Bamboo Innovator Daily Insight: 3 Mar (Tues) – Regaining Resilience: 7 Methods To Become Mentally Stronger; Buy-and-hold fund prospers with no new bets in 80 years


  • Regaining Resilience: 7 Methods To Become Mentally Stronger: Forbes
  • Dig up knowledge of bamboo for healing: JP
  • The Power of Magical Thinking; David Copperfield on the Enemies of Art; Artists do something zealots can’t stand: They break down divisions between people: NYT
  • Be the leader your people don’t walk out on: Forbes
  • 14 books by mega-succesful CEOs that will teach you how to run the world: BI
  • Why Warren Buffett Is Worth $72 Billion and You’re Not: NYT
  • Michael Jordan is a billionaire: BI
  • The secretive Cargill family has 14 billionaires thanks to an agricultural empire – more than any other clan on earth: BI
  • Meet The Richest Billionaire In Every Country: Forbes
  • From Bedouin To Billionaire: How Mohed Altrad Became Europe’s Scaffolding King: Forbes
  • How Many Of The World’s Richest Billionaires Are Still Entrepreneurs? Forbes
  • Disclosure Can Produce Meaningful Change: NYT
  • Why half of all new executives fail can be narrowed down to 4 reasons: BI
  • Teach First is a rival and finishing school for business: FT
  • Storytelling In The Digital Media Age: Techcrunch
  • Adam Tepper, founder and chief executive of the bitcoin exchange company Independent Reserve, has died after a motorcycle accident in Thailand. He was 34.: JG
  • Fiat Agnelli Family to Tighten Grip on Ferrari After Spinoff: Bloomberg
  • What Buffett’s anti-banker rant might have been about; The canny investor writes for multiple audiences-including heads of acquisition targets. Fortune
  • Companies Drag Feet on Updating Fraud Safeguards; Some feel no urgency to adopt new standards, even after clock runs out on old ones: WSJ
  • Get Creative at Your Desk With a Little Playtime; New York University researchers explore how manipulating everyday objects may spark new ideas: WSJ
  • The growing anti-science movement is making people in Silicon Valley nervous: BI


  • How to Win Every Argument: The Use and Abuse of Logic: Amazon, FT

Investing Process

  • Buy-and-hold fund prospers with no new bets in 80 years: Reuters


  • Inside the Sharp-Elbowed World of Chinese E-Commerce; Merchants use fake orders, shell storefronts to gain prominence on Alibaba’s marketplaces: WSJ
  • China Anticorruption Campaign Targets Party ‘Cliques’; As legislature meets, Beijing’s antigraft campaign cracks down on political factions: WSJ
  • Corruption Crackdown Costs – Macau Casino Revenues Collapse “Shockingly Bad” 53%: Zerohedge
  • China graft purge targets military elite: FT
  • Chinese Rushing to Buy Property for Portugal Visas Get Burned: Bloomberg
  • Is Chinese QE Next?: Bloomberg


  • Mumbai Mulls China-Like Skyscrapers in Makeover: Bloomberg

Japan & Korea

  • Pension funds overpower Kuroda’s misfiring bazooka: FT


  • Indonesia’s Blue Bird Targets New Growth: Noni Purnomo: Forbes
  • BI, President Try to Assuage Fears Over Rapidly Weakening Rupiah: JG
  • Indonesia to Regulate E-Commerce; Online transactions in Indonesia are expected to top $3 billion this year: JG


  • Who’s fooling whom in haven asset hunt? FT
  • Who will bear losses when banks go wrong? ‘Bail-in’ framework will put investors at risk but much remains unclear: FT
  • Public outrage is the perfect stick to prod HSBC into break-up: FT
  • Etihad Airways’ Rapid Growth Frustrates Rivals; How Etihad runs and is financed is central in a fight with airlines in the United States, which accuse Persian Gulf carriers of stealing passengers. NYT
  • Immigrants and baby boomers are fuelling the rise of the entrepreneur: Telegraph
  • It’s time to investigate fund managers: Guardian
  • A Small-Cap Idea With Little to Recommend It; The SEC’s plan to create special exchanges sounds like a solution in search of a problem. WSJ


  • IBM Corp was sued by a shareholder that said it committed securities fraud by failing to write down a money-losing semiconductor unit before agreeing to pay another company $1.5 billion to take that unit off its hands. Reuters
  • Could IBM’s brain-inspired chip change the way computers are built? WaPo
  • I’m addicted to Amazon’s new 1-hour delivery service: BI
  • How Apple can overcome dropping iTunes revenue: BI
  • What would the Dow look like if it included Apple?: Reuters
  • Mobile industry tiptoes towards 5G: Reuters
  • Finnish Papermakers Embrace Online World as 10-Year Slump Ends: Bloomberg


  • A Fast Track to Treatment for Stroke Patients; Video-conferencing, mobile robots and virtual neurologists help limit damage: WSJ

Consumer & Others

  • How Hungry-Man’s supersized frozen meals are defying every industry trend: BI
  • McDonald’s needs to make 3 changes to compete with Chipotle: BI

The Machine Behind “Mass Flourishing” and the Artisan Revolution

 “Bamboo Innovators bend, not break, even in the most terrifying storm that would snap the mighty resisting oak tree. It survives, therefore it conquers.”
Bamboo Innovator Insight (Issue 71)

  • The weekly insight is a teaser into the opportunities – and pitfalls! – in the Asian capital jungles.
  • Get The Moat Report Asia – a monthly in-depth presentation report of around 30-40 pages covering the business model of the company, why it has a wide moat and why the moat may continue to widen, a special section on “Inside the Leader’s Mind” to understand their thinking process in building up the business, the context – why now (certain corporate or industry events or groundbreaking news), valuations (why it can compound 2-3x in the next 5 years), potential risks and how it is part of the systematic process in the Bamboo Innovator Index of 200+ companies out of 15,000+ in the Asia ex-Japan universe.
  • Our paid Members from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing.
Dear FriendsCan You Guess This Asian Wide-Moat Company?

The Machine Behind “Mass Flourishing” and the Artisan Revolution

When China’s Premier Li Keqiang was in Africa in May 2014, he gave away a particular machine to the African people as a gift to highlight the global competitiveness of China products and to promote the ‘Love Made-in-China Product’ idea. After his trip, he was told that they were made by a hidden wide-moat champion from another Asian country. Out of the 11 million units sold worldwide every year, 3.3 million are manufactured by this Bamboo Innovator in 2014, or nearly 1 out of 3 machines, tripled from 1 million units in FY2005.

Li was partly inspired by a book called “Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change”, that innovation comes from the grass roots rather than top-down planning laboratories, so everyone can contribute; and that innovation contributes to personal growth – or “self-development,” as Li phrases it. Interestingly, this product is behind the handicraft revolution enabled by Etsy, the fifth most-visited website in the U.S., after Amazon, eBay, Walmart and Best Buy. Etsy is said to be planning to raise $300m in an IPO this year, the biggest IPO to come out of New York since 1999. An article last week talks about a lady who is said to have sold $80,000 worth of merchandise on Etsy and earning about $65,000 a month: “I really wanted to be able to sell the products and make a few extra dollars for dance lessons for my children. I would have been thrilled to make $100 to $200 a month to pay for my daughter’s dance lessons. I’ve tasted loss and felt what it does to you personally. Second chances are so much more appreciated.” Etsy is part of a rising trend of companies that enable the freelance economy. Like Uber, AirBnB, these companies allow people to do what used to be full-time work as part-time gigs, or to strike out on their own instead of working for an established company. It gives more choice to consumers while enabling people in need of cash to easily pick up extra work. Etsy is part of the maker movement led by housewives and avid DIY crafters.

Our latest monthly Moat Report Asia for March 2015 examines an Asian company that was established in 1968 and is now the world’s largest ODM (Original Design Manufacturer) in the machine behind this mass flourishing and the handicraft revolution with a 30% global market share. This company has focused on this product for the past 40-plus years and does not carry major non-core investments on its balance sheet.

There are over 400-500 different precision engineering parts that go inside this product, which is far more than the 25-30 parts that are needed to make a modern smartphone. Just one malfunctioning part, or if the parts do not coordinate with one another, and the entire product would have to be discarded. Thus, the complexity in manufacturing and coordinating hundreds of parts in the machine can result in production challenges, working capital and inventory management problems, delivery delay, and lost clients. The company designs and makes 40-50% of the machine parts in-house, while most of its peers purchased the parts.

The company recognized early on the importance of R&D in order to quickly launch new models and products for its clients who require speed-to-market in introducing new designs for the end consumers. Because the company proactively proposed the designs, they have control and power over the backbone system and structure in the hundreds of internal parts inside the machine. This is crucial because it translates into tangible procurement and cost advantages. As the company’s Chairman Mr. L puts it: “Only when you have R&D capabilities can your road be wider in the long competitive journey. This is our secret to why we enjoy a powerful cost advantage over our rivals that they find very hard to replicate!”

As a result of its vertical integration strategy and R&D capabilities, the company has consistently the highest ROA, ROE, profit margin and working capital efficiency in the industry despite rising cost pressures and the volatile cycle. ROA at 13.2% and ROE at 18.9% is significantly higher than its rivals. Its inventory management is also very impressive at only 36 days (vs peers’ 60-90 days), an extraordinary feat given that there are 400-500 parts to manage.

The company has demonstrated remarkable resiliency in winning in industry crisis over the past 47 years, forging formidable competitive advantages in scale, product quality, R&D design capabilities. In each industry crisis and consolidation phase, the company is able to emerge as a winner and continue onward its growth path in a traditional, boring industry that is experiencing resurgence with the handicraft revolution.

Valuation is also decent and reasonably cheap for a world-class company at PE 12.1x, EV/EBIT 9.6x and EV/EBITDA 8.2x. Its short-term downside is protected by its healthy net cash balance sheet and an attractive 5.3% dividend yield. With the handicraft revolution enabled by Etsy-like online marketplace, as well as growth in demand in emerging markets in China, Russia and ASEAN, Latam, EBITDA and net profit could potentially double, pointing towards a 120-180% growth in market value to $720-900m based on a modest EV/EBITDA 12-15x.

We are most impressed by the company’s corporate culture. Led by Mr. L, the corporate culture has been a nurturing one towards cultivating continuous R&D innovations and the philosophy of owner-operator mindset at every level of the company:

Q: “After all these years, what is the one thing or one event that is the most memorable or touches your heart the most?”

Mr. L: “I am most touched by the dedication of our employees towards the company. During the natural disaster in.., [our factory site] was in the catastrophic zone.. Yet, our employees continue to come to work, with the collective understanding and commitment that ‘if we receive orders, we have the responsibility to deliver them’. With courage and tears, [Company’s name] overcame the challenges and managed to stand up once again. I was appointed the Chairman in 2002 and I put greater emphasis on human capital development, from training to career advancement opportunities and performance-based compensation. I actively promoted the philosophy of owner-operator mindset at every level of the company, that ‘[Company’s name] belongs to everyone’, to continue the spirit that touches my heart during the disaster. As we rebuilt the buildings and factory that were destroyed, we have cultivated a revolutionary feeling.”

We think this is rare in Asian firms and the company deserves a valuation premium.

Who is Mr. L and this wide-moat Bamboo Innovator?

PS: We are very honored to be able to invite Mr. Hemant Amin, Founder, Chairman and CEO of Asiamin Capital, a successful single family office, and Founder and Chairman of the BRKets investor group ( to be the guest speaker on March 17 (Tuesday) at 5.30pm till 7pm. Mr. Jarrod Baker, the Senior Managing Director at NYSE-listed forensic specialist FTI Consulting Inc (NYSE: FCN, MV $1.5bn), was our previous guest speaker and his presentation materials are available here. Hemant will be talking about accounting fraud in Asia with actual Indian cases from his wealth of experience in investing in Asia and India, where he is an early investor in Narayana Murthy’s Infosys which compounded over 60-folds for him: KB will be moderating in the second half of Hemant’s session which will be in the dialogue-style.  We will be making this exclusive content available for our Moat Report Asia subscribers only.

Warm regards,


The Moat Report Asia

A new monthly issue of The Moat Report Asia is now available!

Access the in-depth idea presentation:

Bamboo Innovator Daily Insight: 2 Mar (Mon) – Vincent van Gogh on Why Never Learning How to Paint Helped Him; The Secret to Love Is Just Kindness

Berkshire Hathaway 50th Anniversary Special

  • Charlie Munger: These Four Factors Explain Why Berkshire Hathaway Has Done So Well; Charlie Munger’s Warren Buffett Tell-All: Bloomberg1, Bloomberg2
  • Buffett Embarrassed by ‘Thumb-Sucking’ on Exit of Tesco Stake: Bloomberg
  • Buffett Sets Stage for Massive Buyback, Dividends After Decade: Bloomberg
  • Buffett in the ’70s Was the King of Cool: Bloomberg
  • Life After Buffett: Understanding Succession at Berkshire: NYT
  • Berkshire Hathaway’s Willingness to Kill: ReformedBroker
  • A Dozen Things Taught by Warren Buffett in his 50th Anniversary Letter that will Benefit Ordinary Investors: 25iq
  • Warren Buffett on Heinz: Oh yeah!: Fortune
  • A Two-Man Race Is On to Succeed Buffett at Berkshire: WSJ


  • Vincent van Gogh on Why Never Learning How to Paint Helped Him: Farnam
  • The Secret to Love Is Just Kindness: Science says lasting relationships come down to-you guessed it-kindness and generosity: Atlantic
  • Why powerful people are rarely punished appropriately: Fortune
  • Ben Horowitz: The Struggle: Farnam
  • What A Rembrandt Can Teach you about Software and Programmers: Farnam
  • An Insider Explains Why the FTC Can’t Put an End to Pyramid Schemes: Bloomberg
  • Why shy teachers like shy students; Teachers prefer pupils who share their personality: WaPo
  • The evening routines of the most successful people: FastCo
  • The Wolfe Of Main Street: How An American Picker Built His Empire Out Of Trash; The host of History Channel’s hit show has turned a fascination with old stuff into a growing brand. FastCo
  • Turning pricing power into profit; Companies often overlook pricing as a driver of earnings growth, instead defaulting to cost cutting and other measures. Here are five steps to growth through pricing: McKinsey
  • Long-term corporate survivors know how to adjust, innovate: JA
  • Saudi Travel Tycoon Becomes Billionaire With Pilgrimage Packages: Bloomberg
  • Relying on others – where does the buck stop? Good governance is everyone’s responsibility in a company; reliance on others is an essential process for decision-making by the board. BT

Investing Process

  • Noble’s shock Q4 loss: Why no warning?: BT
  • Embattled education company Vocation crashes to $273m loss, audit problems flagged: SMH
  • The Genesis Of Smart Beta Investing: VW, RA

Greater China

  • China says refuses to give funds for ‘untruthful’ budget proposals: Reuters
  • New World Development names Adrian Cheng as vice-chairman; in line to succeed his father: SCMP
  • Netflix eyes entering tricky China market on its own: Reuters
  • Alibaba and JD Online take fresh approach to China food shopping: FT
  • Crackdown targets China’s ‘zombie’ firms: WCT
  • Japanese toilet seats flush away China-made rivals: WCT
  • China’s Long Food Chain Plugs In; The country’s sprawling supply chain has challenged governmental efforts to ensure quality, and so its tech giants are working to provide shoppers with useful tools. NYT
  • Macau Fortunes Go From Bad to Worse as New Year Gamblers Vanish: Bloomberg
  • China’s bursting coal bubble raises fear of stranded assets: Telegraph
  • Unattractive returns a challenge for China PPPs; Partnerships face difficulty in luring private capital to ease local governments’ debt burden: SCMP
  • China says to implement drug distribution reforms: Reuters
  • Documentary on Air Pollution Grips China: NYT


  • My govt’s only religion is ‘India first’: Modi: AsiaOne


  • Investors and brokers want Singapore Exchange stripped of regulatory powers: SCMP
  • Vietnam opens door to hard money and soft power: FT
  • Temasek Faces New Normal With Singapore Eying Its Funds: Bloomberg
  • The road to riches isn’t just paved with keys of condos: BT
  • Tupperware’s Sweet Spot Shifts to Indonesia: NYT
  • Malaysia Fund’s Debts Make Defending Ringgit Tougher: Bloomberg
  • Activist monk seeks Buddhism overhaul in Thailand over corruption fears: Reuters


  • Regulators Zero in On Audits of Related Parties; The subject of related parties continues to be a focal point of regulators and government prosecutors seeking to bring civil or criminal legal actions. CFO
  • SEC alleges that the senior managing director of Archipel Capital ran a “Ponzi-like” scheme that it says targeted people who wanted to buy pre-IPO shares of Twitter Inc. and Uber Inc: WSJ
  • Activist investors’ success owes much to wider bull run: FT
  • Sheltering Whistleblowers; The SEC is investigating any attempts by companies to muzzle would-be whistleblowers, including requiring them to forgo Dodd-Frank bounties. CFO
  • Stock markets: where have the good times gone?: FT
  • Activist Funds: From Zero To $100B Plus AUM In 20 Years: VW


  • HTC Wanders Into Virtual-Reality Gear: WSJ
  • How to Keep the Middleman Out of the Internet: II

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李健 《尘缘》: 一身憔悴在风里 漫漫长路 起伏不能由我 人海漂泊 尝尽人情淡薄 热情热心 换冷淡冷漠 任多少真情独向寂寞 只有桂花香暗飘过

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韩红 《故乡的云》: 那故乡的风和故乡的云 为我抚平创伤

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