Renren $RENN has been running downhill since its debut in May, from $20+ to $6.23. It’s trading at less than 1/3rd of its high on opening day. I am not surprised due to the overall market pulling back to major moving averages and support levels but the main reason is due to Chinese stocks taking a beating lately.
Several China based stocks have been scrutinized for faulty accounting and some shady government practices such as censorship. Renren takes that a step further due to a sudden resignation by a key board member before the IPO (this board member was the chief of its audit committee).
Renren is consider by many as the “Facebook” of China, with a population base at least 3-4 times grater than that of the United States. Renren is a social networking Internet platform in China that generates revenues from online advertising and Internet value-added services.
Revenues and total cash from operations have been increasing year-over-year but net income has not lived up to expectations. It does appear that the company has a boat load of cash and future earnings pan out as such:
FY 2011: -0.03
FY 2012: 0.03
FY 2013: 0.13
With all of that said, I wouldn’t touch this stock with a 10-foot pole since it doesn’t come anywhere near my technical criteria but something keeps pulling me back. I hope it’s not a gambling tingle but more of a hint of intuition knocking. I almost want to compare $RENN to $SIRI when it was trading in cents. $SIRI was crap and still wasn’t turning a profit but my intuition said to buy, at least a few thousands shares. I didn’t and now it’s up nearly 10-fold from that point. I know traders that did and have been paid off handsomely.
So Is RENN teasing me because of my SirusXM miss or is intuition correct again in telling me that this stock has been unfairly beaten down in a rough Chinese stock environment and overall market pullback?
Intuition says to grab shares and hold as a value/ rebound play. My “technical” rules say to STAY AWAY.
I think I’ll grab shares on Monday and tuck them away for a while.
Let’s see if breaking the rules comes back to haunt me. My leash will be slightly larger because my overall position size will be smaller than normal.
To give you an idea of a couple of stocks that my screens and rules are pointing me towards, check out $FIO and $BBRG. They are new IPO’s with earnings and sales growth with prices making new highs.
Let’s revisit all three in 3-6 months.
I remember looking at AMZN during the beat down of the dot-com crash thinking there was value there as I loved AMZN as a customer, but could never build the guts to make the plunge (thinking of course it was going to go lower…).
Stocks like RENN make good dollar-cost-average material; put a little in at the start of each month and build it up. Add more when the technicals start moving (if they do!) in your favour.
Declan
6/27, 10:00am: I placed the first test buy, 1/4th of my total (potential) position size. I’ll add more shares if the first batch starts showing a profit and the chart shows a bottom, technically.