Saturday

Did Uncle Jim Buy China Milk Group?

Post a Comment January 3, 2009 – 2:51 pm |   | Permalink |  Print This Post |

Is Jim Rogers Drinking Chinese Milk?

Jim Rogers has made it known that he has been bullish on China, in particular stocks in agriculture and those associated with the environment. In a recent interview, he gave us more clues to his purchases, narrowing it down to Chinese companies listed in the Singapore and Hong Kong Stock Market (He fell short in telling us the names of these companies). We set off to some detective work trying to identify Singapore-listed Chinese stocks in the agricultural and environmental businesses (Singapore because there are less Chinese companies listed compared to Hong Kong, and because it is easier to access from here in Australia)

Of the 30 Chinese companies identified, we have reason to believe that China Milk Group is one of the companies Uncle Jim have been accumulating based on fundamentals. Like everything else, it’s share price has taken a hammering - down from a 52 week high of $1.26 to its close on Friday at $0.38. It’s 52 week low is not far at $0.28. We know that Uncle Jim loves stocks that have been unfairly punished, trading in sectors which have been hit by global factors beyond managements control (based on his interview recently with Bloomberg, he tells us that he has been buying airlines because of the aforementioned reasons). The Chinese Milk scandal recently involving Melamine have resulted in the closure of some of China’s biggest dairy producers. Whilst confidence in Chinese Dairy products may be affected in the short term, China Milk Group have been cleared from any wrongdoing (so far).

It is a profitable company trading near 52 week low; fits the Jim Rogers agriculture bill, has been punished unfairly due to an industry-wide scandal, and has dozens of its competitors (including China’s biggest dairy producer, Sanlu) implicated in the recent Melamine scandal. In our opinion, even Uncle Buffett would approve of our recommendation!

Disclaimer: The author does not (yet) own shares in China Milk Group. Looking to buy on weakness.