Friday, October 3, 2008

Robert Hsu, POT and RIO

A couple of new trades closed by Mr. Robert Hsu for his China Profit Strategy readers.

The two trades are POT and RIO and they should be used in business schools to teach how NOT to invest.

In fact they are brilliant examples about how to turn 100% profits into break-even or losses.

Let's start from POT.

In his November 2007 issue of his China Profit Strategy newsletter Mr. Hsu introcuced POT with a big red title: A FERTILE NEW BUY: POTASH.

He also added a chart showing how POT moved from $24 to above $110 in the previous 2 years.

He was writing: I want you to buy POT under $120. I expect it to reach $160 or higher by mid-2008, which will give us a 40%+ gain from today’s price.

By mid-2008 POT actually went to $240, giving Mr. Hsu's subscribers an imaginary profit of 100%.

We can observe two different actions from Mr. Hsu:
  1. His stocks do not behave as he expects, and he loses money.
  2. His stocks reach his targets, he does not sell, and he misses profits.
Look at the chart for POT now.

Note that on June 26th Mr. Hsu was writing: Buy POT below $230. Two Hundred Thirty dollars!!!

I am not going to report what Mr. Hsu wrote in one year about POT, but since September 4th 2008 (Hold POT) he was not writing a single word about POT in his weekly updates.

Until his October issue of his newsletter where he told his readers to sell POT. If somebody missed the newsletter (dated October 1st 2008) and just got Mr. Hsu's email yesterday they will send POT today for a 22% loss.

I must say Mr. Hsu sold POT on September 30th at 132.01 for a 8.43% gain, but I am thinking about those of his readers who bought POT in June at $230... for them it is a -40%. And it could have been a +100%...

But in his weekly update, yesterday Mr. Hsu also told his paying readers to sell RIO.

He wrote: Global commodities have been hit lately... LATELY??? RIO is sinking since mid-May!!!

And again: Unfortunately, we have given back our huge gains in the stock just in the past three months. To protect us from any more losses, I recommend that you sell RIO.

What an ... (put the word you prefere here)!

Mr. Hsu bought RIO on April 2nd 2007 at around $37.60 ($18.8 split adjusted).

He wrote: Buy RIO under $40 ($20 split adjusted). I expect strong nickel and iron ore prices to push revenue, earnings and the stock higher. I think we’ll see the stock hit $50 ($25 split adjusted) (and possibly more) in the next year.

Not only RIO went to $25. It went to $44, for an imaginary profit of 134%.

In May 2008 Mr. Hsu was writing: So far we have a 123% gain in RIO, and I think there are more profits to come. Buy RIO when it is below $38.

Without giving too many details I can tell you Mr. Hsu sold yesterday at around $15.83, magically turning a 134% gain into a 15% loss.

Now RIO has a PE of around 6. get ready to buy it.

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