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Blast Investor Real-time Plus           by Henry Lu

SOHU Trouble

08/13/2004
 
SOHU got hit today with 1 year suspension penalty from China Mobile.  I made mistake of under-estimating wireless business risk of SOHU many months ago. Now the pain is here with lower stock price.  I believed Charles Zhang's  precdiction that MMS or 2.5 G  business will make up the profit loss of SMS later this year.  In reality the risk of wireless business from competition, regulation or concentrated customer (2  mobile manopoly company) is much higher than I believed.

The good part is that the current suspension is purely due to commercial contract violation, not due to more serious legal or political risk such as politics or porn. Therefore, SOHU still has a chance to lift the ban earlier than 1 year.  Furthermore, the current revenue % from wireless is much less than before from now on.  With much less reliance on wireless business, the wireless business risk going forward is much less now.

This current setback does not affect SOHU Ads business. SOHU valuation now is very cheap compared to its growth prospect.
Ads business is likely to get 0.80 a share in 2005. SOHU is trading at 17.5 x  low forward earning of ads alone at $14 a share.
Game is unknown, but potentially can get up to 0.1 - 0. 2  per share.  Wireless can  get 0.20 per share  assuming haircut 50%  cut  from here.  Therefore, SOHU is likely to hit $1 or more per share earning in 2005.  SOHU currently price of $14 is so low that  downside risk is limited by the valuation.  Further more,  Although Charles Zhang was mistakenly too optimistic on MMS,   I like SOHU management in expanding  game and and search business.  I like  the recent SOHU insider buying.  I  continue to believe in Charles Zhang or SOHU.

Conclusion

I am holding on to my SOHU shares.  With the risk and uncertainty associated with China stocks, It make sense to limit this 2 stocks to a small portion of total portfolio.   SOHU + NTES only account for  1/5 of my portfolio and I do not plan to add more either for the 2 position at current price.  


Blast Investor Model Portfolio Update

(as of 8/13/2004)

Blast Model Portfolio - Performance
Portfolio inception date
 12/31/2003
Portfolio inception value
 $89,000
2004 YTD Performance
 6.39%
S&P500 Index 2004 YTD Performance
 -4.53%

Blast Model Portfolio - Open Positions
Symbol Last Shrs Value Paid Gain
ADGO.OB 0.98 9,000 $8,820.00 0.78 $1,790.00 +25.46%
CHK 14.40 1,100 $15,840.00 13.90 $540.00 +3.53%
HRB 48.79 350 $17,076.50 54.00 -$1,833.50 -9.70%
LIBHA.PK 4.00 1,200 $4,800.00 5.10 -$1,330.00 -21.70%
NEN 69.25 200 $13,850.00 54.00 $3,040.00 +28.12%
NRG 27.40 670 $18,358.00 23.05 $2,904.50 +18.80%
NTES 29.76 350 $10,416.00 36.60 -$2,404.00 -18.75%
SOHU 14.68 700 $10,276.00 24.882857 -$7,162.00 -41.07%
WLL 23.00 600 $13,800.00 22.683333 $170.00 +1.25%
$$CASH -18,549 -$18,549.00 - - -
10 symbols Total(USD):
$94,687.50




Model Portfolio Transactions
Date [Ascending] Type Symbol Shares Price Comm Amount Notes
Dec 31, 2003 Cash In -
-
-
-
 89,000.00 Inception
Dec 31, 2003 Buy WRP 700 18.30 10.00 12,820.00
-
Dec 31, 2003 Buy HCA 500 42.00 10.00 21,010.00
-
Dec 31, 2003 Buy ADGO.OB 22,000 0.78 10.00 17,170.00
-
Dec 31, 2003 Buy LIBHA.PK 1,200 5.10 10.00 6,130.00
-
Dec 31, 2003 Buy SOHU 500 28.60 10.00 14,310.00
-
Dec 31, 2003 Buy NTES 350 36.60 10.00 12,820.00
-
Dec 31, 2003 Buy HRB 350 54.00 10.00 18,910.00
-
Dec 31, 2003 Buy NEN 300 54.00 10.00 16,210.00
-
Dec 31, 2003 Buy CHK 1,100 13.90 10.00 15,300.00
-
Jan 26, 2004 Sell WRP 700 17.40 10.00 12,170.00 - 5%
Mar 5, 2004 Buy WLL 350 22.10 10.00 7,745.00
-
May 10, 2004 Buy SOHU 200 15.59 10.00 3,128.00
-
May 10, 2004 Sell HCA 250 39.97 10.00 9,982.50 - 4.8%
May 24, 2004 Sell ADGO.OB 13,000 1.55 10.00 20,140.00 + 98.7%
Jun 17, 2004 Buy NRG 670 23.05 10.00 15,453.50
-
Jun 17, 2004 Sell HCA 250 40.30 10.00 10,065.00 - 4%
Aug 2, 2004 Sell NEN 100 69.95 10.00 6,985.00 + 29.5%
Aug 5, 2004 Buy WLL 250 23.50 10.00 5,885.00
-