Geely Has Seen The Market Shift From Hesitancy To Hope

I've liked Geely (OTCPK:GELYY) (0175.HK) for a while, and I thought the company's refreshed line-up would reignite growth in 2016, but this Chinese auto OEM is doing much better than I'd expected. Sales growth has been well ahead of overall trends in China on the strength of new SUV models like the Boyue and Emgrand GS, and next year will see the first launches of products designed on a joint platform with parent company-owned Volvo.

The Hong Kong-listed shares are up almost 130% since my last update in late February (while the U.S. ADRs do trade, the Hong Kong shares are much more liquid). While the strong market reaction to Geely's new products has led me to significantly increase my fair value since then, I think you have to make some pretty bold assumptions to consider these shares fundamentally undervalued today. A lot could still go right for the company, but the risk-reward balance isn't as favorable as before.

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Geely Has Seen The Market Shift From Hesitancy To Hope

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: Cummins Getting A Lot Of Benefit Of The Doubt

With the stock up almost 40% from its October 2012 lows and less than 10% from its 52-week high, it seems safe to say that investors are feeling pretty good about Cummins' (CMI) recovery prospects. Though I have little doubt that anything is changing in regards to the company's top-notch quality, I do wonder if investors are too quick to assume that emerging market growth is just going to go back to where it was. I would love to accumulate these shares at attractive prices, but today's valuation already assumes a pretty optimistic scenario.

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Cummins Getting A Lot Of Benefit Of The Doubt

Investopedia: Should Investors Brake For SORL Auto Parts?

Although there are a few exceptions here and there, it seems safe to say that American investors' indiscriminate obsession with all things China is long past. A spate of accounting scandals reminded investors of the corporate governance risks, while inconsistent (if not outright disappointing) performance dispelled the fantasy that anything Chinese was synonymous with instant growth. SORL Auto Parts (Nasdaq:SORL) saw both the rise and fall of that love affair.

This Chinese commercial brake company saw the occasional run on its shares on the back of breathless "China will change everything" nonsense, but the stock has since come down significantly, as retail investors got bored and issues within the Chinese economy slowed growth. Here and now, though, this may be the sort of obscure stock that patient investors want to check out more thoroughly.

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http://stocks.investopedia.com/stock-analysis/2012/Should-Investors-Brake-For-SORL-Auto-Parts-SORL-FDML-HON-TRW0404.aspx

Investopedia: Cummins Finds Another Gear

It looks like truck engine maker Cummins (NYSE:CMI) is back to its old ways by posting eye-popping growth and handily surpassing estimates. As the global truck market continues to grow, it looks like Cummins should have plenty of opportunities to continue to grow its already impressive business.


Better Results Down the Line at Cummins
Cummins seems to be one of the relatively few industrial companies not seeing any real margin pressures in the final results. Sales jumped 56% from last year's first quarter (though declined 7% sequentially), led by 68% growth in the engines business. Growth was strong across the board, though, as power generating was up 54%, components were up 47% and distribution sales rose 35%. (For more, see Truck-Makers Still Hauling In Profits.)

As mentioned, margins were not problematic. Gross margin rose 50 basis points from the year-ago quarter, while operating income doubled and those margins grew more than three full basis points. Also encouraging is that those margins grew sequentially - gross margin rose a full point on that basis, while operating margin grew about 70 basis points. (For more, see The Bottom Line On Margins.)


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http://stocks.investopedia.com/stock-analysis/2011/Cummins-Finds-Another-Gear-CMI-TTM-PCAR-ETN-WNC-TEX-TEN0427.aspx

Investopedia: Can China Yuchai Rev Up Your Portfolio?

Sometimes it seems that investing in China is all about finding the "Chinese version" of some successful Western company. Gome is the "Chinese Best Buy (NYSE:BBY)," Lenovo is the "Chinese Dell (Nasdaq:DELL)," Zhongpin (Nasdaq:HOGS) is the "Chinese Smithfield (NYSE:SFD)," etc. 
With that in mind, then, is China Yuchai (NYSE:CYD) the "Chinese version" of Cummins (NYSE:CMI), the successful Indiana-based diesel engine manufacturer? More to the point, as the risks of investing in Chinese stocks become more widely-known, is this a name investors can trust as a play on the ongoing growth of China's industrial and transportation sectors? (For more, see Investing In China.)

A Solid End to the Year 

China Yuchai reported that fourth quarter revenue rose almost 24% to about $607 million, largely on the back of a nearly 14% increase in unit sales. While pricing was strong in general, the company also benefited from an going migration towards heavy-duty engines making up a larger portion of the sales mix.

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http://stocks.investopedia.com/stock-analysis/2011/Can-China-Yuchai-Rev-Up-Your-Portfolio--CYD-CMI-CAT-F-GM-HMC0401.aspx