“In business, I look for economic castles protected by unbreachable ‘moats’.”
– Warren Buffett
With unresolved crises on the horizon, investors are often immobilized in making investment decision. “Wait for the clouds to clear” is the mantra. Value investing appears to provide a way out to see opportunities in cloudy weather by using the “cheap” price signal to identify “out-of-favor” neglected stocks and invest in them for “reversion back to mean”. Hence, pick stocks with “cheap” valuations based on conventional metrics and ratios – how much lower can they go anyway? – and they will bounce back up to their historical average levels. Or simply wait for a market dip, or a crash, before declaring some magical list of top ten stock tips to invest in. This is NOT value investing.
When Li Ning, the “Nike of China”, announced that its founder is going into industrial park and property development in September 2010, the stock has been a darling, having a competitive “moat” with brand recognition and it has recovered strongly since its bottom in March 2009 by climbing 140% to HK$24 per share. Oh, it is already expected that the market will react negatively to the property news, now it is down 20% to HK$19, value stock, be contrarian, BUY! Down another 20% to HK$15, getting cheaper and it’s out-of-favor, it will bounce back up, BUY! And the value investor catches the falling knife until below HK$5 now; while Nike hits an all-time high.
How do value investors distinguish whether “cheap” stocks are value traps or opportunity?Without an understanding of the underlying business model dynamics and analyzing the durability of the economic moat, an investment decision based on price and macro signals and historical valuation metrics can be misleading and costly. Without an understanding of business model, one would also have sold Wal-mart after it was listed in 1972 as the stock crashed over 60% in the next three years. Wal-mart went on to compound 1,200-fold since 1972 to over US$250 billion in market cap – a $100,000 investment in Wal-Mart becomes a $120 million treasure trove. So why is Wal-mart able to bounce back to scale new heights but the same cannot be said for the “Nike of China”?
Can resilient business models – Bamboo Innovators – outperform even in stormy periods? When Shanghai Composite Index crashed 70% from its peak of 6,000 in October 2007 to below 2,000 at the bottom in March 2009, Yunnan Baiyao was UP around 8%. As the index bounce to 2,200, still down 60% from its peak, Baiyao is up over 220% during the same period. Increasingly, such resilient business models are outperforming in Asia and globally; while the “cheap” stocks get cheaper and they become the fertile ground for “insiders” (庄家) who manipulate prices and volumes and inject “action” via exciting corporate news announcement of “sexy” projects or M&As, luring investors in and then offloading to them in a pump-and-dump cycle. Sophisticated value investors can overcome poor and uncertain macro conditions by investing in resilient compounders because they have their own internal rhythm to create value, like the bamboo, which bend, not break even in the wildest of storm that would have snapped the once-mighty oak tree.
Course Highlights:
– Mr Kee, one of the few Asian fund manager being invited to speak at a number of top banking & finance conferences around the world alongside with renowned speakers such as Praveen Kadle, Chief Executive Officer of Tata Capital & Lauren Templeton, President of Lauren Templeton Capital Management
– Learn from an experienced & qualified instructor who has taught in local Universities
Program Outline and Key Learning Points:
- LEARN the R.E.S.-ilience factors in the business model and economic moat analysis of how Bamboo Innovators create extraordinary value, particularly the “E” factor which stands for “emptiness” in the business model.
- GAIN the surprising insight of sophisticated institutional investors who understand why growth in sales, profit and tangible asset may not translate to market capitalization growth and sustainable share price gains.
- ATTAIN the critical knowledge of 12 types of sophisticated institutional investors that climbing from $50 million to $1 billion in market cap takes an entirely different business model dynamics as compared to scaling up sustainably from $1 billion to $20 billion in market cap.
- RECOGNIZE the 12 types of business models and their profit patterns and acquire the ability to scan through different businesses in various industries to understand the key levers for growth ahead of the investment curve.
- UNDERSTAND why and how businesses hit a stall point in growth and without a transformation in business model, bigger can be riskier. Thus “Grow or Perish” become “Grow AND Perish”
- DISSECT a wide range of real-world cases of Asian and global Bamboo Innovators in various industries and understand the intricacies of their business models, their critical success – and failure – factors.
- UNIFY at the end of the day all the previously disparate loose-hanging concepts, descriptive facts and “checklists” you have learnt from various sources into the practical Bamboo Innovator mental model when it comes to real investment decision-making.
Understand more about the Instructor’s investment approach with the following published articles:
About the Instructor:
Koon Boon is the founder and managing director of the Singapore-based Bamboo Innovator Institute to establish the thought leadership of resilient value creators around the world. KB has been rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets. He was a fund manager and head of research/analyst at a Singapore-based investment management organization dedicated to the craft of value investing in Asia. He had been with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus flagship Asian fund. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. He received his Masters in Finance (magna cum laude) and double degree in Accountancy and Business Management (both summa cum laude) from the Singapore Management University (SMU). He had taught accounting at his alma mater in SMU and lectures at SIM University for working professionals. He had published cutting-edge empirical research in the Special Issue of Istanbul Stock Exchange 25th Year Anniversary of the Boğaziçi Journal, Review of Social and Economic Studies, as well as wrote articles about value investing and corporate governance in the media. He had also presented in top banking and finance conferences in Sydney, Cape Town, HK, Beijing and in the recent Emerging Value Summit 2013. He is also an internationally-featured value investor in Greatinvestors.TV and BeyondProxy.com. He had trained CEOs, entrepreneurs, CFOs, management executives in business strategy, macroeconomic and industry trends in Singapore, HK and China.
