Dear Friends and All,
It has been a month since “Bamboo Innovator” was created in late February and I am grateful that there are some kindred spirits who find the ideas value-adding and resonate in your hearts. There is an article “Creating ‘bamboo innovators’ in S’pore” in Singapore’s Straits Times today that goes beyond the accounting numbers and uses Check Point/Gil Shwed as an actionable example of Bamboo Innovator at work: with the recent recovery in the S&P 500 back to its previous 2007 peak, Check Point is up over 80% in the same period; when the index plunged 50% from its peak to bottom in March 2009, Check Point was resilient, down around 15%. Overall, Check Point is up 12-fold since its 1996 listing to $10 billion, a rare feat in the hyped-up “startup culture” that has resulted in “entrepreneurs” with a get-rich-quick mentality by flipping and selling businesses rather than building business models to last the distance. There is also an upcoming article in Today Singapore possibly on next Monday and I am working towards a possible monthly Monday column about Bamboo Innovator. The wonderfully informative websites BeyondProxy.com and Greatinvestors.TV have also featured another Bamboo Innovator article on detecting accounting frauds and some videos about my thoughts on value investing in Asia (weblinks below). I also look forward to presenting at the upcoming Emerging Value Summit on April 9-10 on the topic “R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innovator” to a group of like-minded value investors around the world. Great value investors including Tata Capital CEO, FCA Corp founder and CEO Mr Robert Scharar are speakers at the Emerging Value Summit which is still open for registration.
Why “Bamboo Innovators”? Bamboos bend, not break, even in the most terrifying storm or devastating earthquake that would snap the mighty resisting oak tree. It survives, therefore it conquers. Disruptive industry trends and black-swan crises have become a permanent fixture in today’s marketplace. How wonderful it would be if countries, companies and individuals can stay resilient amidst the disruptive upheavals and unorthodox challenges – like the bamboo. The study of Bamboo Innovators can hopefully inspire companies to be productive innovators in order to surpass stall points in their business models during tumultuous periods, particularly SMEs aspiring to scale up to become global champions.
Asian Research Product (Subscription Bundle)
- With (1) over 80% of the listed universe of 15,000+ stocks in Asia under a billion dollars in market capitalization and the median market cap is around US$80-100 million; (2) the stock prices and volume/liquidity in Asia often manipulated by nefarious insiders and syndicates of momentum traders and (3) outbreaks of accounting frauds, corporate governance lapse and asset expropriation erupting on a systematic basis at the firm level, how does a long-term investor go about investing in Asia to generate sustainable outsized returns?
- I am working towards a potential long-term collaboration in developing a subscription-based Asian research product to hopefully plug into an established ecosystem with long-term institutional investors in US and Europe seeking to invest in Asia. I am an admirer of the dynamic entrepreneurs behind this ecosystem which serves as an “idea funnel” for the world’s top money managers and I likened them to the “Apple/iTunes of value investing”. I hope my Asian “App” can be a useful feature in this community, though I am no “Angry Bird”! Just a little bird who has been singing for the past decade plus about research-driven value investing ideas in resilient compounders in Asia – the Bamboo Innovators. Just a simple painter with a “beginner’s mind” who loves to paint.
- Interestingly, the Malaysian-listed company that I shared in my last February email which was up 20-25% since last year in December 2012 while the Bursa index was down had continued to deliver value and is now up 50% while the index stays down 1% YTD on political risks at the country level over the upcoming elections. Its European-listed bigcap parent is also up 29% this year despite the continued Euro crisis with the Euro Stoxx index down to flat. Both continue to announce outstanding financial results and business progress. Resilient compounders have their own internal rhythm to outperform in their business fundamentals. Another actionable stock idea, the “Heinz of Korea”, which I shared last December with an esteemed Singapore investment pioneer who helped build Singapore’s asset management industry, is up 49% this year while the Kospi index is flat/down after the elections exuberance. There are many more Bamboo Innovators in Asia that I would love to share with kindred spirits. These are companies which all of us are proud to see their success because they stay dedicated and innovative in their mission.
- As Intuit’s former CTO David Murray puts it aptly, we are great at solving problems but less adept in defining problems. Defining the right problem to solve is the foundation of any great business model. For Sam Walton, the primary problem was offering the lowest prices on household items. For Mark Zuckerberg, the primary problem was that earlier versions of Friendster and MySpace were focused too much on meeting new people rather than enhancing existing relationships. This led Zuckerberg to identify the primary metric he used to manage the site: the time users spent communicating with one another, rather than the number of users or connections. As Murray explains in his insightful book “Plan B: How to Hatch A Plan That’s Always Better Than Your First”, MySpace did a great job executing on the problem it has identified. Facebook is solving a more important problem. So Zuckerberg didn’t out-execute his competitor, he out-theorized it. Yes, I know, “theory” (and “academic”) is a very dirty word in Asia and to businesspeople.
- The primary problem for value investors in Asia is that the beautiful macro Siren is alluring but dangerous at the micro or firm-level, leaving even very famous and experienced money managers shipwrecked before they reach their target destination for their clients. Bamboo Innovator is meant to solve this problem. As Asia’s capital markets develop and mature, clients need to be very suspicious of the old workhorse argument that “Oh, Asia is growing and a rising tide lifts all boats. Miss the bullish growth prospects and you’ll regret. Asia is under-allocated on a GDP-weighted basis and you should position your portfolio early in the global rebalancing process.” This is largely true during the decade from 1998-2008. But the 07/08 global financial crisis is a game-changer at the micro firm-level. Firm-specific strengths and weaknesses are attenuated in their growth expansion strategies. That’s why companies like the Malaysian-listed company (and its European-listed parent) and “Korea’s Heinz” can be up 50% this year while their country indexes are down. Hopefully one day, there will be a self-indexed Bamboo Innovator 500 and actively-managed products (e.g. Bamboo Innovator 50) can be created around the key index and both parent index and the multiple ‘spinoff’ products can scale up assets in a sustainable way without cannibalization and producing the toxic Asset-Gathering-Is-King culture.
- The story of how Jonathan Steinberg’s WisdomTree started from a humble subscription-based investment newsletter that grew into the billion-dollar self-indexing ETF powerhouse disrupting the traditional active funds management industry players never fails to amaze and inspire. WisdomTree now manages US$25 billion in asset under management (AUM) and trades at all-time high in the $2 trillion ETF industry and traditional long-term clients such as Calpers and Australian Superfund are considering switching to passive indexing strategies. Fundamental-based self-indexing is Value Line 2.0 with a touch of Buffett. The same inspiring stories are also seen in BCA Research and its London-listed acquirer and FTSE250 parent Euromoney Institutional Investor built by the late journalist-turned-entrepreneur Padraic Fallon.
Thought Leadership about Bamboo Innovator in Articles, Presentations and Videos
- Straits Times: This published article “Creating ‘bamboo innovators’ in S’pore” in the local newspaper Straits Times attempts to go behind the scene and beyond the financial numbers in investigating the makings of a resilient compounder through the example of Check Point. I am grateful to the Opinion editorial team at Straits Times for their great help and work in editing the piece. The unedited longer version can be found here.
- Today: There will be another upcoming article about Bamboo Innovator in the Management column possibly on next Monday. I am also working hard towards a possible monthly Monday column with Today about Bamboo Innovator – a “Monday Morning with the Bamboo Innovator” hopefully. I am grateful to Today for accepting my article.
- BeyondProxy.com: An article and a video is featured in this insightful website about detecting accounting frauds and avoiding accounting pitfalls when investing in Asia.
- Greatinvestors.TV: On this great website, two videos on Bamboo Innovator are posted: Part one and two.
- Emerging Value Summit: I will be posting the full version of the downloadable slides that I am presenting at the upcoming Emerging Value Summit on April 9-10 on April 8th which you can find at this weblink for the preview version. The topic is “R.E.S.-ilient Compounders in (the Next) Crisis: Buffett + Bosch + Baiyao = Bamboo Innovator” and I will be discussing the Bamboo Innovator framework, the accounting and governance pitfalls of investing in Asia, as well as one specific actionable Asian stock idea.
- Wide Moat Investing Summit: I am grateful to be further invited to be a speaker at the Wide Moat Investing Summit on July 9-10, 2013.
Seminars/Workshops/Speaking
- It is easy to lose perspective when one is mired in day-to-day operations feeling important and useful in fighting fire as opposed to taking a step back to invest in learning and pursuing value-creating opportunities. When he had only five stores, a highly-driven Sam Walton took a step back to attend a workshop that gave the small-town merchant innovative ideas and valuable friendship to transform and scale his business model to $200 billion in market value. From $130 million in 1992, the typical SME size in Asia, Ecolab scaled to $23 billion in market value when they are able to take a step back to first articulate the strategy of “Circle the Globe, Circle the Customers” and execute and adapt with relevance accordingly to the changing circumstances. Nalco, the water treatment technology company that Warren Buffett used to invest in, was acquired in December 2011 by Ecolab.
- I have some unconfirmed interest from the CEO of an Asian-listed company in the “Uprising” industry trends workshop that I also conduct for companies in the technology, media and telecom (TMT) and consumer industry with practical real-world cases and scenarios. The brochures can be found on this weblink. I am working on developing a general public seminar on Bamboo Innovator, similar to the “Master Entrepreneur Program: Scaling SMEs to MNCs” that I did previously for CEOs, entrepreneurs, top management and professionals, and high network individuals in Singapore, HK and Beijing (in Mandarin) with positive feedback on its practical and actionable framework and cases.
- I am also happy to speak about topics on innovation, resilience and business model design to companies and organizations seeking to create sustained value and growth in the face of uncertainty and disruptions in the business environment.
Life
- For my friends in the West who are wondering what the Chinese words in the Bamboo Innovator “logo” mean, it is about “The Way of the Bamboo: How and why our journey in business and in life is about establishing rootedness in values and innovating continually”.
- I will also be teaching some evening courses in accounting to working professionals in Singapore’s SIM University starting July. I am grateful for this opportunity.
- Do follow Bamboo Innovator on the website (www.bambooinnovator.com), Twitter (@bambooinnovator) and Facebook (www.facebook.com/bambooinnovator) for updates and to give your valuable comments and criticisms.
I was at the SMU-Vitol Industry Speakers’ Series on March 15 presented by Dr Brene Brown when she was in Singapore. Brene is the author of “Daring Greatly: How the Courage to be Vulnerable Transforms the Way We Live, Love and Lead” and the message was inspiring: Vulnerability is the birthplace of innovation and the authentic wholehearted person dare to show up and be seen in the arena, to take the hits and punches; totally different from what we are taught that vulnerability is displaying weakness and a lack of confidence and optimism. Click on these two links to see my favorite quotes from the Oprah Winfrey’s “Super Soul Sunday” interview with Brene and the videos: fav quotes and video. Perhaps I am naïve or idealistic, but it is a fact that vulnerability is still a big no-no in Asian culture, yet unless we appreciate one another to carry the Big V, we cannot embrace resilient innovation.
I like to end off by sharing a story about Dwight Eisenhower and the power of vulnerability and authentic leadership. Professor L, Professors T and Professor C, Mr A and Mr B, and to my friends, thank you for your kind encouragement. Really grateful.
During World War II, General Dwight D. Eisenhower would routinely walk among the troops. One day, as the soldiers were preparing for battle, Eisenhower noticed a young man who seemed silent and depressed.
“How are you feeling, son?” he asked.
“General,” he said. “I’m awfully nervous. I was wounded two months ago and just got back from the hospital yesterday. I don’t feel so good.”
Many generals would have tried to buck up the frightened soldier’s spirits, saying, “You don’t need to be scared. You’ve got the best damn army in the world behind you.”
Instead, Eisenhower said, “Well, you and I are a great pair then, because I’m nervous too… Maybe if we just walk along together to the river we’ll be good for each other.”
Eisenhower revealed himself in the most humble way, and that’s one of the reasons his troops were so devoted to him. He became a great leader not by being rigid and fearsome, but by being honest and human.
“His grin, his mannerisms, his approach to life all exuded sincerity. He wore his heart on his sleeve. There was nothing devious about him. It is perhaps a paradox that it was for this reason that he was an outstanding diplomat, a profession in which the guarded truth and the half-truth are supposed to count for much,” historian Stephen Ambrose writes in The Supreme Commander: The War Years of Dwight D. Eisenhower.
Warm regards,
KB Kee
31 March 2013
Bamboo Innovator 