Seeking Alpha: Geely Automobile On A Better Road

Following Geely Automobile (OTCPK:GELYY) (0175.HK) is an interesting experience, as the volatility gives you a lot of opportunities to make buy/sell calls. Back in June of 2015, I thought that Geely's shares could approach $12/ADR as the company started delivering the results of its restructuring and new product launches. The shares did come close to that level before year-end - before concerns about sales momentum, subsidies, the health of the Chinese consumer, and assorted other issues led to a nasty decline.

From an operational standpoint, I think Geely is in better shape than the market valuation suggests. At a minimum, I wouldn't overlook the fact that Geely has shown it can develop new models that are competitive with foreign/JV models. There are definitely valid concerns here, including the corporate structure, the heavy influence of government subsidies, the health of the Chinese economy, and the healthy of the export business, but the shares seem to more than reflect those concerns. If you have an elevated appetite for risk, this could be a name to consider.

While the ADRs do trade from time to time, I would recommend investors consider the far more liquid Hong Kong-listed shares.

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Geely Automobile On A Better Road

Seeking Alpha: Geely Automobile Back On The Right Road?

I wasn't too keen on Geely Automobile (OTCPK:GELYY) back in December of 2013, and the performance since then hasn't exactly made me regret that call. A stale lineup and poor dealership channel have both contributed to an ugly trend in unit volume, sending the shares down 30% at their worst point since December and down 17% even after a recent rally.

If management were simply fiddling while the business burned, I'd scratch it off my list and pay no further attention to it. Management is addressing many of the company's problems, though, and I'm cautiously optimistic on what these changes could mean for the future. I realize that forecasts of high single-digit revenue growth and low double-digit FCF growth don't exactly echo "cautious optimism", but I think the company's closer collaboration with Volvo, rebranding strategy, and dealership improvements can lead to meaningful improvements. "Can" and "could" are still the operative words here, though, and this is an idea only really suitable for the risk-tolerant investors in the crowd.

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Geely Automobile Back On The Right Road?

Seeking Alpha: Can Micro-Transport Be A Major Driver For Kandi Technologies?

There's a lot of weirdness around Kandi Technologies (KNDI). These shares have risen more than 50% in the past year and about 340% over the past two years on the sizzle of the company's opportunity and potential in all-electric vehicles (or EVs) within China, even though it has never been particularly successful at selling electric ATVs, go-karts, or other products, let alone passenger autos. Like many Chinese companies, it employs a Byzantine holding company structure, employs a largely unknown auditor, and used a reverse merger to list its shares in the U.S..

On the other hand, this company boasts a joint venture with Geely (OTCPK:GELYY), one of the largest domestic auto manufacturers in China. Together, these companies are addressing a "micro-transport" market in China that could support hundreds of thousands of vehicles without needing to compete directly with the likes of Tesla (TSLA), BYD (OTCPK:BYDDY), BMW (OTCPK:BAMXY), and a host of joint ventures between Chinese domestics and larger global car companies. While working Geely doesn't guarantee the quality of Kandi, it does offer some assurance that there are real products and a real market here. While I think the fair value is far beyond murky and very difficult to quantify at this point, as "opportunity stocks" go, Kandi at least has a good story to tell.

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Can Micro-Transport Be A Major Driver For Kandi Technologies?

Seeking Alpha: With Geely Auto, Opportunity Comes Ugly

Sometimes there are good reasons that a stock looks undervalued. In the case of Geely Automobile Holdings (OTCPK:GELYY), you can take you pick as to why analysts or investors may not like the company. The company has a reputation as a low-end manufacturer of cheap cars with dodgy quality, its tie-up with Volvo doesn't really offer much brand value in China, and its earnings quality is definitely lacking.

All of those are, I believe, fair points to flag. What is just as important is to look at what could go right. The company has been investing considerable resources into R&D and has not only closed the quality gap on its domestic peers, it's closing in on foreign JVs. The company is also actively working to refurbish and refresh its line, with a move toward higher-end brands and models. Geely is also the second-largest exporter of cars from Europe and it is my belief that China is not far removed from following in the footsteps of Japanese and Korean car manufacturers in terms of entering Western European and U.S. markets.

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With Geely Auto, Opportunity Comes Ugly

China's Potash Hypocrisy

If nothing else, China has chutzpah. China's government put out a statement early on Wednesday indicating that it was paying "close attention" to the possibility that BHP Billiton (NYSE:BHP) would succeed in its bid to acquire Canadian fertilizer giant Potash (NYSE:POT). In mentioning that a so-called BHP potash monopoly would "harm global interests" and that prices are already "unbearable" for Chinese farmers, it would seem that this is a not-so-subtle shot across the bow for not only BHP, but perhaps Canada as well. 

Given that BHP Billiton has a significant stake in Chinese potash company China Sinofert, China actually does have some influence in this process and could certainly apply pressure to BHP through that investment. Moreover, there is still the possibility that a Chinese investment fund or company could make a competing bid for Potash - even as large Chinese companies seem reluctant to commit to much interest in such a move.

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A123 Needs To Recharge

What is there to say about the high-tech battery sector today? Advanced lithium batteries are still the most likely clean-tech option to get traction in the auto sector, but large-scale rollouts are still off in the distance. In the meantime, investors have certainly turned on the smaller, riskier names in this sector and sent the stocks down while the overall market has done alright. 

The Quarter that Was
A123 once again came up short on the revenue line this quarter, as sales totaled a bit under $23 million. Transportation revenue (which is close to half of the total) was flat sequentially, while consumer revenue and service revenue both grew nicely. The company did not record any electric grid revenue this quarter, and the company shipped 10% fewer megawatts on a sequential basis. 


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Does A123 Have The Juice?

Investing in potentially game-changing technology comes at a cost. By the time you know the winners from the losers, a large percentage of the gains are already in the hands of those investors who stepped up when there were more doubts than answers. On the other hand, investing in these companies is a virtual guarantee of volatility and runs a serious risk of capital loss. 

All that said, battery maker A123 (Nasdaq:AONE) in one of those plays that may be worth the risk. Although the stock has been weak lately and first-quarter earnings will not help matters, these are still early days for the company, the technology, and the industry as a whole.  

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