Running the Ugly Scan

I ran the Ugly scan (discussed yesterday) on the first 250 (alphabetically) of the S&P SmallCap 600 Index and came up with Amedisys Inc (AMED). Last week it hit a new high on higher than normal volume and has been going sideways for a good long time. It's something to keep your eye on if you are an Ugly-style investor.

Ugly has been on top of AMED all along, of course, it's just that I look at weekly charts and he looks at the daily's.

AMED, Weekly Chart

Buying an Apartment in Beijing (II)

I've figured out a few things about the Chinese real estate market over the last six weeks. Imagine that Shanghai is New York City and Beijing is Washington, DC. Imagine that every rich farmer and entrepreneur in Kansas, Oklahoma, Nevada, etc. travels either to NYC or DC to buy an apartment. That's exactly what's going on here in China.

There are tens of thousands of nouveaux riche Chinese and they are all investing in property, mainly in Beijing or Shanghai. (Shanghai has been a much hotter market than Beijing.) Add in overseas Chinese and expats like us and you get a property market that makes no sense in local terms. Say the average monthly income for a local is $250. Then consider that a decent-sized, entry-level apartment in the CBD (Chaoyang Business District) section of Beijing costs at least $250,000, and you begin to understand the gap.

As I've mentioned before, the equity market here is at eight-year lows and you'd be very hard pressed to find someone who has made money in stocks. In fact, if you want to upset any middle or upper class person here, ask them about their stock portfolio. Most have lost over half of their money, and many people have lost even more. There are few places that rich Chinese can put their RMB savings, and property is one of the only obvious outlets.

I met one guy from Wenzhou, my age, who just bought ten apartments here in one shot, paying over $3 million (cash, of course). He'd like to rent them out, but doesn't care much one way or the other if he does, it's just an investment for him. I've visited dozens and dozens of apartments throughout the Chaoyang District that have stood empty for many months, if not years. You've got these massive residential complexes that stand more or less empty, yet are completely sold out.

So when you think about supply and demand (match a tiny central section of a major city up against the masses of newly rich), the "insane" prices here actually make perfect sense. What's really interesting is that after you move in to your tenth-floor apartment in a twenty-storey block (a lonely buyer who actually plans to live there), you can be pretty much assured that you'll have the whole building to yourself.