I am not big on updates on Portfolio stocks for no reason.  A little over a month ago I said I was purchasing XING a Chinese Net Net Stock.  I purchased the stock at $1.91/share and  in the last five weeks the stock has risen to $2.73/share (at close of market today) or about a 42% increase. I am not complaining, but I found myself asking, Why?

If you read the google Finance news on XING, you would say nothing recently was really going on. Just the usual Momentum stuff. Back in December they had an article where XING sent out a Press release with  their unadited results of their “molybdenum mine… and actual operating results are better than our initial forecast.” This was important because the CEO Wu is not much trusted by many shareholders and it wasn’t clear the recent purchase of China Luxuriant Jade Company and XING’s foray into Molybdenum mining was gong to produce revenue. Any revenue. The press release shows that they did and that it was profitable. A sigh of relief from some investors, including me, since the Molybdenum mining operation was one of the items I considered a risk.

Yahoo finance showed even less information. Nothing since December. Sometimes these small cap Net Net stocks will rise on no news, particularly if they are thinly traded like SODI.

But when I dug a little deeper I think I found a reason for the increasing volume and price movement. An article on Seeking Alpha entitled Molybdenum Poised for Massive Comeback, spoke of the under performance of Molybdenum or Moly as it is known affectionately. The price discrepancy when compared to copper was attributed to the fact that Moly has no futures market. This will all change next month, according to the article, when Moly gets a futures slot on the London Metals Exchange (LME). The thinking is that speculators may come in and restore the “normal” price relationship to other precious metals. The Seeking Alpha article says, “Moly a year ago was trading at 8.5x the price of copper, now it’s only 3.5x the price. Moly to nickel was at 2.6x, now at 1.4x. At molybdenum’s peak in 2005, it was trading at a price 28 times that of copper.”

Since XING has been repositioning itself as a mining company, as it divests itself of its phone operations, the price rise may be anticipating some future commodity heat from Moly when it becomes traded as future. I don’t know anything about precious metal trading and have no way of evaluating the company on that basis. I do know that it XING is still a NCAV company and despite the run up in the last month still has an estimated Net Current Asset Value of $4.28/share. This means there is still the required 33% discount off of Net Net value, for your margin of safety.

Disclaimer: As I stated I own 1500 shares of XING. I am not a finance expert, I am a film and television producer. I strongly urge anyone who is interested in XING to do your own research before you invest.  Make sure you understand why you are investing in a company and when you will get out of the investment.

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