| Foreign investment funds now also ‘surfing’ | ||
| 13:42' 10/12/2009 (GMT+7) | ||
VietNamNet Bridge – Foreign investment funds, generally considered to be long term investors, have been observed making ‘surfing investments’ in
In two years, over 300 new foreign funds In the early part of this decade, the first years of Vietnam’s stock market, only a few investment funds were active in Vietnam, among them Vietnam Dragon Fund, VinaCapital and Mekong Capital. Because then there were only a few dozen companies listed on the bourse, it was easy to guess what the investment funds purchased and what they sold. A lot of domestic investors followed the funds’ lead, hoping for a bigger profit. As According to the Ministry of Finance, by November 2009, Foreign funds also dabble in short-term buys The investment strategies of new funds in The director of a well known foreign fund in Khong Van Minh, Director of the Jaccar Vietnam Fund, stresses that long term investment will remain the strategy of the fund. However, in order to get adapted to The 382 investment funds make different moves on the market. What they have in common is ample capital, which allows them to purchase shares continuously in many trading sessions and then sell shares in many trading sessions The managing director of the SAM Investment Fund says that “value investors” investors do not care if the market is rising or falling. They simply purchase shares when they find the prices reasonable. He says that a reasonable range for the VN Index now is 500-550 points. VietNamNet/DTCK |
Saturday 19 June 2010
Foreign Investment funds now also 'surfing' (Vietnam News)
Be a stock picker: Buy GREAT companies and hold for the long term until their fundamentals change
All the above are GREAT companies.
NEVER buy these GREAT companies at HIGH prices.
You can often buy them at FAIR prices.
On certain occasions, you have the chance to buy them at slightly BARGAIN prices.
Rarely, for example during the recent 2008 Crash, you had the chance to buy them at GREAT prices.
It is better to buy a GREAT company at a FAIR price than to buy a FAIR company at a GREAT price.
It is safe to hold these stocks for the long term since these companies have competitive advantages, selling only when their fundamentals change.
The present prices of these stocks are near or above their previous high prices.
Those who bought regularly into these stocks would have capital gains, through dollar-cost averaging.
Further comments:
- Warren, on the other hand, after starting his career with Graham, discovered the tremendous wealth-creating economics of a company that possessed a long-term competitive advantage over its competitors.
- Warren realized that the longer you held one of these fantastic businesses, the richer it made you.
- While Graham would have argued that these super businesses were all overpriced, Warren realized that he didn't have to wait for the stock market to serve up a bargain price, that even if he paid a fair price, he could still get superrich off of those businesses.
- In the process of discovering the advantages of owning a business with a long-term competitive advantage, Warren developed a unique set of analytical tools to help identify these special kinds of businesses.
- Though rooted in the old school Grahamian language, his new way of looking at things enabled him to determine whether the company could survive its current problems.
- Warren's way also told him whether or not the company in question possessed a long-term competitive advantage that would make him superrich over the long run.
- By learning or copying Warren, you can make the quantum leap that Warren made by enabling you to go beyond the old school Grahamian valuation models and discover, as Warren did, the phenomenal long-term wealth-creating power of a company that possesses a durable competitive advantage over its competitors.
- In the process you'll free yourself from the costly manipulations of Wall Street and gain the opportunity to join the growing ranks of intelligent investors the world over who are becoming tremendously wealthy following in the footsteps of this legendary and masterful investor.
Related:
The Evolution of Warren Buffett
Learning and Understanding the Evolution of Warren BuffettLi Lu sharing his Value Investing Strategies (Video)
The Three Gs of Buffett: Great, Good and Gruesome
The GREAT company has long-term competitive advantage in a stable industry. This company:
- takes a one time investment capital and
- pays you a very attractive return (dividend + capital appreciation),
- which will continue to increase as years pass by;
Here are the golden words of Buffett on the GREAT businesses to own:
1. On 'Great' businesses, Buffett says, "Long-term competitive advantage in a stable industry is what we seek in a business.
- If that comes with rapid organic growth, great.
- But even without organic growth, such a business is rewarding.
- We will simply take the lush earnings of the business and use them to buy similar businesses elsewhere.
- There's no rule that you have to invest money where you've earned it.
- Indeed, it's often a mistake to do so: Truly great businesses, earning huge returns on tangible assets, can't for any extended period reinvest a large portion of their earnings internally at high rates of return."
Friday 18 June 2010
Learning and Understanding the Evolution of Warren Buffett
The Evolution of Warren Buffett
It will be difficult for Buffett to continue to beat the market, assuming that he can do so. There are basically three ways for him to try.
All in all, Buffett has come a long way from his early days.
Further Comments:
--------
1. Imitating Ben Graham: Buffett's early investments were clearly in the Graham and Dodd mold.
The first major one, in 1957, was National Fire American Insurance, operated by the Ahmanson brothers (the older, H.F., also gave his name to a savings and loan). The brothers tried to buy in the stock for $50 a share (just above its annual earnings), but Buffett sent an agent all over to Nebraska with a counteroffer of $100 a share. Even at this higher price, he just about doubled his money.
In 1958, Buffett put 20% of the partners' money in Commonwealth Bank of Union City, at a price of $50 a share, because he estimated its stock value at $125 a share, and the company was growing at 10% a year. This was a more than adequate (60%) "margin of safety." If the gap between price and value closed in 10 years, he would realize some $325, or a return of about 20% annualized. But he sold a year later at $80 a share, earning 60% in a year, while the ten-year return had fallen to "only" an annual 16%.
In 1959, he placed 35% of the partners' money in Sanborn Map, a company that produced detailed city maps of buildings, whose users were insurance companies, fire stations, and the like. This had been a prosperous business in the 1930s and 1940s, before a cheaper substitute rendered it unprofitable in the 1950s. Nevertheless, the stock had fallen from $110 a share to $45 a share in 20 years, even though the company had built up an investment portfolio worth $65 a share during that time using excess cash. In Ben Graham style, Buffett's partners and two allies obtained 46% of the stock and forced management to distribute most of the portfolio to shareholders, at a 50%-ish (pre-tax) gain to the investors who elected this option.
Going into the 1960s, Buffett continued to buy companies at a discount to asset value Graham style. These included Berkshire Hathaway, a struggling textile producer with per-share working capital approximating its $15 share price, Dempster Mills, and Diversified Retailing. Buffett bought all of these companies with the expectation of getting the underlying businesses for "free." This was true only for Dempster, a badly-managed company that was turned around in less than three years for triple the investment. In the case of Berkshire, at least, even "free" was too much to expect.
But Buffett eventually used Berkshire's cash flow to acquire Diversified, and then redeployed the two companies' cash elsewhere. What's more, when he distributed partnership assets pro rata in 1970, he had effectively changed the form of his investment vehicle from a partnership (where capital gains were taxed every year), to a corporation (where gains were taxed only when realized).
There was one investment during this period that signalled Buffett's eventual departure from the Graham style. That was the purchase of the stock of American Express, whose main business was credit cards, but whose stock suffered when the firm's warehousing operation vouched for the value of "salad oil" deposited by a crook. This man,Tino deAngelis, borrowed (and lost) money on the strength of phony collateral, leaving Amex holding the bag. The stock took a hit when Amex paid out $60 million, its entire net worth, to settle the resulting claims. But Buffett realized that he was really getting the credit card business at a discount. Late in the 1960s, he sold his Amex stock for between three to five times his acquisition cost, three to five years after he had bought it.
--------
2. Transition to a "GARP" Style: Warren Buffett then evolved into what we would call a "GARP" (growth at a reasonable price) investor, albeit one with a strong value bent.
This transition occurred during the early years of his "new" (post Buffett partnership) incarnation, after he had hooked up with Charlie Munger, who believed that it was better to buy a great company at a good price, rather than a good company at a great price..
(a) What happened in the early 1970s was that certifiable growth companies got not only into value, but deep value territory (great companies at great prices).
One of them was Washington Post That company had publishing and broadcasting assets worth perhaps $400 million in 1970, but which sold in the market for $80-$100 million. Buffett bought some 12% of the company, which not only closed the gap between market value and asset value, but also grew earnings per share in excess of 15% over the next decade.
GEICO, a low cost insurer, had represented one of Buffett's first investments as a boy. Started with $100,000 in seed capital in 1936, it was worth about $3 million when Ben Graham bought a controlling stake in 1948. From there, it advanced in spectacular fashion to a peak of over $500 million, over 100 times, in two and half decades, before falling onto hard times in the early 1970s.
By 1976, it was near bankruptcy when Buffett had Salomon Brothers organize a rescue via a $76 million capital infusion. Berkshire provided $19 million of it, and basically co-underwrote the convertible preferred offering with Salomon. Adding this to an earlier $4 million investment in common gave Buffett a 33% stake in a company that would grow per-share earnings at about 15% a year over the next two decades.
Other, less celebrated, long term holdings from the period include Affiliated Publications, the Interpublic Group (IPG), Media General, and Ogilvy and Mather.
(b) Buffett also experimented with cheaply priced leaders of their respective industries:
Safeco for insurance, General Foods (GIS) in food, and the former Exxon in energy. There was a group of inflation hedges in the form of Alcoa (AA), Cleveland Cliffs Iron (CLFQM.PK), GATX, Handy and Harman, and later Reyolds Aluminum. Finally, there were arbitrage operations in Arcata Corporation and Beatrice Foods.
Buffett also dabbled in larger media companies such as ABC (DIS), Capital Cities, and Time Inc (TWX). He made a proposal to the management of the latter company that he take a large blocking position, to prevent a takeover, which Time rejected, to its later regret. (A takeover attempt by Paramount forced it into an ill-advised merger with Warner Communications.)
Both ABC and Capital Cities came back onto Buffett's radar screen when the chairman of the former retired, and the chairman of the latter, Buffett's good friend Tom Murphy, wanted to acquire the former, a move that had the blessing of the outgoing chairman. On its own, Capital Cities had no chance to acquire ABC, but an over $500 million investment from Berkshire provided the "equity" slice that made the leveraged deal possible. It also had the effect of making Berkshire a nearly 20% shareholder in the combined company, discouraging a takeover. At 16 times earnings, it was not a Graham investment, and had no margin of safety on the balance sheet.
But Tom Murphy reduced the combined companies' debt by over $1 billion (nearly half) within a year, while growing earnings at a mid-teens rate. (The stock grew at nearly 20% a year for a decade, because of multiple expansion, before the company was taken over by Disney.
(c) Buffett's next moves were among the most controversial of his career (and foreshadowed his recent purchases of General Electric and Goldman Sachs preferred).
Not finding any cheap common stocks around the run-up to Black Monday (1987), Buffett bought converitble preferred stocks in Champion International, Gillette, Salomon Brothers and US Airways (UAUA) issued specifically to him.
Champion was a mediocre investment and U.S. Air was a money-losing one. Salomon fell onto hard times and had to be personally rescued by Buffett. Gillette was a fundamentally strong company that paid out essentially all of its net worth in a special dividend to avoid a takeover (before Buffett's investment recapitalized it). In this regard, it was much like American Express (AXP) of the 1960s. Buffett returned to American Express in the mid 1990s with a similar $300 million investment in convertible preferred.
(d) During this time, Buffett completed his transformation as a GARP investment by buying Coke (KO).
With a mid-teens P/E ratio, this was not a classic Graham and Dodd investment, but the company was selling at "only" 1.25 times the market multiple, a ratio that expanded to 3 times in a decade, tripling the absolute multiple. Earnings more than tripled during this time, making Coke a huge winner for Berkshire.
In recent years, Buffett has added "international" to his repertoire, investing in Guinness (drinks) and Tesco (TSCDY.PK) (retail) of Britain, Posco (PKX), the South Korean steel company, PetroChina and the Brazilian real.
It will be difficult for Buffett to continue to beat the market, assuming that he can do so. There are basically three ways for him to try.
- The first is to substitute faster-growing foreign stocks for large cap U.S. stocks. That is, he may try to beat Exxon Mobil (XOM) using the stocks of PetroChina (PTR) (owned in the past), or Petrobras of Brazil, to play the emerging markets theme.
- The second way to try to beat the market is to try to time purchases near lows or obtain special terms, as Berkshire did with its large stakes in General Electric and Goldman Sachs (GS).
- The third way is to avoid stocks of clearly dying "leading" companies such as International Paper (IP), General Motors, and Eastman Kodak (EK), a quasi-index strategy that, if successful, would still lead to modest outperformance.
All in all, Buffett has come a long way from his early days.
Further Comments:
- The first and second strategies are termed OFFENSIVE STRATEGIES to improve the return of the portfolio.
- The third strategy is a DEFENSIVE STRATEGY to reduce harm to the return of the portfolio.
--------
1. Imitating Ben Graham: Buffett's early investments were clearly in the Graham and Dodd mold.
The first major one, in 1957, was National Fire American Insurance, operated by the Ahmanson brothers (the older, H.F., also gave his name to a savings and loan). The brothers tried to buy in the stock for $50 a share (just above its annual earnings), but Buffett sent an agent all over to Nebraska with a counteroffer of $100 a share. Even at this higher price, he just about doubled his money.
In 1958, Buffett put 20% of the partners' money in Commonwealth Bank of Union City, at a price of $50 a share, because he estimated its stock value at $125 a share, and the company was growing at 10% a year. This was a more than adequate (60%) "margin of safety." If the gap between price and value closed in 10 years, he would realize some $325, or a return of about 20% annualized. But he sold a year later at $80 a share, earning 60% in a year, while the ten-year return had fallen to "only" an annual 16%.
In 1959, he placed 35% of the partners' money in Sanborn Map, a company that produced detailed city maps of buildings, whose users were insurance companies, fire stations, and the like. This had been a prosperous business in the 1930s and 1940s, before a cheaper substitute rendered it unprofitable in the 1950s. Nevertheless, the stock had fallen from $110 a share to $45 a share in 20 years, even though the company had built up an investment portfolio worth $65 a share during that time using excess cash. In Ben Graham style, Buffett's partners and two allies obtained 46% of the stock and forced management to distribute most of the portfolio to shareholders, at a 50%-ish (pre-tax) gain to the investors who elected this option.
Going into the 1960s, Buffett continued to buy companies at a discount to asset value Graham style. These included Berkshire Hathaway, a struggling textile producer with per-share working capital approximating its $15 share price, Dempster Mills, and Diversified Retailing. Buffett bought all of these companies with the expectation of getting the underlying businesses for "free." This was true only for Dempster, a badly-managed company that was turned around in less than three years for triple the investment. In the case of Berkshire, at least, even "free" was too much to expect.
But Buffett eventually used Berkshire's cash flow to acquire Diversified, and then redeployed the two companies' cash elsewhere. What's more, when he distributed partnership assets pro rata in 1970, he had effectively changed the form of his investment vehicle from a partnership (where capital gains were taxed every year), to a corporation (where gains were taxed only when realized).
There was one investment during this period that signalled Buffett's eventual departure from the Graham style. That was the purchase of the stock of American Express, whose main business was credit cards, but whose stock suffered when the firm's warehousing operation vouched for the value of "salad oil" deposited by a crook. This man,Tino deAngelis, borrowed (and lost) money on the strength of phony collateral, leaving Amex holding the bag. The stock took a hit when Amex paid out $60 million, its entire net worth, to settle the resulting claims. But Buffett realized that he was really getting the credit card business at a discount. Late in the 1960s, he sold his Amex stock for between three to five times his acquisition cost, three to five years after he had bought it.
Further comments:
Investment analysis during the late 19th century and the early part of the 20th century was focused primarily on determining a company's solvency and earning power for the purposes of bond analysis.
Benjamin Graham had adapted early bond analysis techniques to common stocks analysis.
But Graham never made the distinction between a company that held a long-term competitive advantage over its competitors and one that didn't.
He was only interested in whether or not the company had sufficient earning power to get it out of the economic trouble that had sent its stock price spiraling downward.
He wasn't interested in owning a position in a company for 10 or 20 years.
If it didn't move after 2 years, he was out of it.
It's not like Graham missed the boat; he just didn't get on the one that would have made him, like Warren, the richest man in the world.
--------
2. Transition to a "GARP" Style: Warren Buffett then evolved into what we would call a "GARP" (growth at a reasonable price) investor, albeit one with a strong value bent.
This transition occurred during the early years of his "new" (post Buffett partnership) incarnation, after he had hooked up with Charlie Munger, who believed that it was better to buy a great company at a good price, rather than a good company at a great price..
(a) What happened in the early 1970s was that certifiable growth companies got not only into value, but deep value territory (great companies at great prices).
One of them was Washington Post That company had publishing and broadcasting assets worth perhaps $400 million in 1970, but which sold in the market for $80-$100 million. Buffett bought some 12% of the company, which not only closed the gap between market value and asset value, but also grew earnings per share in excess of 15% over the next decade.
GEICO, a low cost insurer, had represented one of Buffett's first investments as a boy. Started with $100,000 in seed capital in 1936, it was worth about $3 million when Ben Graham bought a controlling stake in 1948. From there, it advanced in spectacular fashion to a peak of over $500 million, over 100 times, in two and half decades, before falling onto hard times in the early 1970s.
By 1976, it was near bankruptcy when Buffett had Salomon Brothers organize a rescue via a $76 million capital infusion. Berkshire provided $19 million of it, and basically co-underwrote the convertible preferred offering with Salomon. Adding this to an earlier $4 million investment in common gave Buffett a 33% stake in a company that would grow per-share earnings at about 15% a year over the next two decades.
Other, less celebrated, long term holdings from the period include Affiliated Publications, the Interpublic Group (IPG), Media General, and Ogilvy and Mather.
(b) Buffett also experimented with cheaply priced leaders of their respective industries:
Safeco for insurance, General Foods (GIS) in food, and the former Exxon in energy. There was a group of inflation hedges in the form of Alcoa (AA), Cleveland Cliffs Iron (CLFQM.PK), GATX, Handy and Harman, and later Reyolds Aluminum. Finally, there were arbitrage operations in Arcata Corporation and Beatrice Foods.
Buffett also dabbled in larger media companies such as ABC (DIS), Capital Cities, and Time Inc (TWX). He made a proposal to the management of the latter company that he take a large blocking position, to prevent a takeover, which Time rejected, to its later regret. (A takeover attempt by Paramount forced it into an ill-advised merger with Warner Communications.)
Both ABC and Capital Cities came back onto Buffett's radar screen when the chairman of the former retired, and the chairman of the latter, Buffett's good friend Tom Murphy, wanted to acquire the former, a move that had the blessing of the outgoing chairman. On its own, Capital Cities had no chance to acquire ABC, but an over $500 million investment from Berkshire provided the "equity" slice that made the leveraged deal possible. It also had the effect of making Berkshire a nearly 20% shareholder in the combined company, discouraging a takeover. At 16 times earnings, it was not a Graham investment, and had no margin of safety on the balance sheet.
But Tom Murphy reduced the combined companies' debt by over $1 billion (nearly half) within a year, while growing earnings at a mid-teens rate. (The stock grew at nearly 20% a year for a decade, because of multiple expansion, before the company was taken over by Disney.
(c) Buffett's next moves were among the most controversial of his career (and foreshadowed his recent purchases of General Electric and Goldman Sachs preferred).
Not finding any cheap common stocks around the run-up to Black Monday (1987), Buffett bought converitble preferred stocks in Champion International, Gillette, Salomon Brothers and US Airways (UAUA) issued specifically to him.
Champion was a mediocre investment and U.S. Air was a money-losing one. Salomon fell onto hard times and had to be personally rescued by Buffett. Gillette was a fundamentally strong company that paid out essentially all of its net worth in a special dividend to avoid a takeover (before Buffett's investment recapitalized it). In this regard, it was much like American Express (AXP) of the 1960s. Buffett returned to American Express in the mid 1990s with a similar $300 million investment in convertible preferred.
(d) During this time, Buffett completed his transformation as a GARP investment by buying Coke (KO).
With a mid-teens P/E ratio, this was not a classic Graham and Dodd investment, but the company was selling at "only" 1.25 times the market multiple, a ratio that expanded to 3 times in a decade, tripling the absolute multiple. Earnings more than tripled during this time, making Coke a huge winner for Berkshire.
In recent years, Buffett has added "international" to his repertoire, investing in Guinness (drinks) and Tesco (TSCDY.PK) (retail) of Britain, Posco (PKX), the South Korean steel company, PetroChina and the Brazilian real.
Further comments:
- Warren, on the other hand, after starting his career with Graham, discovered the tremendous wealth-creating economics of a company that possessed a long-term competitive advantage over its competitors.
- Warren realized that the longer you held one of these fantastic businesses, the richer it made you.
- While Graham would have argued that these super businesses were all overpriced, Warren realized that he didn't have to wait for the stock market to serve up a bargain price, that even if he paid a fair price, he could still get superrich off of those businesses.
- In the process of discovering the advantages of owning a business with a long-term competitive advantage, Warren developed a unique set of analytical tools to help identify these special kinds of businesses.
- Though rooted in the old school Grahamian language, his new way of looking at things enabled him to determine whether the company could survive its current problems.
- Warren's way also told him whether or not the company in question possessed a long-term competitive advantage that would make him superrich over the long run.
- By learning or copying Warren, you can make the quantum leap that Warren made by enabling you to go beyond the old school Grahamian valuation models and discover, as Warren did, the phenomenal long-term wealth-creating power of a company that possesses a durable competitive advantage over its competitors.
- In the process you'll free yourself from the costly manipulations of Wall Street and gain the opportunity to join the growing ranks of intelligent investors the world over who are becoming tremendously wealthy following in the footsteps of this legendary and masterful investor.
The Evolution of Warren Buffett
The Evolution of Warren Buffett
It will be difficult for Buffett to continue to beat the market, assuming that he can do so. There are basically three ways for him to try.
1. Imitating Ben Graham: Buffett's early investments were clearly in the Graham and Dodd mold.
2. Transition to a "GARP" Style: Warren Buffett then evolved into what we would call a "GARP" (growth at a reasonable price) investor, albeit one with a strong value bent.
This transition occurred during the early years of his "new" (post Buffett partnership) incarnation, after he had hooked up with Charlie Munger, who believed that it was better to buy a great company at a good price, rather than a good company at a great price..
(a) What happened in the early 1970s was that certifiable growth companies got not only into value, but deep value territory (great companies at great prices).
(b) Buffett also experimented with cheaply priced leaders of their respective industries:
(c) Buffett's next moves were among the most controversial of his career (and foreshadowed his recent purchases of General Electric and Goldman Sachs preferred).
(d) During this time, Buffett completed his transformation as a GARP investment by buying Coke (KO).
It will be difficult for Buffett to continue to beat the market, assuming that he can do so. There are basically three ways for him to try.
- The first is to substitute faster-growing foreign stocks for large cap U.S. stocks. That is, he may try to beat Exxon Mobil (XOM) using the stocks of PetroChina (PTR) (owned in the past), or Petrobras of Brazil, to play the emerging markets theme.
- The second way to try to beat the market is to try to time purchases near lows or obtain special terms, as Berkshire did with its large stakes in General Electric and Goldman Sachs (GS).
- The third way is to avoid stocks of clearly dying "leading" companies such as International Paper (IP), General Motors, and Eastman Kodak (EK), a quasi-index strategy that, if successful, would still lead to modest outperformance.
1. Imitating Ben Graham: Buffett's early investments were clearly in the Graham and Dodd mold.
- The first major one, in 1957, was National Fire American Insurance, operated by the Ahmanson brothers (the older, H.F., also gave his name to a savings and loan). The brothers tried to buy in the stock for $50 a share (just above its annual earnings), but Buffett sent an agent all over to Nebraska with a counteroffer of $100 a share. Even at this higher price, he just about doubled his money.
- In 1958, Buffett put 20% of the partners' money in Commonwealth Bank of Union City, at a price of $50 a share, because he estimated its stock value at $125 a share, and the company was growing at 10% a year. This was a more than adequate (60%) "margin of safety." If the gap between price and value closed in 10 years, he would realize some $325, or a return of about 20% annualized. But he sold a year later at $80 a share, earning 60% in a year, while the ten-year return had fallen to "only" an annual 16%.
- In 1959, he placed 35% of the partners' money in Sanborn Map, a company that produced detailed city maps of buildings, whose users were insurance companies, fire stations, and the like. This had been a prosperous business in the 1930s and 1940s, before a cheaper substitute rendered it unprofitable in the 1950s. Nevertheless, the stock had fallen from $110 a share to $45 a share in 20 years, even though the company had built up an investment portfolio worth $65 a share during that time using excess cash. In Ben Graham style, Buffett's partners and two allies obtained 46% of the stock and forced management to distribute most of the portfolio to shareholders, at a 50%-ish (pre-tax) gain to the investors who elected this option.
- Going into the 1960s, Buffett continued to buy companies at a discount to asset value Graham style. These included Berkshire Hathaway, a struggling textile producer with per-share working capital approximating its $15 share price, Dempster Mills, and Diversified Retailing. Buffett bought all of these companies with the expectation of getting the underlying businesses for "free." This was true only for Dempster, a badly-managed company that was turned around in less than three years for triple the investment. In the case of Berkshire, at least, even "free" was too much to expect.
- But Buffett eventually used Berkshire's cash flow to acquire Diversified, and then redeployed the two companies' cash elsewhere. What's more, when he distributed partnership assets pro rata in 1970, he had effectively changed the form of his investment vehicle from a partnership (where capital gains were taxed every year), to a corporation (where gains were taxed only when realized).
- There was one investment during this period that signalled Buffett's eventual departure from the Graham style. That was the purchase of the stock of American Express, whose main business was credit cards, but whose stock suffered when the firm's warehousing operation vouched for the value of "salad oil" deposited by a crook. This man,Tino deAngelis, borrowed (and lost) money on the strength of phony collateral, leaving Amex holding the bag. The stock took a hit when Amex paid out $60 million, its entire net worth, to settle the resulting claims. But Buffett realized that he was really getting the credit card business at a discount. Late in the 1960s, he sold his Amex stock for between three to five times his acquisition cost, three to five years after he had bought it.
2. Transition to a "GARP" Style: Warren Buffett then evolved into what we would call a "GARP" (growth at a reasonable price) investor, albeit one with a strong value bent.
This transition occurred during the early years of his "new" (post Buffett partnership) incarnation, after he had hooked up with Charlie Munger, who believed that it was better to buy a great company at a good price, rather than a good company at a great price..
(a) What happened in the early 1970s was that certifiable growth companies got not only into value, but deep value territory (great companies at great prices).
- One of them was Washington Post That company had publishing and broadcasting assets worth perhaps $400 million in 1970, but which sold in the market for $80-$100 million. Buffett bought some 12% of the company, which not only closed the gap between market value and asset value, but also grew earnings per share in excess of 15% over the next decade.
- GEICO, a low cost insurer, had represented one of Buffett's first investments as a boy. Started with $100,000 in seed capital in 1936, it was worth about $3 million when Ben Graham bought a controlling stake in 1948. From there, it advanced in spectacular fashion to a peak of over $500 million, over 100 times, in two and half decades, before falling onto hard times in the early 1970s.
- By 1976, it was near bankruptcy when Buffett had Salomon Brothers organize a rescue via a $76 million capital infusion. Berkshire provided $19 million of it, and basically co-underwrote the convertible preferred offering with Salomon. Adding this to an earlier $4 million investment in common gave Buffett a 33% stake in a company that would grow per-share earnings at about 15% a year over the next two decades.
- Other, less celebrated, long term holdings from the period include Affiliated Publications, the Interpublic Group (IPG), Media General, and Ogilvy and Mather.
(b) Buffett also experimented with cheaply priced leaders of their respective industries:
- Safeco for insurance, General Foods (GIS) in food, and the former Exxon in energy. There was a group of inflation hedges in the form of Alcoa (AA), Cleveland Cliffs Iron (CLFQM.PK), GATX, Handy and Harman, and later Reyolds Aluminum. Finally, there were arbitrage operations in Arcata Corporation and Beatrice Foods.
- Buffett also dabbled in larger media companies such as ABC (DIS), Capital Cities, and Time Inc (TWX). He made a proposal to the management of the latter company that he take a large blocking position, to prevent a takeover, which Time rejected, to its later regret. (A takeover attempt by Paramount forced it into an ill-advised merger with Warner Communications.)
- Both ABC and Capital Cities came back onto Buffett's radar screen when the chairman of the former retired, and the chairman of the latter, Buffett's good friend Tom Murphy, wanted to acquire the former, a move that had the blessing of the outgoing chairman. On its own, Capital Cities had no chance to acquire ABC, but an over $500 million investment from Berkshire provided the "equity" slice that made the leveraged deal possible. It also had the effect of making Berkshire a nearly 20% shareholder in the combined company, discouraging a takeover. At 16 times earnings, it was not a Graham investment, and had no margin of safety on the balance sheet.
- But Tom Murphy reduced the combined companies' debt by over $1 billion (nearly half) within a year, while growing earnings at a mid-teens rate. (The stock grew at nearly 20% a year for a decade, because of multiple expansion, before the company was taken over by Disney.
(c) Buffett's next moves were among the most controversial of his career (and foreshadowed his recent purchases of General Electric and Goldman Sachs preferred).
- Not finding any cheap common stocks around the run-up to Black Monday (1987), Buffett bought converitble preferred stocks in Champion International, Gillette, Salomon Brothers and US Airways (UAUA) issued specifically to him.
- Champion was a mediocre investment and U.S. Air was a money-losing one. Salomon fell onto hard times and had to be personally rescued by Buffett. Gillette was a fundamentally strong company that paid out essentially all of its net worth in a special dividend to avoid a takeover (before Buffett's investment recapitalized it). In this regard, it was much like American Express (AXP) of the 1960s. Buffett returned to American Express in the mid 1990s with a similar $300 million investment in convertible preferred.
(d) During this time, Buffett completed his transformation as a GARP investment by buying Coke (KO).
- With a mid-teens P/E ratio, this was not a classic Graham and Dodd investment, but the company was selling at "only" 1.25 times the market multiple, a ratio that expanded to 3 times in a decade, tripling the absolute multiple. Earnings more than tripled during this time, making Coke a huge winner for Berkshire.
- In recent years, Buffett has added "international" to his repertoire, investing in Guinness (drinks) and Tesco (TSCDY.PK) (retail) of Britain, Posco (PKX), the South Korean steel company, PetroChina and the Brazilian real.
Academician turned property millionaire
By Sherry Koh | June 17, 2010
Academician turned property millionaire
The humble and funny man: Dr Peter Yee at his office-cum-training centre in Selayang.
Despite his unassuming and jokester demeanour, Yee, 53, is someone who stays strongly focused on his goals. He has compiled a long list of academic qualifications through the years and has also paid many “tuition fees” (errors in property investment) since he started investing in his late 30s.
His never-give-up attitude has led him towards the much-desired path of financial freedom. To him, there is no such thing as failure, just learning. He has started businesses and failed. But he never saw those experiences as a failure despite what some might have branded him. He continued acquiring non-academic knowledge and finally found his riches via property investment.
Today, he lives in his dream house with a panoramic view of Kuala Lumpur’s city centre. The dream home closely resembles a sketch of a house on a hill that he drew in year 2000 and stuck onto the door of his wardrobe.
His tenacity might remind people of Yoda’s (Jedi Master from the Star Wars universe created by George Lucas) worldwide-known gems of advice - Do or do not. There is no try. StarProperty.my visited Dr Peter Yee at his office in Selayang, played the 'Success' board game he created and chatted about his interesting journey towards financial freedom.
Tell us about your journey towards financial freedom.
I spent too much time studying. That was my mistake. I went to five different universities, including the ones in Japan and the USA. I bought my first bungalow in my late 30s. Before that, it was just “break-even” every day. Basic education is important. But if I were to get a degree and immediately focus on making money, the results would’ve been different. A lot of my new friends and neighbours are not highly educated, but they make a lot of money because they focus their time on making money. That’s why my third book’s topic has changed. It will be about making money.
You should never give up in life, regardless of your age. There’s no such thing as failure. I have started businesses and closed them down. People might say that I am a failure, but I don’t think so. Instead, I change. This is because some businesses were not be suitable for me.
You were a teacher and remisier before. Did those experiences have a major impact on your life?
In year 2002, I was a school teacher and was posted to Kuala Terengganu. I was bonded for seven years as I took the Government’s scholarship. I wanted to leave to do business but I couldn’t because I did not have the RM100,000 to return to the Government. At that time, I had a house in Kuala Lumpur. It was sometimes rented out, and sometimes my family and I stayed for a while. An important learning is to invest in properties near you, maybe within 30 minutes, especially for residential properties. It is easier for tenant management and property maintenance.
My second scholarship was to Japan to study computer algorithm. It was a four-year contract. I served two years and paid back half the sum, RM15,000. I came back (Kuala Lumpur) to do management training for a college. It wasn’t easy because I was sent outstation all over Malaysia. One week in Penang, one week in Kuantan and so on. I did not like that kind of life. So I resigned and started my own training company that is similar like now, but smaller. Universities don’t teach living skills, how to make money or how to live a better life.
I needed sales. Everyday my staff asks, “Boss, what to do.” [laughs]. Nine months after starting the business, I became very depressed because there were no sales. So I shut down the business and became a remisier. I sold off the only house I have and paid a deposit of RM50,000, after negotiating with the company.
From all these, I learnt that in order to move forward, one needs to change to go on a different career path and also learn to sacrifice.
As a remisier, the income was good. In one month, one could make between RM30,000 to RM50,000, and sometimes more. In a year, there are maybe one or two good months. The other months, "sleeping" time. When it was busy, I talked until my cheek hurt. When it was quiet, there’s maybe one call per day. When the market was busy, I had four phones. That’s too busy! After five years, I decided that the job was not suitable and I attending a course called ‘Money and You’.
It started with a goal: The sketch of Yee's dream home, taken from his book 'The Certain Way
To Life's Riches'
Actually, I attended many self-development courses to find out what was wrong with me. I found out that there was nothing wrong with me. There’s something wrong with my formal education! So I had to complement my formal education with not-so-formal education. In that seminar (Money and You), they said, “Do you like what you do?” If you don’t like, then you are like a prostitute. You only like the money, but you don’t like the job." Then I thought, “Eh! I feel like a prostitute.” [laughs]. So I resigned and managed to pull out some capital from the deposit . That is the beginning of my property investment career.
At that time, my wife was also looking for a location for a business. And that’s why I came to Selayang. We found a place with a 3+2 agreement, meaning 3 years of fixed rent, while 2 years float. After three years, there was some money coming in. So, I approached the landlord and he increased my rental from RM1,200 to RM2,200. When I asked him to reduce the rent, he shouted at me, “If you don’t like, many other people want to rent!”
It was very hard for me to accept that the world is so merciless. It won’t work to pay him endlessly. So we did something for ourselves. So we really thank that man, Mr Chan. Because of him, we have many shops now. Otherwise, we would still be renting.
What’s the board game about? Why did you create it?
I created the board game about 10 years ago. At that time, I like to play board game. You know, Robert Kiyosaki’s cash flow game? I enjoyed that game very much but I feel that his game missed something out. His game focuses mainly on financial intelligence. In life, finance is one of the important parts. But what about the other parts? Personal, health, relationship with family. So in my board game, we have financial intelligence but we added other aspects. Emotion, relationship, career, society, health and knowledge. It’s about how you balance these six aspects. For example, if you spend more time to make money from your job, then you will spend less time with your family. So how do you balance?
But then, when you talk about balance, if you don’t have passive income, how are you going to balance? So, that’s why I wrote this book (You Can Become Rich In Property). If you have passive income, then it frees you. This means more free time to balance other things.
The second book (The Certain Way To Life’s Riches) is about laws of attraction, about how to make things happen. People usually only look at the results. They don’t look at the steps. So I give them the steps.
How long did it take for you to build your dream home?
During a meeting with my friends, everyone set their goal. We wrote it down and presented to one another. This is my picture [shows a sketch that’s included in his book]. I wanted a house on a hill. That’s the beginning.
I bought three bungalows on separate occasions, but they were not suitable. Later on, I sold one condo to buy a piece of land and I sold one shop to build the house. And this is the view I see [showing another picture in his book]. Compared to the sketch, it’s quite similar, but the duration took about six years.
So I believe that anybody can create their own things as long as they really want it and really focus on it. The result is that my dream house is actually free.
How long have you stayed in your dream home?
About five years. It is just five minutes from this shop. So, if there’s anything that you want, write it down. And then list the steps on how to make it happen. I put my sketch in front of my bed and looked at my drawing in the morning, during transient periods and before I sleep. It has to do with mindset. Whatever I did , it was all to realise my dream house.
What kind of challenges did you face in that six years, while achieving your goal?
There were challenges! For example, there was one house was attracted to me. Initially, the owner wanted to sell it for RM400,000, but I did not have the money. But I still wanted the house. I was renting then. I said to myself, “I want!. But no money, how to buy?”. Six months later, the seller asked, “You want the house or not?”. I answered I want! So the seller said, “Why? What happened? Is it the price?”. I told the seller that it was the price and she said, “OK. I’ll come to your house. We talk.”
After negotiating, the seller agreed to RM365,000. So I bought the house. I just had enough for the 10% down payment. I was a remisier then. I wanted to speed up the process. So I speculated in the market and I lost half of the money! I was supposed to sign the S&P (Sales & Purchase Agreement) within two weeks. It took a few months for me! [laughs].
The seller waited for you?
Yes.
What are the other examples of laws of attraction that worked in your favour?
There was one from the auction market. I went all the way to Shah Alam to bid for it and I got it. Initially, the seller asked for RM330,000. But I did not have enough money, so I ignored it. Then the seller called me back and reduced to RM300,000 three months later. Six months later, the seller called me again and reduced further to RM264,000.
It’s things like that. It attracts, as long as your mind persists on having something, whatever it may be.
Dreams do come true: The view from Yee's hilltop home, which is similar to the sketch he drew.
Photo taken off Yee's second book 'The Certain Way To Life's Riches'.
What is your property portfolio like?
Mixed. Some from auction and some from sub-sale (existing buildings).
From your property investments, what are some of the key learning?
It is better to stay on landed property as the rental is not as good. So you rent to yourself.
After I resigned as a remisier, I went to a property exhibition. Within a day, I bought two properties with cash (from my remisier deposit). My learning is to never buy property like that. You must do some research.
There’s another one where the sales person told me that the property will be completed with CF (Certificate of Fitness) within a week. It took one year and the price went down.
It was RM143,000 during launch and the current market value is about RM130,000.
Do you still have that property?
Yes. It is still rented out. Another lesson is to never take free advice [laughs]. I had a friend who stayed in an apartment who told me that the area has an investment future. So I bought two units. I bought it at RM80,000 in year 2000 and another unit at RM85,000. The market value now is about RM75,000. But in life, you should never give up also [laughs]. Even if you made a wrong decision already, you can still make it right. So I averaged it by buying three more units at RM53,000, RM47,000 and RM56,000. The average investment is less than RM75,000. So, never give up on life. Think positive.
Do you still have these five units?
Yes, still keeping all.
Any other examples?
There is one unit that I bought from a company. It took six months to negotiate. There were three directors. Two will agree, then the other disagrees. Two will sign the cheque, and the other one is overseas. My learning? Buying property needs patience, especially when you want to get below market price. I also learnt to not buy properties that are too far away. When a property is near you, it is easy for you to go and see. Now, it is easier still because I live on a hill. So I just need to see if the rented units have lights on at night [laughs].
I also bought a land with 20 other people. I am a minor shareholder. The market value at that time is RM20 million. Now the price has gone up. RM20 million has become RM40 million. My learning is that capital gain is mostly from the land. Building gives you the cash flow. Building is a deteriorated cost. It needs repair.
What happened to the land?
A developer is planning to build a 5-storey strata title shops. That is the best deal. The land appreciates, then you build your own and make money all the way.
What’s your passive income?
Sometimes more, sometimes less. I am also not sure of the exact figure. But it is more than enough to cover my expenses. I am financially free, because my properties' passive income is enough to support my expenditure. My personal expenditure is very low.
What types of courses or seminars do you conduct?
We have a few property courses conducted at this centre. I even give a one-year free coaching. This is because of the mission I set, hence I do not mind as long as they purchase properties. My seminars are available for a few hundred Ringgit only. It is cheaper, but they have to come here (Selayang). After my class, when the participants are not sure if they should purchase a property or not, they can make an appointment with me. I will give my opinion so that they will make less mistakes.
I will also give relevant CDs, advise on recommended readings and all details necessary for them to get started. There are three courses. One is How to Make Money from Residential Property with Little/ No-Money-Down. This one is suitable for those who are new to property investment, for those with no property yet and little savings. They will learn about money management, what is financial freedom, what is No-Money-Down, how to manage tenant and eventually buy their own home.
Second one is How to Make Money from Commercial Property?. This course is for those with some savings between RM100,000 and RM200,000. It is not advisable for beginners to attend. If they attend, they will learn the best techniques, but when they go back, they will get stressed out because they cannot go forward. From each commercial property deal, one can make RM50,000 to RM100,000. But one would need some capital.
I make the learning easy and I share a checklist which I use as well.
What if there is only one participant? Do you still conduct the workshop?
No. At least 10 people.
What’s the third workshop?
It is How to Make Money from Auction Property?. You can make a lot of money from auction properties, if you know how to. But there is a lot of risk as well. If you are interested in commercial auction, then it is better for you to attend the commercial class first.
What’s your next goal?
You really want to know? [laughs]. We want to create a balanced life city called Inova city. A city where people work and play. I have 30 years to do it. So I will continue working until then. It is based on the concept of a balanced life. For example, a mother who works close to her child’s day care centre.
Any advice for people who wants to start investing, apart from coming to your workshops?
Read up, especially those from local authors, and subsequently read those from the international scene. And then, attend all the suitable seminars.
Do you have any specific go-to strategies?
It depends. For No-Money-Down, use as little of your own money and look for properties below market price. Stretch the loan, rent out the place and make sure that rental is more than the instalment. After that, go for your second one. Make sure that the instalments do not eat into your salary. After second one, go for your third one. Maybe purchase one property every three to six months.
What is the best and worst advice you have received?
The worst advice I received was free advice. [laughs]
Unless it is from someone who knows better!
Yes. Correct. The best advice I received was also free advice from a professional. We knew each other from the property field. He gave me one good advice, which is to buy property in a rich man’s area, not in a poor man’s area. I took that advice and made a lot of money.
But not everyone can afford those areas.
[laughs] So, begin with a poor man’s area for cash flow. Whether the market iis up or down, you can still get tenants. When people buy bungalows, it is like buying dreams. Like my dream home, I didn’t care how much. I just wanted it. Many rich people got richer dreams, so they are willing to pay the price.
For information on Dr Peter Yee’s one-day workshops, visit www.balancelifesuccess.com,e-mail info@balancelifesuccess.com or call 017-2491077.
Property investors on top of the world
Property investors on top of the world
JONATHAN CHANCELLOR
June 18, 2010
AUSTRALIA is the fourth-fastest-growing property market in the world after a 20 per cent price jump in the past year.
But China overtook Hong Kong as the world's hottest housing market with a 68 per cent annual price rise, according to a survey of 47 countries by the international estate agent Knight Frank.
''The top four positions in our rankings are all occupied by Asia-Pacific locations, whilst Europe dominates the bottom half of the table,'' said Liam Bailey, the head of residential research. As house price declines slowed in most depressed markets, 25 of the countries registered rises.
Most of the countries where home prices fell were in Europe. Prices rose 8.8 per cent in Britain and 2.3 per cent in the US. But Dubai, which had been the best performer, became the worst, falling 8 per cent.
Asian investors, attracted by a weak British pound and rising rents, were strong in London.
The report says that while housing markets are polarised, each quarter provided new evidence of recovery: ''It remains to be seen if this is another period of sustained growth or the middle peak in a double-dip recession.
''With interest rates now rising, the government withdrawing stimulus and the supply response picking up - albeit modestly - we expect house price growth to slow over the next six to nine months," said the Australia research director, Matt Whitby.
But Knight Frank said 4.8 per cent of Australia's growth was in the March quarter, which the agency believes might have overstated growth.
Source: The Sydney Morning Herald
JONATHAN CHANCELLOR
June 18, 2010
AUSTRALIA is the fourth-fastest-growing property market in the world after a 20 per cent price jump in the past year.
But China overtook Hong Kong as the world's hottest housing market with a 68 per cent annual price rise, according to a survey of 47 countries by the international estate agent Knight Frank.
''The top four positions in our rankings are all occupied by Asia-Pacific locations, whilst Europe dominates the bottom half of the table,'' said Liam Bailey, the head of residential research. As house price declines slowed in most depressed markets, 25 of the countries registered rises.
Most of the countries where home prices fell were in Europe. Prices rose 8.8 per cent in Britain and 2.3 per cent in the US. But Dubai, which had been the best performer, became the worst, falling 8 per cent.
Asian investors, attracted by a weak British pound and rising rents, were strong in London.
The report says that while housing markets are polarised, each quarter provided new evidence of recovery: ''It remains to be seen if this is another period of sustained growth or the middle peak in a double-dip recession.
''With interest rates now rising, the government withdrawing stimulus and the supply response picking up - albeit modestly - we expect house price growth to slow over the next six to nine months," said the Australia research director, Matt Whitby.
But Knight Frank said 4.8 per cent of Australia's growth was in the March quarter, which the agency believes might have overstated growth.
Source: The Sydney Morning Herald
Thursday 17 June 2010
Parkway: Prize for Indian billionaire or Malaysian fund
Parkway: Prize for Indian billionaire or Malaysian fund
17 Jun 2010, 0048 hrs IST,REUTERS
NEW DELHI/SINGAPORE: India's Fortis Healthcare is locked in a battle with Malaysian sovereign wealth fund Khazanah for control of Singapore-based Parkway Holdings, Asia's biggest listed hospitals firm.
Fortis, which owns roughly 25 per cent of Parkway, was keen to build a controlling stake in the company before Khazanah made a surprise $835 million offer last month to lift its stake from 23.5 per cent to 51.5 per cent. Parkway operates 16 hospitals across Asia including Singapore, Malaysia, India and China. Its prized assets are Singapore hospitals, Gleneagles and Mount Elizabeth, whose patients include many wealthy businessmen and politicians.
By July 30, Fortis needs to say whether or not it intends to make a full offer for Parkway. Several analysts expect Fortis, controlled by billionaire brothers Malvinder and Shivinder Singh, to launch a counter bid for Parkway at a 10-15 per cent premium over Khazanah's S$3.78 a share offer.
A source linked to Fortis said the firm's preference is to make a partial offer to buy just over 50 per cent of Parkway instead of making a general offer, which would require a waiver from authorities. But bankers say this is unlikely as Singapore has never given a waiver to firms such as Fortis, which bought into Parkway less than six months ago. If it fails to get an exemption, Fortis will have to spend at least $2.5 billion to buy Parkway shares it does not already own.
Fortis plans to raise as much as $1.2 billion, preparing itself for a possible counterbid. It bought into Parkway to use it as a springboard for overseas expansion. Malvinder, Fortis' chairman, moved to Singapore with his family and took over as Parkway's chairman.
"It would be a choice between the long-term vision of Singh brothers and managing short-term financial opportunities," said Muralidharan Nair, partner for health sciences at Ernst & Young in Mumbai.
With a combined fortune estimated at $3 billion by Forbes magazine -- good for 17th place on its India rich list -- the Singh brothers have the means and access to capital to take on the Malaysian fund. A successful counterbid by Fortis may also put a question mark on Parkway's expansion into Malaysia, as most of the Singapore firm's operations in the country are carried out via Pantai, in which it holds a 40 per cent stake and the balance is held by Khazanah.
Pantai accounts for a quarter of Parkway's revenue and almost one-third of earnings before interest, tax, depreciation, amortisation and rent, according to Credit Suisse.
Making a counterbid for Parkway was originally the second choice for Fortis, said sources aware of the Indian company's game plan. The recent posturing by Fortis has kept Parkway's shares at or above Khazanah's offer price and the Malaysian firm may not be able to get enough acceptance as a result.
Should Khazanah fail, Fortis will retain control of Parkway with four seats on the board versus Khazanah's two. Khazanah cannot accept any of the shares offered if the acceptance falls short of 51.5 per cent under Singapore rules relating to partial offers, a spokeswoman for Khazanah said. But if the Malaysian wealth fund succeeds in its offer, Fortis will be stuck with a minority stake in a company it cannot control although it might be in a position to block proposals made by a Khazanah-led management.
Khazanah and Fortis may also try to reach some form of compromise whereby both parties have a say in the strategic outlook for Parkway. Fortis has been lobbying the governments of Singapore and Malaysia to reach some kind of a deal, sources said.
Fortis may decide to sell out, but only if Khazanah raises its offer price. Based on Khazanah's offer price, Fortis will make a gross profit of about 6.1 per cent on its original investment of $685 million, which valued Parkway at about S$3.56 a share. After deducting around 2 per cent for fees and commissions payable to bankers, lawyers and others associated with the deal, the Indian company is set to pocket a relatively small profit of around $30 million.
"The Singh brothers will put rationality before adrenalin push. They won't fight for ego. Expect them to exit Parkway if they get a good premium," said Jagannadham Thunuguntla, equity head at SMC Capitals in New Delhi.
http://economictimes.indiatimes.com/Parkway-Prize-for-Indian-billionaire-or-Malaysian-fund/articleshow/6058128.cms
17 Jun 2010, 0048 hrs IST,REUTERS
NEW DELHI/SINGAPORE: India's Fortis Healthcare is locked in a battle with Malaysian sovereign wealth fund Khazanah for control of Singapore-based Parkway Holdings, Asia's biggest listed hospitals firm.
Fortis, which owns roughly 25 per cent of Parkway, was keen to build a controlling stake in the company before Khazanah made a surprise $835 million offer last month to lift its stake from 23.5 per cent to 51.5 per cent. Parkway operates 16 hospitals across Asia including Singapore, Malaysia, India and China. Its prized assets are Singapore hospitals, Gleneagles and Mount Elizabeth, whose patients include many wealthy businessmen and politicians.
By July 30, Fortis needs to say whether or not it intends to make a full offer for Parkway. Several analysts expect Fortis, controlled by billionaire brothers Malvinder and Shivinder Singh, to launch a counter bid for Parkway at a 10-15 per cent premium over Khazanah's S$3.78 a share offer.
A source linked to Fortis said the firm's preference is to make a partial offer to buy just over 50 per cent of Parkway instead of making a general offer, which would require a waiver from authorities. But bankers say this is unlikely as Singapore has never given a waiver to firms such as Fortis, which bought into Parkway less than six months ago. If it fails to get an exemption, Fortis will have to spend at least $2.5 billion to buy Parkway shares it does not already own.
Fortis plans to raise as much as $1.2 billion, preparing itself for a possible counterbid. It bought into Parkway to use it as a springboard for overseas expansion. Malvinder, Fortis' chairman, moved to Singapore with his family and took over as Parkway's chairman.
"It would be a choice between the long-term vision of Singh brothers and managing short-term financial opportunities," said Muralidharan Nair, partner for health sciences at Ernst & Young in Mumbai.
With a combined fortune estimated at $3 billion by Forbes magazine -- good for 17th place on its India rich list -- the Singh brothers have the means and access to capital to take on the Malaysian fund. A successful counterbid by Fortis may also put a question mark on Parkway's expansion into Malaysia, as most of the Singapore firm's operations in the country are carried out via Pantai, in which it holds a 40 per cent stake and the balance is held by Khazanah.
Pantai accounts for a quarter of Parkway's revenue and almost one-third of earnings before interest, tax, depreciation, amortisation and rent, according to Credit Suisse.
Making a counterbid for Parkway was originally the second choice for Fortis, said sources aware of the Indian company's game plan. The recent posturing by Fortis has kept Parkway's shares at or above Khazanah's offer price and the Malaysian firm may not be able to get enough acceptance as a result.
Should Khazanah fail, Fortis will retain control of Parkway with four seats on the board versus Khazanah's two. Khazanah cannot accept any of the shares offered if the acceptance falls short of 51.5 per cent under Singapore rules relating to partial offers, a spokeswoman for Khazanah said. But if the Malaysian wealth fund succeeds in its offer, Fortis will be stuck with a minority stake in a company it cannot control although it might be in a position to block proposals made by a Khazanah-led management.
Khazanah and Fortis may also try to reach some form of compromise whereby both parties have a say in the strategic outlook for Parkway. Fortis has been lobbying the governments of Singapore and Malaysia to reach some kind of a deal, sources said.
Fortis may decide to sell out, but only if Khazanah raises its offer price. Based on Khazanah's offer price, Fortis will make a gross profit of about 6.1 per cent on its original investment of $685 million, which valued Parkway at about S$3.56 a share. After deducting around 2 per cent for fees and commissions payable to bankers, lawyers and others associated with the deal, the Indian company is set to pocket a relatively small profit of around $30 million.
"The Singh brothers will put rationality before adrenalin push. They won't fight for ego. Expect them to exit Parkway if they get a good premium," said Jagannadham Thunuguntla, equity head at SMC Capitals in New Delhi.
http://economictimes.indiatimes.com/Parkway-Prize-for-Indian-billionaire-or-Malaysian-fund/articleshow/6058128.cms
'Asian economy to be 50% larger'
'Asian economy to be 50% larger'
TNN, Jun 17, 2010, 12.59am IST
WASHINGTON: With India and China leading the way, the recent recession has underlined the emergence of Asia as a global economic powerhouse, says an IMF official.
"Based on expected trends, within five years, Asia's economy (including Australia and New Zealand) will be about 50% larger than it is today (in purchasing-power-parity terms), account for more than a third of global output, and be comparable in size to the economies of the US and Europe," IMF director, Asia and Pacific Department, Anoop Singh said.
"By 2030, Asian GDP will exceed that of the Group of Seven major industrial economies (G-7)," Singh wrote in the issue of IMF's finance and development.
"Several economies in the region are generating growth outcomes that are helping pull the world economy out of recession. China and India are leading the way, but the phenomenon is by no means limited to these two countries. "Asia's economic importance is unmistakable and palpable," he said. “The recent crisis has underlined the emergence of Asia as a global economic powerhouse,” he added.
As such it is only natural, then, for Asia's voice to become increasingly influential in economic and financial discourse.
TNN, Jun 17, 2010, 12.59am IST
WASHINGTON: With India and China leading the way, the recent recession has underlined the emergence of Asia as a global economic powerhouse, says an IMF official.
"Based on expected trends, within five years, Asia's economy (including Australia and New Zealand) will be about 50% larger than it is today (in purchasing-power-parity terms), account for more than a third of global output, and be comparable in size to the economies of the US and Europe," IMF director, Asia and Pacific Department, Anoop Singh said.
"By 2030, Asian GDP will exceed that of the Group of Seven major industrial economies (G-7)," Singh wrote in the issue of IMF's finance and development.
"Several economies in the region are generating growth outcomes that are helping pull the world economy out of recession. China and India are leading the way, but the phenomenon is by no means limited to these two countries. "Asia's economic importance is unmistakable and palpable," he said. “The recent crisis has underlined the emergence of Asia as a global economic powerhouse,” he added.
As such it is only natural, then, for Asia's voice to become increasingly influential in economic and financial discourse.
The VIX Indicator: Beat the Crowds to Big Profits with the Ultimate "Fear Gauge"
The VIX Indicator:
Beat the Crowds to Big Profits with the Ultimate "Fear Gauge"
June 17th, 2010
Investors are motivated by two things and two things only: Fear and Greed. It's just that simple.
So more often than not, investors turn quite bullish when they think a stock is headed higher and quite bearish when they fear that all is lost. The trouble with this strategy is that during these extremes in sentiment they often lose their shirts.
While conventional financial theory suggests that markets behave rationally, not accounting for the emotional aspect of the trade often leads to the wrong entry and exit points.
And believe me when I tell you this: It's hard to turn a buck on the Street when you're constantly getting one or both of them wrong.
That's why successful traders often rely on the VIX indicator to assess whether or not the current market sentiment is excessively bullish or bearish... which helps them plot their next move.
You see, the VIX is a contrarian indicator. That is, it tells you whether or not the markets have reached an extreme position. If so, that tends to be a sure sign that the markets are about to stage reversal.
The idea here is that if the wide majority believes that one bet is such a sure thing, they pile on. But by the time that happens, the market is usually ready to turn the other way.
Of course, "the crowd" hardly ever gets its right.
It's counter-intuitive, but it's true nearly all of the time - especially in volatile markets.
And that's why the VIX indicator is a trader's best friend right now.
Beat the Crowds to Big Profits with the Ultimate "Fear Gauge"
June 17th, 2010
Investors are motivated by two things and two things only: Fear and Greed. It's just that simple.
So more often than not, investors turn quite bullish when they think a stock is headed higher and quite bearish when they fear that all is lost. The trouble with this strategy is that during these extremes in sentiment they often lose their shirts.
While conventional financial theory suggests that markets behave rationally, not accounting for the emotional aspect of the trade often leads to the wrong entry and exit points.
And believe me when I tell you this: It's hard to turn a buck on the Street when you're constantly getting one or both of them wrong.
That's why successful traders often rely on the VIX indicator to assess whether or not the current market sentiment is excessively bullish or bearish... which helps them plot their next move.
You see, the VIX is a contrarian indicator. That is, it tells you whether or not the markets have reached an extreme position. If so, that tends to be a sure sign that the markets are about to stage reversal.
The idea here is that if the wide majority believes that one bet is such a sure thing, they pile on. But by the time that happens, the market is usually ready to turn the other way.
Of course, "the crowd" hardly ever gets its right.
It's counter-intuitive, but it's true nearly all of the time - especially in volatile markets.
And that's why the VIX indicator is a trader's best friend right now.
Budget 2010: a beginner's guide to Britain's debt
Budget 2010: a beginner's guide to Britain's debt
The scale of Britain's debt is why George Osborne is delivering an emergency Budget. Here's an expert lowdown on the state Britain is in.
By George Buckley, UK economist at Deutsche Bank
Published: 1:10PM BST 16 Jun 2010
WHAT IS BRITAIN'S DEBT POSITION AND HOW DID IT BUILD UP?
Of all the most highly-rated countries in the world, the UK government's debt position has deteriorated the quickest over the past two years. The government now owes about 70pc of the UK's total annual output, and this figure will rise further over the coming years. The new government is likely to announce drastic measures to address the situation in Tuesday's Budget, but it will take time to stop debt from rising.
IS IT BRITAIN'S HOUSEHOLDS THAT ARE MOST IN DEBT?
The two parts of the economy with the most debt are the government and households. The failure to save in the good times along with the credit crisis, bank bail-outs and the ensuing recession can be blamed for the rise in government debt. The surge in household debt can be attribued largely to higher house prices over the past 15 years. People have had to borrow more as house price increases have outstripped the rate at which they were able to build up savings. Following the recession people have borrowed less, but the process of reducing debt will take time.
WHAT ARE THE DIFFERENT WAYS OF MEASURING BRITAIN'S DEBT?
While the budget deficit is the amount which the government borrows in any one year, it is also important to look at the level of debt. This is the total amount that the government owes because of all of its current and previous borrowing. There are two main measures of debt - gross and net. Gross debt is the total amount of outstanding loans, while net debt takes off the financial assets that the government owns. These figures are reported in a similar to way to borrowing - in other words both in money terms and as a percent of GDP. Currently, gross debt stands at over £1trillion, which is more than 70pc of GDP.
HOW DOES BRITAIN'S DEBT POSITION COMPARE WITH OTHER MAJOR COUNTRIES?
Fortunately, government debt was low (relative to other developed countries) prior to the credit crisis, so we can at least be thankful for that. Debt should therefore settle at a level lower than the average of the G7 countries by the end of this parliament. Debt will be lower than countries such as Italy and Japan, which owe much more relative to the size of their economy than the UK does. But it will probably be higher than Canda and even Spain over the next few years.
WHAT'S THE STRUCTURAL DEFICIT?
The structural deficit is that part of the total shortfall between government receipts and spending that can't be explained by weaker economic growth. When strong economic growth returns, it is the level of the deficit that still remains. The way that this must be tackled therefore is to introduce measures to reduce spending, such as the £6bn of cuts already announced, and/or raise taxes, such as increasing the rate of VAT or capital gains tax.
WHAT'S THE DANGER IF THE DEFICIT ISN'T TACKLED?
The euro area is in crisis because of its huge deficits. A combination of recession and banking sector bail-outs has meant increased government borrowing, with the result that investors have been worried that some countries may not be able to pay them back. In turn, they have demanded a higher rate of interest to compensate them for the increased risk involved in lending governments their money. This is how it can become a viscous cycle - because when interest rates rise it becomes more difficult to pay. The government must therefore address the situation to ensure that the nation's debt is sustainable.
http://www.telegraph.co.uk/finance/financetopics/budget/7831122/Budget-2010-a-beginners-guide-to-Britains-debt.html
The scale of Britain's debt is why George Osborne is delivering an emergency Budget. Here's an expert lowdown on the state Britain is in.
By George Buckley, UK economist at Deutsche Bank
Published: 1:10PM BST 16 Jun 2010
WHAT IS BRITAIN'S DEBT POSITION AND HOW DID IT BUILD UP?
Of all the most highly-rated countries in the world, the UK government's debt position has deteriorated the quickest over the past two years. The government now owes about 70pc of the UK's total annual output, and this figure will rise further over the coming years. The new government is likely to announce drastic measures to address the situation in Tuesday's Budget, but it will take time to stop debt from rising.
IS IT BRITAIN'S HOUSEHOLDS THAT ARE MOST IN DEBT?
The two parts of the economy with the most debt are the government and households. The failure to save in the good times along with the credit crisis, bank bail-outs and the ensuing recession can be blamed for the rise in government debt. The surge in household debt can be attribued largely to higher house prices over the past 15 years. People have had to borrow more as house price increases have outstripped the rate at which they were able to build up savings. Following the recession people have borrowed less, but the process of reducing debt will take time.
WHAT ARE THE DIFFERENT WAYS OF MEASURING BRITAIN'S DEBT?
While the budget deficit is the amount which the government borrows in any one year, it is also important to look at the level of debt. This is the total amount that the government owes because of all of its current and previous borrowing. There are two main measures of debt - gross and net. Gross debt is the total amount of outstanding loans, while net debt takes off the financial assets that the government owns. These figures are reported in a similar to way to borrowing - in other words both in money terms and as a percent of GDP. Currently, gross debt stands at over £1trillion, which is more than 70pc of GDP.
HOW DOES BRITAIN'S DEBT POSITION COMPARE WITH OTHER MAJOR COUNTRIES?
Fortunately, government debt was low (relative to other developed countries) prior to the credit crisis, so we can at least be thankful for that. Debt should therefore settle at a level lower than the average of the G7 countries by the end of this parliament. Debt will be lower than countries such as Italy and Japan, which owe much more relative to the size of their economy than the UK does. But it will probably be higher than Canda and even Spain over the next few years.
WHAT'S THE STRUCTURAL DEFICIT?
The structural deficit is that part of the total shortfall between government receipts and spending that can't be explained by weaker economic growth. When strong economic growth returns, it is the level of the deficit that still remains. The way that this must be tackled therefore is to introduce measures to reduce spending, such as the £6bn of cuts already announced, and/or raise taxes, such as increasing the rate of VAT or capital gains tax.
WHAT'S THE DANGER IF THE DEFICIT ISN'T TACKLED?
The euro area is in crisis because of its huge deficits. A combination of recession and banking sector bail-outs has meant increased government borrowing, with the result that investors have been worried that some countries may not be able to pay them back. In turn, they have demanded a higher rate of interest to compensate them for the increased risk involved in lending governments their money. This is how it can become a viscous cycle - because when interest rates rise it becomes more difficult to pay. The government must therefore address the situation to ensure that the nation's debt is sustainable.
http://www.telegraph.co.uk/finance/financetopics/budget/7831122/Budget-2010-a-beginners-guide-to-Britains-debt.html
Moody's Issues Annual Sovereign Report On Malaysia
PRESS RELEASE: Moody's Issues Annual Sovereign Report On Malaysia
Thu Jun 17 02:10:08 2010 EDT
The following is a press release from Moody's Investors Service:
Singapore, June 17, 2010 -- Moody's Investors Service says in its latest
annual sovereign report that Malaysia's A3 sovereign credit rating has
been underpinned through the global crisis by its strong external
position, deep and liquid domestic capital markets, and a well managed
financial system.
The sovereign credit outlook is stable, and is adequately supported by
favorable expectations for economic performance and policy management, as
well as the government's efforts to liberalize investment laws and foster
competition so as to improve the country's growth model.
"Malaysia's strong liquidity and deep capital markets have ensured the
'finance-ability' of large fiscal deficits and 'affordability' of the
higher level of government debt that was ratcheted up by policy responses
to the external shocks of 2008-09," says Aninda Mitra, a Moody's Vice
President and author of the report.
While Malaysia boasts a well-diversified and reasonably competitive and
externally oriented economy, stabilization of the government's debt level
in the medium term requires stronger economic and fiscal reforms than
seen in the recent past, notes the report.
Consequently, the government's recent articulation of medium-term policy
goals of enabling greater domestic competition, fostering a
knowledge-driven economy, and achieving a higher income status -- as
contained in the "New Economic Model" -- represent its strong intent to
re-invigorate and re-balance the drivers of economic growth.
According to the report, however, a demonstrable commitment to specific
medium-term strategies that may better underpin its relative sovereign
credit fundamentals remains pending. In particular, the rationalization
and better targeting of fuel subsidies and the implementation of goods
and services taxes are both important.
Moreover, the abilities to heighten local competition and generate
greater domestic private investment are crucial. Such measures could
lift trend growth prospects as well as reduce the relatively large role
of the public sector in capital formation, it says.
Against the backdrop of sound monetary management and sophisticated
capital markets, sustainable improvements in Malaysia's growth
fundamentals and the government's fiscal performance would provide upward
rating pressure. On the other hand, the inability to retrench Federal
Government finances could weaken its debt dynamics and undermine investor
confidence, and result in downward credit pressure.
Entitled, "Credit Analysis: Malaysia", the report can be accessed at
www.moodys.com.
The principal methodology that Moody's uses in rating the Government of
Malaysia is 'Moody's Sovereign Bond Ratings Methodology,' published in
September 2008 and available on www.moodys.com in the Rating
Methodologies sub-directory under the Research
Thu Jun 17 02:10:08 2010 EDT
The following is a press release from Moody's Investors Service:
Singapore, June 17, 2010 -- Moody's Investors Service says in its latest
annual sovereign report that Malaysia's A3 sovereign credit rating has
been underpinned through the global crisis by its strong external
position, deep and liquid domestic capital markets, and a well managed
financial system.
The sovereign credit outlook is stable, and is adequately supported by
favorable expectations for economic performance and policy management, as
well as the government's efforts to liberalize investment laws and foster
competition so as to improve the country's growth model.
"Malaysia's strong liquidity and deep capital markets have ensured the
'finance-ability' of large fiscal deficits and 'affordability' of the
higher level of government debt that was ratcheted up by policy responses
to the external shocks of 2008-09," says Aninda Mitra, a Moody's Vice
President and author of the report.
While Malaysia boasts a well-diversified and reasonably competitive and
externally oriented economy, stabilization of the government's debt level
in the medium term requires stronger economic and fiscal reforms than
seen in the recent past, notes the report.
Consequently, the government's recent articulation of medium-term policy
goals of enabling greater domestic competition, fostering a
knowledge-driven economy, and achieving a higher income status -- as
contained in the "New Economic Model" -- represent its strong intent to
re-invigorate and re-balance the drivers of economic growth.
According to the report, however, a demonstrable commitment to specific
medium-term strategies that may better underpin its relative sovereign
credit fundamentals remains pending. In particular, the rationalization
and better targeting of fuel subsidies and the implementation of goods
and services taxes are both important.
Moreover, the abilities to heighten local competition and generate
greater domestic private investment are crucial. Such measures could
lift trend growth prospects as well as reduce the relatively large role
of the public sector in capital formation, it says.
Against the backdrop of sound monetary management and sophisticated
capital markets, sustainable improvements in Malaysia's growth
fundamentals and the government's fiscal performance would provide upward
rating pressure. On the other hand, the inability to retrench Federal
Government finances could weaken its debt dynamics and undermine investor
confidence, and result in downward credit pressure.
Entitled, "Credit Analysis: Malaysia", the report can be accessed at
www.moodys.com.
The principal methodology that Moody's uses in rating the Government of
Malaysia is 'Moody's Sovereign Bond Ratings Methodology,' published in
September 2008 and available on www.moodys.com in the Rating
Methodologies sub-directory under the Research
Subscribe to:
Posts (Atom)