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China Opens Its Market to the West: Now What?

China’s new Shanghai-Hong Kong Stock Connect program opened up China’s domestic stock markets to international investors for the first time ever this week. This is a big deal: it brings China one step closer to being a “normal” investment destination. But before you plow money into Chinese stocks, there are a few things to consider. I shared my thoughts with Kira Brecht, writing for The Guardian:

Still, there are plenty of signs to suggest US investors should slow down and do their research before jumping into Chinese investments, particularly now.

One barrier: China’s companies are characterized by a lack of transparency to the West and an absence of legal protections. Analysts warn that accounting and disclosure standards in China don’t match up to more rigorous western standards…

All of this telegraphs risk, at least until the kinks are worked out.

Case in point: billionaire hedge fund manager John Paulson reportedly lost $468m in Chinese forestry company Sino-Forest Corp in 2011. The losses triggered questions regarding the accuracy of the accounting of the forest and timber land holdings.

“John Paulson is generally considered to be one of the most successful hedge fund managers, yet he lost a fortune in Sino Forest. If even he can get hosed in China, what hope does the individual investor have?” said Charles Sizemore, principal of Sizemore Capital Management.

Basic research could be a challenge.

“The US has a well laid out GAAP (generally accepted accounting principles). In China, things are less transparent. They don’t have the same accounting standards,” said Briefing.com’s O’Hare.

“You are at the mercy of the company giving you the numbers,” said Sizemore.

Read the full article here.

Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

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Sizemore on CNBC: Old Enemies Come Together in Microsoft-Oracle Partnership

Watch me discuss the Sprint ($S)Clearwire ($CLWR)Softbank ($SFTBY) merger and the Microsoft ($MSFT)Oracle ($ORCL) partnership with CNBA Asia’s Bernie Lo and Oriel Morrison:

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Sizemore on CNBC Asia: “Japanese Equity Market at Extreme Risk”

Watch Charles Sizemore chat with CNBC’s Oriel Morrison about the Japanese markets and the potential for a full-blown capital markets meltdown.

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Netflix and the New Media Revolution

I recently gave my thoughts on Netflix (Nasdaq:$NFLX) and its business model to the E-Commerce Times’ Erika Morphy:

Netflix all but invented the content-over-Internet model, which is quickly reshaping the way consumers view media, said Covestor Model Manager Charles Lewis Sizemore.

“Netflix and its competitors are the biggest shake-up to media since paid cable TV,” he told the E-Commerce Times.

house-of-cards-final-posterHouse of Cards has been a boost to Netflix’s reputation in the same way that original programming vastly changed the way viewers thought about HBO and Showtime, Sizemore continued.

“I don’t know anyone who buys HBO to watch movies; these days they buy it for its original programming — like the popular Game of Thrones. Netflix is trying to follow that model, and they are wise to. Otherwise, the company is a commodity seller of old content with nothing to distinguish it from its competitors.”

Not that it is clear sailing for Netflix going forward. Not that long ago, it was bleeding subscribers.

Competition from Amazon (Nasdaq:$AMZN), Apple (Nasdaq:$AAPL), Walmart’s (NYSE:$WMT) Vudu and other streaming services is a significant concern, Sizemore said. “Netflix needs to keep differentiating itself lest it get lost in this crowd.”

Certainly, these competing companies are not going to give up their own subscribers without a fight, Scherer added. “All of these providers are fighting for the same subscribers, as well as for the same content.”

Content costs remain a concern for Netflix, noted Covestor’s Sizemore.

“They’ve been getting their material from the studios at very attractive prices, but as Netflix grows and comes to threaten the media status quo, the content providers are rethinking this. Higher costs for content, coupled with competition from competing services, mean that margins will likely shrink.”

To read the full article, see Netflix Plays Its Q1 Cards Right

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Sizemore on Fox: Cashing in on the Echo Boomers

Watch me give my thoughts on investing in the rise of the Echo Boomer generation on Fox Business:

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