Yongye Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese fertilizer manufacturer Yongye International (Nasdaq: YONG  ) leapt as much as 17% in intraday trading before settling back down to a much smaller gain.

So what: The excitement today stemmed from Yongye's announcement of preliminary results for the first quarter. At this point, management sees first-quarter revenue clocking in at $50.2 million, which is more than double the first quarter of last year and well ahead of the $35 million that analysts were looking for. The company also affirmed its expectation of revenue in the range of $315 million to $325 million for all of 2011.

Now what: Obviously the news ended up ringing hollow for many investors as sellers chipped away at the big gains early in the day and left the stock with a fairly unimpressive gain. Like many other Chinese reverse-merger companies, Yongye has been under attack by short-sellers claiming that something doesn't smell right at the company. To the extent that the market believes short-sellers' claims, even impressive financial reports can lose a lot of their punch.

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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned Yongye International is a Motley Fool Global Gains recommendation. The Fool owns shares of Yongye International.  You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


Read/Post Comments (31) | Recommend This Article (18)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 11, 2011, at 3:52 PM, 123spot wrote:

    I thought the Fool owned shares of YONG, but I didn't notice a mention in the disclosure. Did they ever own them or am I just mistaken? Nor was there a mention that YONG was a GG rec. Did I gett that wrong , too, or has rec been rescinded?

  • Report this Comment On April 11, 2011, at 4:28 PM, millsbob wrote:

    i have the same questions as 123 -- what's up, Fools?

  • Report this Comment On April 11, 2011, at 4:44 PM, MAURIZIO400cc wrote:

    yea what's up?

    now someone's got something to explain.

    please Matt...

  • Report this Comment On April 11, 2011, at 5:42 PM, buffalonate wrote:

    The Motley Fool has put up tons of articles trying to pump this stock in the last 2 months. No one is buying that this company is legit. This stocks is trading really cheaply and if it was legit Yongye would be buying back shares like crazy but they won't. Epiq's shares crashed on a short attack and they bought back shares immediately because they knew they were cheap. Yongye won't ever buy back shares because there is nothing to the company but smoke and mirrors.

  • Report this Comment On April 11, 2011, at 8:04 PM, KatoPotato wrote:
  • Report this Comment On April 11, 2011, at 8:06 PM, MAURIZIO400cc wrote:

    now if anybody there at motley fool can read and understand english this lunatic buffalonate here has just accused you people of being a fraud and a scam, we all know that's just tipical of the criminal mind to accuse others of what they are doing. wheter or not you are going to prosecute this rat for libel that is your business, but to us of the community you own to do your job and share with us the information you have. explain, why there is no notice that the fool owns share of yong or that is a GG recommendation. I really hope you are going to say that it was a mistake, because the implication are all too clear otherwise, and you guys are in legal trouble.

  • Report this Comment On April 11, 2011, at 8:24 PM, MichaelHamilton wrote:

    this is garbage chinese company, avoid at all costs

  • Report this Comment On April 11, 2011, at 9:54 PM, goldminingXpert wrote:

    That'd be very interesting if the Fool sold out of its shares recently. Hopefully they warned their poor GG subscribers to get out as well.

  • Report this Comment On April 11, 2011, at 11:34 PM, TMFKopp wrote:

    You can put the conspiracy theories to rest.

    That YONG is not listed in the disclosure was an unfortunate oversight -- it should read that Yongye is a Motley Fool Global Gains pick and that The Fool owns shares of Yongye. It will be fixed in the morning.

    Matt

  • Report this Comment On April 12, 2011, at 12:15 AM, goldminingXpert wrote:

    Okay, we'll put away the conspiracy theories.

    You've got to wonder about that "impressive" report in light of Roth's downgrade Friday. How could Roth run a channel check, say sales are slow and farmers aren't adopting the product quickly -- and then have YONG on Monday beat those analyst estimates by 30%? The numbers make no sense. Either Roth or Yongye is lying it would seem.

  • Report this Comment On April 12, 2011, at 1:15 AM, TMFKopp wrote:

    @Ian

    Yes, something isn't right between the two reports.

    I'm not sold one way or another on YONG, but IMO that Roth report is a really bad piece of work. The big question with this stock is whether the numbers are real -- and Roth doesn't address that at all. Instead the report talks about competitive pressures and working capital concerns.

    And as for the PT, Roth slaps a 5x P/E on its 2011 estimates? They might as well just come out and say that they think the numbers are a mirage. If they really believe that new $1.20 2011 EPS target -- not to mention the 23% projected EPS growth from 2011 to 2012 -- then a 5x P/E is a joke.

    The jury may be out here, but it's hard to take Roth's report as serious evidence either way.

    Matt

  • Report this Comment On April 12, 2011, at 3:23 AM, kariku wrote:

    Also why wasn't there an article on Friday "Yongye shares plunged: what you need to know?"

  • Report this Comment On April 12, 2011, at 3:52 AM, Camber12 wrote:

    I agree with several other comments here and think that there really needs to be some clarity here. If a stock is going to be recommended here then there is obviously a reason behind it but with Yong it seems little has been said over the past few weeks as the company gets slammed here and there and even in Yahoo boards (I know posters can be fake) by various posters as a complete scam of a company etc etc and that this is classic Pump and Dump. Can someone there at the Fool actually come out and say Hey i have been there - its not some post office box.....The company is real and not just an office with some poor person answering the phone??

    Moreover for all other fools like me that actually invested in this company and are staying long with the hope that this is a "real" story is there anything that can be said or proved to show us that the money invested is in an actual company and the the figures put out by the firm and supposedly audited by KPMG are remotely legitimate? Finally, as a newbie to investing and options I am quite concerned as to what has been happening in the options market in relation to Yong. Can someone there give me (us) a clearer picture of what has been happening with regard to options and Yong over the past few trading days? Seems like the stock is being shorted so badly that any time there is any strength in the stock for even a small rally that it falls back to even a lower level except today where it ended up a meager 2+%. Well its my first ever comment here but looking for any guidance and or advice. All the best.

  • Report this Comment On April 12, 2011, at 6:02 AM, MAURIZIO400cc wrote:

    good job Matt

  • Report this Comment On April 12, 2011, at 6:05 AM, MAURIZIO400cc wrote:

    Camber12

    read Matt's posts all your answers are there+ you sayd it yourself, if it looks like a duck...

  • Report this Comment On April 12, 2011, at 6:27 AM, stonejonathan wrote:

    So much to say here... lets see.

    #1 TMF

  • Report this Comment On April 12, 2011, at 10:08 AM, kariku wrote:

    @Matt

    "That YONG is not listed in the disclosure was an unfortunate oversight -- it should read that Yongye is a Motley Fool Global Gains pick and that The Fool owns shares of Yongye. It will be fixed in the morning."

    Well ?

  • Report this Comment On April 12, 2011, at 10:35 AM, buffalonate wrote:

    Why would the Motley Fool risk picking a company like Yongye that puts out such unbelievably rosy numbers? Especially a Chinese smallcap. When they said they went from distributing to 1000 stores to 23000 stores in the span of 2 years I knew it was a fraud and gave it a thumbs down. Deep down you should know that a fertilizer company cannot grow like that.

  • Report this Comment On April 12, 2011, at 11:46 AM, b3tigers wrote:

    Alan K.

    Thanks for the update. How come Tim Hanson

    didn't write the article since he visits the company

    every year for the past three years and owns shares?

  • Report this Comment On April 12, 2011, at 12:06 PM, 123spot wrote:

    Matt, thanks for the timely answer and the correction. Hey, we all make mistakes. But MF is one of the few corporate entities that responds promptly to concerns and addresses them. I deeply appreciate that. Peace.

  • Report this Comment On April 12, 2011, at 1:22 PM, john795806 wrote:

    @Ian,

    I wouldn't go so far as to say that Roth Capital might be "lying". I can't tell that they did a channel check from their report; they did not seem to supply any evidence to support their assumption that Yonye's sales were lagging. They spoke of competitive pressures, but didn't mention any competing products. They mentioned the possibility of a disappointment in earnings projections--based on what?. In brief, I saw some doubts from Roth Capital, but no evidence.

    Yongye is going to be volatile. I would expect another unresearched, speculative short attack in the next day or two. Attacks on Yongye remind me of the golden rule of propaganda: Repeat a lie often enough, and it will be believed. But shorts should beware; Yongye made it clear that they thought their stock was under-valued, and would be seeking means to address this. If Yongye is legit, as I believe it is, another short attack could result in some definitive response from Yongye--a stock buyback perhaps--and backfire, big time.

  • Report this Comment On April 12, 2011, at 2:34 PM, goldminingXpert wrote:

    Yongye's CFO told me their stock was undervalued and they were exploring strategic alternatives in February. Then the year-end earnings came and went.

    Words are just words until they do something.

  • Report this Comment On April 12, 2011, at 2:49 PM, john795806 wrote:

    @Ian,

    True, that! We shall see.

  • Report this Comment On April 12, 2011, at 5:12 PM, gabypanama wrote:

    If anybody can post a link that mentions the company or their product other than Yongye itself or investors site like this, then Ill believe that company is more than mirrors and smoke.

    I can find other companies, other products...but not Yongye. So far Ive googled a lot, and they only exist in their own webpage, and in sites such as this.

    So, Ill believe they exists when I see some links.

  • Report this Comment On April 12, 2011, at 5:47 PM, MAURIZIO400cc wrote:

    gabypanama,

    your specious logic sounds almost plausible, bravo! who thaught you the art of insinuating douts and worries in the minds of unsuspecting humans? was it training in the kgb? to bad that your dramatic timing his off. you goy to work on that pal, don't miss your cue or your lines will sound odd and out of place

  • Report this Comment On April 12, 2011, at 5:53 PM, MAURIZIO400cc wrote:

    bukkalonate

    maybe you have experience of something that did not grow as much as you would have it, but that does not mean that is impossible, as many a girl could tell you.

  • Report this Comment On April 12, 2011, at 10:45 PM, matthewbanis wrote:

    Maybe if you guys would stop being cheap and bought a subscription to global gains your concerns would be answered. Also, for whatever it's worth as a member w/e I've posted a question on the GG Boards I've always gotten a prompt response as I'm sure most GG members will attest, too. And yes, of course, I'm assuming a lot of articles are written as well as stocks owned by the MF as a hook to get people to pay for subscriptions...I mean someone needs to pay these authors, someone needs to pay for trips to China, someone needs to pay for hosting, severs, etc. And finally, I'm long YONG and will be buying more.

    Thanks

  • Report this Comment On April 12, 2011, at 11:37 PM, lowmaple wrote:

    guess since i know MF has this as a rec i am not concerned i wasn't mentioned but these inflammatory remarks are completely uncalled for. As far as shorts manipulating the stock sooner or later i t will really make a significant move and all LONG term invests will be rewared.

  • Report this Comment On April 13, 2011, at 3:40 AM, kariku wrote:

    "Maybe if you guys would stop being cheap and bought a subscription to global gains..."

    There are 14 MF paid services, I don't think people subscribe to all of them. I have 2, that doesn't make me cheap. Only problem is that YONG is on a different one.

  • Report this Comment On April 15, 2011, at 5:44 PM, RegLeCrisp wrote:

    Buffalochip, how do you know YONG isn't buying back their shares? I was wondering the same thing, btw.

  • Report this Comment On April 18, 2011, at 1:19 AM, john795806 wrote:

    Options are a good way to play Yongye and reduce your risk. If you believe YONG is in a temporary slump and that it will soon correct, you can buy calls, which give you the option to buy YONG at a later date. For example--you could purchase October calls at $3 for about $1.90 per share. This gives you the right to buy Yongye at anytime between now and October 22nd at $3 per share. If the stock hits $4.90, you break even; if it collapses below $3, your loss is limited to $1.80 per share--even if the stock goes to zero. Anything above $4.90 (between now and October 22, no less!), and you make a profit--and a substantial one if it returns to a reasonable P/E ratio.

    You can also play the other side of Yongye--if you really believe it is a fraud, by October, you would expect to see a substantial collapse in its stock price, and can purchase puts, which give you the option to sell at a specified price. You can also invest in puts or calls that are due at other dates.

    Options can provide you with some protection against wild price swings one is likely to see in YONG, and let you sleep better than if you are either selling short or holding the stocks and hoping for a rebound. Just be sure that you understand how options work before taking the plunge.

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