Global Investing
I think I may have not mentioned about my view of global investing in my previous blog entry. Why am I doing such large task of doing global investment?
I am great believer of value investing style, GARP style, and (Old) Warren Buffett's investing style. With respect to (Old) Warren Buffett's investing style, you need to find companies with sustainable moats that maintain respectable amount of earnings power over years or even forever. If I were to stick to Singapore Exchange (SGX) market, I will either find one or none of them meeting that aforesaid criteria. Therefore, there is a need to expand the search net globally. After all, it is certain that each country will have at least one or few such companies - they may be either listed or unlisted.
I do think value investing works globally. There will be days when there is extremely difficult to find value stocks in the stock market of a particular country. Thus, it is better to search outside your perimeter you used to than compromise your investing criteria.
If we have long term view, exchange rate movement should not matter at all. Otherwise, you may wish to adopt the view of Seth Klarman whereby you buy 'cheap insurance' aka hedging positions against the risks you envisage.
How to get investing ideas?
Someone, I get to know when I was networking at Omaha (Yellow Brker event), asked me this question: how to get investing ideas.
I thought no one is doing anything different from the common group of value investors or market participants. I engage wide range of activities to get 'light bulb' (investing ideas were formed): reading, watching, talking, observing, etc). Up to now, almost all realized investment successes I had came from reading investment fund's report and blogs. Some current unrealized investment successes came from reading newspapers and observing things in the public.
Unfortunately, we may get the same sources but we have different frequency to recognize which are investment opportunities.
Segro Investment
I bought Segro PLC at 200 pence per share at 9 January 2012 and sold Segro PLC at 369.50 pence per share on 30 May 2014. Including dividends and transaction cost, the profit of Segro PLC investment is approximately +100.5%.
One day, I was reading Third Avenue Management LLC’s annual letter – after all, I respected and used the work of Martin Whitman, the founder of Third Avenue Management LLC. I notice that Third Avenue Management LLC recently bought Segro PLC (in 2012). Since I was bullish in office-based REIT stocks during 2011-2012, I check it out and liked it although it has huge portfolio of industrial warehouses. Clearly, its properties in London and Europe, and its ability to collect rental income from these properties are heavily discounted by Mr Market. With huge defense (large margin of safety on net asset value basis) and slow-paced attack (slow, persistent earning power recovery), we were bound to make a lot of profit in this stock.
I think I may have not mentioned about my view of global investing in my previous blog entry. Why am I doing such large task of doing global investment?
I am great believer of value investing style, GARP style, and (Old) Warren Buffett's investing style. With respect to (Old) Warren Buffett's investing style, you need to find companies with sustainable moats that maintain respectable amount of earnings power over years or even forever. If I were to stick to Singapore Exchange (SGX) market, I will either find one or none of them meeting that aforesaid criteria. Therefore, there is a need to expand the search net globally. After all, it is certain that each country will have at least one or few such companies - they may be either listed or unlisted.
I do think value investing works globally. There will be days when there is extremely difficult to find value stocks in the stock market of a particular country. Thus, it is better to search outside your perimeter you used to than compromise your investing criteria.
If we have long term view, exchange rate movement should not matter at all. Otherwise, you may wish to adopt the view of Seth Klarman whereby you buy 'cheap insurance' aka hedging positions against the risks you envisage.
How to get investing ideas?
Someone, I get to know when I was networking at Omaha (Yellow Brker event), asked me this question: how to get investing ideas.
I thought no one is doing anything different from the common group of value investors or market participants. I engage wide range of activities to get 'light bulb' (investing ideas were formed): reading, watching, talking, observing, etc). Up to now, almost all realized investment successes I had came from reading investment fund's report and blogs. Some current unrealized investment successes came from reading newspapers and observing things in the public.
Unfortunately, we may get the same sources but we have different frequency to recognize which are investment opportunities.
Segro Investment
I bought Segro PLC at 200 pence per share at 9 January 2012 and sold Segro PLC at 369.50 pence per share on 30 May 2014. Including dividends and transaction cost, the profit of Segro PLC investment is approximately +100.5%.
One day, I was reading Third Avenue Management LLC’s annual letter – after all, I respected and used the work of Martin Whitman, the founder of Third Avenue Management LLC. I notice that Third Avenue Management LLC recently bought Segro PLC (in 2012). Since I was bullish in office-based REIT stocks during 2011-2012, I check it out and liked it although it has huge portfolio of industrial warehouses. Clearly, its properties in London and Europe, and its ability to collect rental income from these properties are heavily discounted by Mr Market. With huge defense (large margin of safety on net asset value basis) and slow-paced attack (slow, persistent earning power recovery), we were bound to make a lot of profit in this stock.
With respect to slow, persistent earning power recovery, Segro PLC appointed current CEO, who used to be Finance Director at Segro PLC, in April 2011. His strategy is to sell non-core properties that are not part of the strategy and buy properties that meet the requirements. All you need to give Segro PLC time to restore its earning power as CEO is shaping Segro PLC into income focused REIT
It is much easier to estimate intrinsic value based on net asset value basis and hard to estimate intrinsic value based on earning power. Clearly, it has crossed the intrinsic value based on net asset value basis. The range of my estimated intrinsic value based on earning power is very wide. Therefore, it is good opportunity for us to sell it with the reason of downsizing my portfolio.
It is very much in line with Warren Buffett's reply to a shareholder at Berkshire Hathaway meeting 2014 in Omaha:
It is slightly edited from live chat at Motley Fool website. Thus, I didn't want to spend too much time to exact the intrinsic value based on earnings power. It is better for me to have cash and wait for similar or better investment opportunities (rather than worry too much every day)."Graham didn't get too specific about IV, in terms of precise calculations, but IV has become the same as private business value. Now, I'm not sure who first came up with it, well actually it was Aesop. The intrinsic value of any business is the present value of all cash distributed between now and judgement day. We're not perfect in judging that, by the way. Aesop said a bird in the hand is better than two in the bush, in 600BC and that hasn't been improved much by business professors since then. The question is: how sure are you that there are two in the bush, how far away is the bush, what are interest rates. Aesop wanted to leave us something to work on...but that's intrinsic value."
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