The Moat Report : Asia
Subscribe to Avoid Pitfalls When Navigating the Dangerous Asian Capital Jungle in Search of Wide-Moat Businesses
Fellow value investors will get:
Individual Investor Package
Institutional Investor Package
|(1) The Moat Report Asia (Monthly)
||(1) The Moat Report Asia (Monthly)
|(2) Bamboo Innovator Insight (Weekly)
||(2) Bamboo Innovator Insight (Weekly)
|(3) Timely Updates
|(4) Access to Bamboo Innovator Watchlist (550+ companies) and Bamboo Innovator Index (200+ companies) database (upcoming)
|(5) “Ask the Bamboo Innovator”
Our Personal Motivation – Why Do We Care So Much About Doing The Moat Report Asia For You
“Ride the Asian Growth Story!” – our personal motivation in embarking on The Moat Report Asia has been driven by our sadness from observing up close and personal the hard-earned assets of many investors, including friends and their families, burnt badly by this popular “macro theme” when the companies that are supposed beneficiaries of the positive macro trend, be they “The Great Middle-Class Consumption Story” or “The Great Urbanization Story”, turned out to be fraudulent set-ups with controlling insiders expropriating the cash and tangible assets away by intricate “tunnelling” acts via money-go-round related-party transactions. Famous Asian “blue-chip” companies are not spared from governance breakdowns, ranging from the “Best Buy of China”, “Nike of China”, “Wal-Mart of China” to Korean chaebols with well-known brand franchises and reputable Southeast Asian and Taiwanese family businesses. We witnessed firsthand the emotional upheavals that successful professionals go through when they invest their hard-earned money – and their parent’s and family’s – in these “Ride The Asian Growth Story” stocks either by themselves or through money managers and saw the previously-multibagger returns disappeared and even turned into hefty losses. And they were ashamed to visit their parents back in their home country as a result, tormented by guilt and living through anguish. We also lament the plight of promising entrepreneurs such as “Asia’s J.K. Rowling” who are tempted into value-destroying deal-making when surrounded by shrewd fee-seeking bankers and syndicates. And then following fund-raising exercises, the share price typically plunged subsequently after a few years with missing cash and assets. Many Asian stocks appear to live in two time periods with a distinctive structural break in time series. Before the outbreak of the 2007/09 Global Financial Crisis (GFC), they were stock market darlings generating “multibagger” returns. During the GFC, their share prices nose-dived, but they either get cheaper and cheaper or erupt into some form of governance or accounting fraud scandals; there is no mean-reversion back to their previous promising growth and valuation levels because the numbers were propped up artificially during good times and the studiously-assessed net-net assets with liquidation value have already been tunnelled out and expropriated.
This prevalent situation in Asia is analogous to that of the Picture of Dorian Gray in the novel by Oscar Wilde (1890) – the face of Dorian Gray showed no signs of aging as time passed, whereas the sins of his worldly existence are vivid in the portrait of himself that he kept hidden in the attic. The Dorian Grays of Asia have been able to get away with their accounting frauds and misgovernance transgressions because they are branded as sexy growth companies who charm party-goers with their good looks (quantitative financials) and riding on “The Asian Growth Story”. At Bamboo Innovator, our task is to support fellow value investors to understand and appreciate the early signs of potential problems and red flags in Asian companies ahead of the market, to see the real attic portrait of the companies’ financial health and economic worth.
Yet, searching for the accounting grains of sand can be tricky given that confirmation bias can distort the view of focusing on the trees or “chess pieces” but missing the forest or the “chess board”. It is all too easy to nit-pick and feed into the delicious emotion of having to be “right”. For instance, one would not invest in Google because of the accounting treatment in stock-based compensation. We have always been fascinated why and how even under the most austere of conditions and environment, certain entrepreneurs and their business models seem to remain resilient and continue to compound value, just like the bamboo who bend, not break, even in the most terrifying storms that would snapped the mighty resisting oak tree. This has been the central fascination of our lifework and the reason why we are inspired to share our findings with a community of like-minded value investors. We still hold on feverishly to the idealistic hope that a community of like-minded people can come together to spread their knowledge and kindness built around a resilient mental model, a home that everyone can breathe in it and make it their own. We hope that our candid and authentic views about value investing can be shared in our little community. This is why we care so much about doing The Moat Report Asia for you. Having the inner compass of the Bamboo Innovator in our hearts can help us not lose our way in difficult and uncertain times as we journey together in the dangerous Asian capital jungles.
A Manual of Self-Reliance to Regain Buffett’s Punchcard-Conviction In Our Hands During Uncertain Times
Conviction in stocks is rare in uncertain times which immobilize decision-making. It’s far easier to armor up behind the statistics of diversification and wishy-washy confusing macroeconomics prognosis. Assets are shift around, generating fees and expenses which are costly to the investor as a result. All these come undone when most end up pursuing similar strategy, resulting in correlated performance and destructive destabilizing price impact in deleveraging crises situations. Warren Buffett warned us wisely that when we think and act as if our investment portfolio were a punch card with only twenty slots, our ultimate financial and emotional welfare will be improved dramatically. No longer will we be vulnerable in times of uncertainty and panic situations due to lack of conviction, as we are now guided by the in-depth knowledge of how to choose wisely. Choosing wisely means being selective. It means not only looking but looking properly, looking with real thought. It’s about seeing the full picture, noting the details that matter, and understanding how to contextualize those details within a broader framework of thought.
Intuit’s former Chief Technology Officer and entrepreneur David Murray summed up his years of experience in remarking that we are great at solving problems but less adept in defining the right problems. LinkedIn’s founder Reid Hoffman expounded on this when he said that it’s really asking “How can I help?” and to “fulfill needs, solve problems”. 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 experienced money managers shipwrecked before they reach their target destination for their clients. The Moat Report Asia is meant to solve this problem. As Asia’s capital markets develop and mature, investors need to be very suspicious of the old workhorse argument that “Oh, Asia is growing and a rising tide lifts all boats. Ride the Asian Growth/ Consumption/ Urbanization/ GDP-Reweighting Story. Miss the bullish growth prospects and you’ll regret.” This is perhaps largely true during the decade from 1998-2008. But the 2007/09 global financial crisis is a game-changer at the micro- or firm-level. Firm-specific strengths and weaknesses are attenuated in the growth expansion strategies as those who persisted in building innovative business models break away from the pack to outperform even in uncertain times.
- Process-Driven High-Conviction Stock Ideas: With The Moat Report Asia, investors can regain conviction back in your own hands and heart when you are being guided by the actionable in-depth knowledge of the stock ideas and, most importantly, the investment process from which they are derived from. You can expect consistency and discipline from the stock ideas every month because they are derived using the unique, proprietary and systematic Bamboo Innovator framework in search of the resilient compounders with innovative business models to stay ahead of the momentum traders and colluding insiders on the investing curve in the miasmic Asian capital jungles. You will acquire the power of abstraction in finding out how the monthly stock idea relates to the Bamboo Innovator Index as part of a larger investable opportunity set into resilient compounders in Asia. Never again are you bombarded by ad-hoc ideas based on some popular faddish themes with no underlying serious investment thought process. Essentially, the aim of the The Moat Report Asia is to be a manual of self-reliance as you will be able to think and make more effective judgment and thoughtful decisions for yourself as you sharpen your critical thinking skills by framing challenges in a clear mental model in the messy world of reality. We hope you will be able to gain a deeper insight about Asia through the eyes of the innovative resilient compounders and not through the myriad confusing macro prognosis.
- Detect Frauds Ahead of the Curve: With The Moat Report Asia, you will be able to understand and appreciate the early signs of potential frauds, misgovernance and value traps where they matter most in terms of impact on firm valuation and that cannot be easily found anywhere else because of the independent and unbiased view. Never again are we manipulated by “catalysts” news announcements purposefully created and released by the “insiders” to lure investors in to do their pump-and-dump trick. Yes, we don’t discover the “murderer” or fraud perpetrators by separating ourselves from them or just following clues. As shown in the wisdom of Father Brown, the unlikely anti-hero detective in GK Chesterton’s novel that’s ranked alongside Sherlock Holmes for its remarkable insights in solving crimes, we need to delve deep into the psychological state where we can most easily identify with the “murderer”. The reason other characters in Chesterton’s mysteries don’t figure out who the murderer is that they are not willing to lower themselves into the world of the criminal. Yet, this can be very harmful for the investor as they lower too deep into the dark side and fail to extricate themselves out of the situation to identify the positive side – the resilient compounders. For instance, one would not invest in Google because of nitpicking the accounting treatment in stock-based compensation. Having the inner compass of the Bamboo Innovator in our hearts can help investors not lose their way.
- Re-Evaluate Portfolio Holdings: With The Moat Report Asia, you will hopefully be able to re-evaluate the durability and resilience of investments returns in all the other investments in your portfolio, particularly during periods of crisis, when you use the powerful lens of the Bamboo Innovator to view the firm value creation process afresh.
- Spark Your Own Idea Generation Process: With access to the Bamboo Innovator Watchlist and Bamboo Innovator Index database, you will be able to see insertions and deletions of Asian wide-moat businesses based on changes in corporate fundamental and potential tipping points in the business model or possible red flags.
With The Moat Report Asia, you will hopefully be able to bend, not break in the inevitable traumatic knocks in market and in life and remain upright and evergreen no matter how the world around us changes.
“People get thin without meat, but without bamboo they get vulgar,” the sage Confucius remarked to a friend when he was reputedly so absorbed in his investigation of bamboos that he forgot to taste meat for three months. Hopefully the monthly stock ideas in The Moat Report Asia will come alive not only when you subscribe and “taste” them but also when you feel them from inside of you and discover contextually-relevant forms for yourself as we navigate the Asian jungles together.