Jim Chanos: “If you start to look at acquisitions as capitalized R&D, suddenly these companies look a lot more expensive.”

JIM CHANOS: These Are The Kinds Of Companies We’re Looking At Right Now

LINETTE LOPEZ SEP. 17, 2013, 3:02 PM 3,513 3

Jim Chanos, founder and Managing Partner of Kynikos Associates, speaks at the 16th annual Sohn Investment Conference in New York on May 25, 2011. Jim Chanos isn’t going to tell you exactly what he’s researching at his world renowned short-selling firm, Kynikos Associates, but he’ll give you an idea — a small one — of what he and his team are thinking about. He did that today on Bloomberg TV’s “Market Makers” with Erik Schatzker and Stephanie Ruhle. Chanos says he’s looking at large companies that are growing by making a lot of acquisitions. “Some of them don’t even have profits, they’re having to do bigger and bigger deals,” said Chanos, adding, “They’re trying to buy their way into growth and it’s fooling this generation of analysts.”That’s when Stephanie Ruhle brought up Apple, a company Kynikos uses as a hedge. Unlike some of the companies Kynikos shorts, Chanos pointed out that Apple actually researches and develops its own products.

Large tech companies that get their new products through acquisitions, on the other hand, are essentially “capitalizing their R&D,” said Chanos.

And, as Bloomberg reporter Corey Johnson said breaking in, “The knuckleheads that don’t consider acquisitions a part of free cash flow think free cash flow still looks good.”

Chanos closed saying, “If you start to look at acquisitions as capitalized R&D, suddenly these companies look a lot more expensive.”

Don’t be a knucklehead.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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