Reply to Reader on LongCheer

Hi niversphere:


This is XXXXX25, anyway, in your own opinions, what else must I look at
into investing into a particular company?
Like what queen mention, Longcheers seems to be in a very competitive
industry. Have you any idea how are they going to increase revenue and
profit?
I would appreciate if you could give me some pointers where to look for
relevant information?

Thanks

Regards
XXXXX25


My Reply: >>>>>>>>>>>>>>>>>

My Investment Philosophy

All investors should have an investment philosophy and here are mine as follows :

1. A concentrated portfolio of no more than 5 holdings at anytime.
2. Business must be highly scalable. This simply means that the company must offer me good growth in its own core business.

3. Management must be ambitious and capable to lead the helm to bring the company to greater heights. Setting up a business and growing the company are completely different issues and challenges to me.

4. Set high barriers to entry. Having high barriers to entry to me is not that important as it's probably pertained to the industry that the company is in. Ability to set up high barriers to entry is of greater importance to me.

5. Company must have its own R&D team. Needless to say, when we buy into a company, we buy into its future and not its past. R&D is a must to stay ahead of competition.

6. Business should be concentrated on its core business. Speaks for itself .

7. Good mix of products with a ready new line of products coming up.

8. Potential to be a multi-bagger.

9. Company must have a positive cash flow and preferably free cash flow.

10. A market leader in its own industry.

11. Ethical investing. No live stocks, gambling or moral degrading companies



LongCheer operates in a competitive industry which is a characteristic of a growing industry. Basic micro economics determines that common profits to be earn in the long run as competitors come into play and the industry develops from its growth stage, developed stage to its matured stage.

As LongCheer does not have an active Investor Relations site. Finding relevant secondary information would be a little more difficult. Try finding them on www.baidu.com

Management has reiterated their ambition to expand to the US phone market. Currently only those listed in US like TechFaithWireless has a presence in the US market. Check www.engadget.com

Had you done the market share research (see my previous post with a link) on LongCheer. You would realized that the market share of LongCheers' customers are small. This works both ways, either you can see it as great potential for growth or otherwise.

Take TechFaithWireless for example, their japanese customer(3 letters) had embedded an "insult" message in its phone dictionary selling in the Chinese market. Naturally, as expected their market share decreased and TechFaithWireless' performance affected as well.

It goes to show the dependency relationship between design houses and its key customers.

Management has since lowered shareholders expectations since it last result release and is seen as a smart move. Common sense dictates that revenue growth cannot continue at 3 digit growth. I would expect YoY and QoQ decrease in percentage increase, margins lowered as more competitions sets in the lower tier, but not a decrease in revenue.



Cheers
Niversphere.


*XXXXX25: Edited