Trader Haven – KNDI Christmas … A lump of coal or a Once in a Lifetime Gift?

I RECEIVED AN EMAIL ON CHRISTMAS DAY  FROM ART PORCARI, THE MOST-KNOWLEDGEABLE $KNDI FOLLOWER IN THE UNIVERSE !

AS A $KNDI FOLLOWER , I FEEL COMPELLED TO FEATURE HIS THOUGHTS IN MY BLOG !!!

………………………………………………………………………………………………………………………….//……………………………………………………………………………………………………………………..

I posted this, this morning on the KNDI Private Chat Board.  Be sure to find the time to read it. I suspect it could be valuable to you.

Happy Holidays to All.

………………………………………………..//……………………………………………………………..

I spoke with Art today + he agreed to let me edit and dramatize his marvelous post… And also , to feature it in my blog !

BTW, I have traded $KNDI for almost a decade… and currently have a long position.

 

***  btw  – It is  57 years since  I joined Dean Witter in 1962…And although I  left the formal financial business,

I’m always close to Stocks, their charts + their stories !

(Jack has added these charts )

10 YEAR KNDI CHART

6 MONTH KNDI CHART

First: A Comment and Opinion on Todays Market Overall market

Without a doubt, it has been a crazy and devastating year for most investors. Jan. 3 will be my ***45thAnniversary as a Market Pro and Watcher after joining Merrill Lynch in 1974.  When I joined Merrill the Dow had just pierced 1000 on the upside in 1973 A year later it reached a low of 576. Luckily I had just gotten my license a couple of months before the market bottomed. I was able to open several new accounts by prospecting only for bonds before it bottomed,  so I wasn’t tainted with the market decline, just hopeful for its forward prospects. Merrill required each broker to be trained for around eight months depending on when you joined the firm. So one of the first accounts I opened after getting my license was for a married couple, both Psychiatrists who had some cash in their newly formed Keogh account. ─ so I talked them into buying a few hundred shares of RCA at $9.25 paying a $1.10 dividend and ITT at $11.125 paying a $1.50 dividend. As it turns out, both of those trades were at each stocks multiyear rock bottom price.  Why were they down so much, because the prime rate was around 12%!  Up from around 6.5% when the down hit 1000 for the first time a year earlier. So yes, there was a fundamental reason for the Market to have halved.

Since that time I have seen a lot of serious bear markets. Each had a solid fundamental reason causing the market slide.  This market is different. This market has been “talked” down. Mainly from a political point of view based on “Party Interests” in the 24/7 news cycle. Both TV and Social Media have been used extensively which in turn gives Wall Street deep pocket professionals ammunition to use some of the crazy highly leveraged ETF’s and other Derivatives, both long and short,  to cause 100 point swings in a minute or less just by working in unison. To keep it simple. You see each time an ETF fund gets new buyers and sellers, the computers actually buy or sell a respective amount of each of the underlying shares.  Once the momentum starts in either direction, it can be easily manipulated, at least to a point, by these funds and their High-Frequency Trading techniques.  This wouldn’t be so bad if it weren’t for human psychology.  Preservation is important, so the shorts know” it is a lot easier to scare someone out of a stock or market than to scare them in.” For that reason, market drops usually happen so much faster than market gains. Looking at this market right now, you have another force favoring the shorts over the past few weeks and that is a lot of tax loss selling across the board due to a lot of cap gains that were generated earlier in the year. As I mentioned In a prior post, most of this ends by Christmas Eve.

Re. my opinion on the overall market.  There is too much negativism without fundamental reasons.  I am no expert on the real estate market, but obviously, the move up in mortgage rates gives concern and slows down home buying. When home sales and prices drop, the media is all over it, blaming it on the Fed for interest hikes. or just fear of long-term commitment in the housing sector. While this has got some merit, my personal feeling is home sales drop on average is more caused by the new tax rules limiting write-off to $10k.  Of course, most of the drop is in the highly taxed states like CA, and the Northeast corridor. But then again, that is where the controlling stock markets are located.  Speaking of interest rates the Ten year Bond is at 2.79%, right about where it was last January and 45 basis points below its recent Nov Election day high of 3.24%  despite of the recent rate hike. Other factors causing this bogus decline is the rapid price oil drop.

Crazy as it sounds,  “Back in the Day”, bear markets usually were started with ridiculously high priced oil and gold galloping up. In other words inflation, the almost universal cause of bear markets.

None of that here. I guess it is possible that all the “high-tech” in the markets today are speeding up anticipation, but at the rate this is going, if a recession is “in the cards”, then it looks like it is going to be over before it begins.  But then, what do I know? It’s been a long time since I have been a Market Pro.

NOW, ON TO KNDI…

Now I am just an old – fashioned believer, that,  if you pick a young company like KNDI …

*with Incredible Management,

+ in a dynamic multi-trillion dollar industry in which it was a “first-mover” ,

+ it is priced less around ten years later, though 25 times bigger,

+ more profitable than not,

+ trading at the same price as when it began,

+ at a 30% discount to book value,  which BTW is up over 50 fold from the beginning,

then that  is living proof that we must be living in a parallel universe* where all historical market rules are reversed.

* A parallel universe is a hypothetical self-contained reality co-existing with one’s own.

But speaking of KNDI… In 2013 it had a horrible year losing ($.61) a share reported on Mar. 30, but that didn’t stop the stock from hitting $22.44 a share just a couple of months later.

But look at 2014, KNDI had positive Net Income of .29 a share and the stock hit a low of $5.00 shortly after the positive earnings were reported in 2015.  (Parallel Universe?) 

So here we are on Chrismas eve and the stock interday hit a multi-year low of 3.54, well under its $5 book value and even lower than the $4.50 price it started trading at in 2007. BUT, IT Did manage to be one of the few NASDAQ stocks that went up in the 700 points down market yesterday.

A Lump of Coal, or Once in a Lifetime Gift?

Well for those of us who have been in it for a while and have no cash to buy more, I guess for now it is a Lump of Coal. But IMO, (for whatever that’s worth) if you at least have staying power, Diamonds come from coal and EVERYTHING that has been coming out from the Company, at least in SEC filings, China Media and Conference Calls are now signaling a dynamic growth spurt has  begun.

Last Quarters’ revenues of almost $39 million, (Double the $20 million JV revenues thanks to diversification) was the best in a year and a half and were it not for a large one-time charge for R&D, KNDI would have been Profitable.

For the first two months of this quarter, the 3800+ EVs sold (all new versions) already beats any quarter in almost two years and 4000-6000 looks likely to be added to that number in December which even at the low end would beat last years sales by over 20%.

JV revenues alone for just the first two months of this quarter should triple last quarters and at the low end should reach $120 million or a sextuple over last quarter, And a jump to almost $200 million for the year …for three consecutive years of JV Growth.  And BTW, be very profitable.

tThis is all just great fundamental growth. (A warm and comfy to assure continued life for those who can hold, but as of recent years, no help to the stock.) BUT, As I clearly walked through in my recent KNDI article, from China Media articles out this past week, it is looking very likely…

… that sometime between now and Jan. 10th, KNDI JV will finally be awarded the Holy Grail of EVs in China, its own Production License.

From these articles, it becomes even more exciting in that as Mr. Hu told us in an earlier Conference Call, the rules for receiving a future production license were about to become much more difficult to receive. So Difficult that at this moment, no EV maker waiting in line can likely qualify until the end of 2019 UNLESS they are “Grandfathered” due to a new minimum 30,000 unit past 2 year EV Requirement about to be added.  Not even KNDI can likely reach that “bar”,.

HOWEVER, as mentioned above, Mr. Hu knew this was coming when he told shareholders that he and Li Shufu were already promised to be approved under the old rules.  This was likely confirmed as reliable by both Hu and Li when they decided to meet the May “last requirement” of putting in an additional $163 million in paid-in capital to the JV earlier this year.

Could the surprise jump to close on the High of the Day Monday be signaling an award as soon as later this week?

Hu Knows?  * Chuckle here @ the pun !

My personal druthers are that it waits until all tax loss selling is over and happens in early January.

But either way, irrespective of what the rest of the US stock market is in for, once this happens and KNDI JV gets that award…

… the wheels will be in motion to fulfill my $24 a share prophecy for late next year. If for no other reason than pollution, China has no choice by to fully support EVs.

Bottom Line. 

In all my 45 years in the Market, and tens of thousands of hours I have spent getting to know KNDI and Management, I have NEVER seen a more grossly undervalued stock … EVER. 

Hu has CRUSHED not just boulders, but Mountains in carving the path to KNDI’s reemergence as an industry leader in this multi-trillion dollar industry.

As I foretold in a prior article this past fall, KNDI has crossed the Valley of Death and the past three months EV sales growh along with other revenue lines have confirmed this.

(OPINION NOW, NOT ADVICE, as Art is no longer a licensed Broker. )

If you are concerned about the market as a whole, sell some of your other stock that concern you and buy more KNDI. If you have cash, Buy more KNDI. If not, then do whatever it takes to at least keep your existing position. DO NOT be concerned about the record 6.6 million shares short position, by far the largest it has ever been with the stock below $4.  Even in the past, when it was this size or larger, a large portion of the short had to do with millions of Underwriters Warrants outstanding which were being hedged against. They are all gone and have been for a few years.

The Short Right now in KNDI is totally UN-HEDGED, not even by the options market because the open interest in the options market is already fairly well balanced out with its outstanding puts and calls. They may have a lot of money to play with due to the rest of the market decline, but re. KNDI. ..

That’s OK,…THE KNDI SQUEEZE IS COMING !

KNDI has IMO always been a “Diamond in the Rough”. 

IMO, again …  It is about to become a Crown Jewel in a portfolio for any investor with common sense and resources to play.

END

COMMENTS

WORDPRESS: 0
DISQUS: 0