IBM

Seng Hock Tan, Aegis Portfolio Managers (Asia) – ‘(Tech investing) -Value Investing in Asia’

Seng is the Founder and CEO of Aegis.

 

  • Value investing in Aisa
    • Horse (business model)
    • Jockey (Entrepreneur)
    • But first…. must look at the track (Asian environment)
      • ‘Booby track’
      • Possibility of cash and assets disappearing
  • International Business Machines Corp. (NYSE:IBM) – ‘Lion Infrastructure’ to ride Asian growth
    • 24% revenue growth in Asia
    • P/B = 11.7x
    • Recurring services 36% of Revenue
    • Software analytics 59% of Revenue
    • Techs that BRK bought
      • Verisk Analytics
      • Intel
      • DirecTV
      • Liberty Media
      • Mal Mart
        • Sharing information back and forth with suppliers is critical to the model and success (must use IT)
        • U.S. is homogeneous & more scalable
        • Asia is heterogeneous & harder to scale
          • China will have more e-shoppers than U.S. by 2015
          • Asia has 4 of the 5 top ‘app’ crazed countries
          • Chinnovation not equal to value creation
          • Uses copycat models
          • India much harder (not as well organized, many languages)
          • Asia incentives 2010 (distorted)
            • Carrot of easy money, property & stocks
            • Neglect knowledge accumulation in core business
            • Think Munger (incentives and opportunities)
            • Governance critical
              • Not only quant numbers in Asia, must look at more
              • Knowledge of other business models as business is often diversified
              • Hard to invest from afar because of the ‘track’
              • Law of the land – to collect a winning ticket
              • Right People
                • Follow company and management for a long time
                • Only invest slowly
                • Wait a long time for results
                • Good opportunities with trust, horizon, and Mr. Market
                • ‘Lions’
                  • Ethical
                  • World class institution
                  • Leader/Entrepreneur
                  • Thirst for knowledge
                  • ‘Hyenas’
                    • Just want to ‘win the game’
                    • ‘Survivors’ – for themselves

 

  • Q&A
    • What about Buffett and Tech?
      • IT is recurring income
  • Mistakes & lessons?
    • Getting management wrong, must be patient and slow

 

Value Investor Conference: Omaha, Nebraska – May 4th, 2012

Dustin Hunter, SunRift Capital Partners (www.sunriftcp.com)

 (These notes are to the best of my recollection.)