Chinese, Resource Stocks Pop

The rally in the stock market continues to cause big single-day gains in many stocks. General Steel Holdings (GSI) and Spreadtrum (SPRD) both popped 19 percent today; both are in my China fund. Massey Energy (MEE), held in my Best of Funds fund, climbed 21 percent. Teck (TCK) added another 13 percent and is now up 125 percent in the Best of Funds and 350 percent in the Green Dragon fund.

This has the hallmarks of short-covering or market melt-up behavior, but I've been early with my shorts in the Best of Funds. Many investors are looking for at least a correction, but none has arrived. Right now, I think this could be typical "buy the rumor/sell the news" behavior, and we might see a decline when the stress tests are released on Thurday, or possibly the day before.

P.S. My short fund continues to get annihilated.

Spreadtrum Popped

I mentioned Spreadtrum (SPRD) stock back in January, when it was trading for just under $1.00 per share. I was watching it because it has over $1 per share in cash. Last Thursday, March 26, Samsung selected the company as a chipset provider for mobile phones. It's good news because the company's future customer base was in doubt.

Shares jumped from $0.95 on Thursday to $1.79 on Friday, but shares fell to $1.50 today. I entered into a half position in my China Fund, the positon is up about 37% from the $1.09 entry. Not great relative to other chip stocks, but not bad relative to the overall market.

Finding Bargains?

With shares down 60-80% there have to be some good buys available. One stock I'm eyeing is Spreadtrum (SPRD), a Chinese semiconductor company. As of today, the company sells for $0.96, but had more than $1.50 per share in cash at the end of September.

My Marketocracy China fund continues to move up the rankings, thanks to a timely exit in November 2007 when I moved to 40% cash. Currently the fund has less than 40% of assets in equities, as can be seen by the milder losses in the one-year chart. I wish ProShares Ultra Short FTSE/Xinhua China 25 (FXP) was a better vehicle to short with, but overall the returns are solid, especially compared to a straight China equity fund.