iBooyah.com Investment Matters

Without going into too much on XFML, our position today is we would stay away from any new and unproven Chinese company.  Our primary reason is the Chinese economy could very well be slowing after years of unprecedented growth. While XFML does hold a lot of potential, this would not be a good time to buy.  If the Chinese economy does cool, XFML could really be in trouble as the nature of their business is dependent on a growing economy.  If the economy does not continue to grow, there is very little need for advertising firms such as XFML.  We realized the Chinese market is large and the potential is immense, but this is one stock we would not jump at just because it is a Chinese company.

First Financial Bancorp. (FFBC):  Our main issue with small bank such as FFBC is the low trading volume.  Why is this important? In our view, it is very important that a stock has enough volume so we can quickly liquidate.  The last thing you want is not being able to sell your shares if you need to get out quickly.  For some reason, most people fail to consider this important factor when buying stocks.

In comparing FFBC’s P/E against its peers such as USB and FITB, it is apparent FFBC is expensive in terms of its valuation.  This does not necessary mean it is a bad thing.  It just means Wall St. expects this company to grow at a much faster rater than its peers.  The risk here is if the company does not exceed Wall St. expectations, the stock will likely take a beating. 

Bottom line, we would NOT buy this stock at this level.  Although it is a $15 stock, this is not a cheap stock.  If you are looking for a bank stock, consider US Bancorp (USB).  We like this stock much better as it is value more closely within the industry average. Furthermore, the company is financially strong with diverse revenue stream.  Trading with a P/E of 13 and EPS of 2.61, USB is actually much less risky and you will not have to worry about the lack of volume.