Muddy Waters is out today with its latest on one of its recommended Chinese shorts:
Focus Media Holding Ltd. (FMCN)'s bizarre acquisition of a ginseng plantation at the Russian and North Korean border illustrates that FMCN's acquisitions are not kosher. The most troubling aspect of this acquisition is that the selling shareholders, who had purchased the plantation only five months earlier from the founders, included at least one FMCN employee. Strangely, this company seems to have no operations; yet, most recently reported a net profit margin of 48.9% on $1.5 million in revenue.
We therefore wonder what purpose the ginseng plantation entity serves, and whether there are ongoing improprieties associated with it.
The Strategy of Ben Graham – Warren Buffett’s Mentor
From 1923 to 1957 Warren Buffett’s mentor, Ben Graham, followed a strategy of investing in net-nets. He said: “It always seemed, and still seems ridiculously simple to say that if one can acquire a diversified group of common stocks at a price less than the...net current assets alone…the results should be quite satisfactory. They were so in our experience, for more than 30 years.”
Today net-nets are rare. They are collected under GuruFocus’ Net-Net Screener. GuruFocus also publishes a monthly newsletter which recommends the safest net-nets. All of these are included in GuruFocus Premium Membership.
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