Seng Hock Tan on Tech Value Investing

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.)