he never saw a Sept. 25 resignation e-mail that Situ addressed to him and copied to the SEC (and many others).

The Bottom Line

LDK Solar still looks expensive in light of questions about its accounting for inventory and therefore profits. The shares, already off sharply, could keep heading toward zero.In his resignation letter, Situ said that LDK's inventories might be overvalued by $46 million to $92 million, which is more than the company reported in profits before its May 31 initial offering in the U.S. E-mail discussions that started before the May IPO show Situ trying to get colleagues to reconcile discrepancies between LDK's accounting ledger and its warehouse ledger. A spreadsheet circulated by Situ showed that by the end of August, LDK warehouse records listed about $54 million worth of silicon feedstock, but accounting records showed $100 million.

Through August, according to Situ's spreadsheet, LDK sank about $119 million of cash into inventory. LDK's Jack Lai says that Situ's numbers are wrong.

Situ's internal campaign ended on Sept. 13, when financial chief Lai held a conference call with him and other accounting staff. Situ argued that LDK should take a charge for its unusable silicon scrap. In a subsequent statement, Situ says the conference ended when he was overruled by the company's chief accounting officer, Qiqiang Yao. The ruling: Silicon scrap that was not usable today might someday become usable with the new processing techniques.

That sounds like a judgment on a par with the decision to freeze Ted Williams' head, in hope that future medical miracles might someday revive the Red Sox legend.

Situ says he quit after that decision, not wanting to be party to what he considers a stock fraud. Finance chief Lai says that Situ just didn't understand the silicon-wafering business. In a Thursday press release, LDK says that a management team took a physical inventory of polysilicon feed stocks and found no accounting discrepancies. When LDK's auditors at KPMG complete an independent investigation, the company says it will disclose the results.

A nice *Hit* piece if I ever read one, especially the part about the sports analogy... "That sounds like a judgment on a par with the decision to freeze Ted Williams' head, in hope that future medical miracles might someday revive the Red Sox legend."

With this being one of several shots across the bow for LDK I'd have to agree that it will be a tough row ahead and I am not afraid to say that the shorts could very well have their day with this for a time. With this market currently though, I'll take the safe side of the trade and stay long. If this story goes positive there will be a quick upside as shorts cover and people look to get long again after exiting. If not, looks like I see this in the portfolio until May.

I am comfortable buying the other half of this position between $14-$17 dollars of it sours. If I get a quick upside for 30% or better with out clear guidance I may just take the trade and exit my position.

No. The write down is negotiable, if you study the case of NTRZ.OB wich I continue to hold. There is a market for what some are quick to call "scrap". KPMG is a company that would look at this valuation and consider the business model and use of material. I do not think this is detrimental.

Hsu seems to have done well riding the China wave, no doubt it has been a performer for the better part of a year and more. I am less qualified to recommend in that sector, and focus more on valuation. I did not believe (and continue to) the report regarding LDK, it did not make sense, and continues not to reveal the true valuation of this company. I am strongly adverse to valuation of companies in China specifically because I do not have strong contacts with companies that trade there, not because they are not good companies. I do have a strong contact with KPMG (no insider information) and I trust what they do, what they do do is fair and valued. Having limited knowledge on China, but having strong knowledge regarding KPMG coupled with the large disconnect with the share price of LDK and a "Market Slaughter" info-babe report by the skirt at Barron's makes me puke! How shabby, one can have strong convictions with out the "hype" trade commentary I see on blogs. I respect these guys & gals, to see this "crap" journalism surprises and disgusts me. Say what you want in a blog etc... don't put it to publish on the news wire only to reissue it again the next day with out knowing your sources. The could have done allot more due diligence on this, and the information not the hype makes me bullish on a China stock, when there is so many more less risky trades.

The best analysts of the dot com era, (oh, I hate to say this) Jim Cramer. I don't like the guy, I do not chose his picks and I think he is a pompous A**. That said, he is above some of the newsletter touter's picks. I would expect he might grab at LDK once it hits $60.

There is the "Tape" and there is momentum trades. They do well, if you are skilled or lucky. Getting out of a trade is as important as when you enter. I like to leave early on most trades, I do not need to make all the money. As well I am often early on the Macro view of sectors and investments long term. Asking myself the trend 10 years from now in my review of a company gives me time and advantage. What I am learning is how to make that viewpoint meet the market in a 12-18 month time frame.

There is something interesting happening with the markets here at home currently, and I think 70% of the investors will miss this due to myopic views and daily doses of financial performance reviews by the "experts".

Just a stab in the dark here........................but if I were to take a guess, Gudork is short (minded) LDK

Fair enough Gukdorak, and yes, nobody can be totally right about this unless they are trading from the inside. I can say I have little faith in LDK's management, but do like their taste in auditors. Things can be hid from auditors, so that's a variable. I have a stop out at 5% above my cost, so as to avoid damage or ruin to my portfolio, but my entry was at a very low point. Overall though it seems as if they would have taken ownership of this if it were a problem, given the contarct log they are building on.