Sunday, September 16, 2018

Funny Quote of the Day

Look up this post when you are feeling down ;)


To just type it out: if anyone is having a bad day, remember that today in 1976, Ronald Wayne sold his 10% stake in Apple (AAPL US) for $800. Today (Sep 2018) it is worth 1,081,130,640,000 dollars.

Remember: compounding is the eighth wonder of the world.

Huat Ah!

Saturday, September 08, 2018

Ready Bayer One!

Bayer was a EUR 100 billion market cap industrial conglomerate that has collapsed big time from a recent high of EUR 120 per share to EUR 73.5 today. There were two reasons. Firstly, the firm is being sued in the US for selling cancer causing fertilizers. Well, actually it's Monsanto, the world's largest GMO seed seller and pesticide and herbicide manufacturer that was selling bad products but hey, Bayer is going to buy Monsanto, so Bayer and its investors are on the hook! Next, Bayer announced disastrous results warning of lower full year sales and profit blaming higher integration cost with Monsanto.

The market sent the stock down 5% last week after it dropped 12% two weeks ago as a result of the Monsanto debacle. However, I believe this is where things are getting really interesting. Value investors like to fish in perfect storms. We are prepared to get wet while catching whales! Okay, let's first state the investment thesis - our reason for buying a stock which should be clear and concise:

Bayer will become the world's powerhouse in crops and seeds after acquiring Monsanto with close to 30% global share and together with its original stable portfolio of businesses in consumer and pharma drugs, it is poised to generate at least 10% free cashflow based on today's market cap. 

The following chart shows the pro-forma breakdown of Bayer's revenue after absorbing Monsanto.

Bayer's revenue breakdown

To put it simply, Bayer's revenue split would be 50% crop and seeds, 40% pharma and 10% consumer. Essentially, we can see it as 50% Growth - coming from crops and seeds and 50% Stable Cashflow - coming from its pharma and consumer segments. All three businesses are traditionally great businesses with strong moats, which we shall discuss in greater detail in the following paragraphs.

The crops and seeds business is dominated by Monsanto. This firm is the global leader in seeds, weedkillers and crop products. It has very high global market share (40-80%) in various products including GMO (genetically modified organisms) soy bean and corn seeds. After its combination with Bayer, it would be the world's largest player in an oligopolistic market with a few other players - Du Pont, Dow Chemical, Syngenta, BASF and Agrium. But it will be the Big Brother calling the shots (actually Monsanto was already the biggest brother in the US). The agriculture industry is also in a secular growth trajectory as the global affluent population continues to increase and we need to keep up food production.

Nobody likes Big Brother. The environmentalists had been making noises about Monsanto's GMO products, labelling them as evil and causing illnesses but the truth is a lot of people would go hungry without GMO seeds. Alas, we cannot have our cake and eat it. It's gonna be GMO or no food. Your choice. What's even more interesting is that the bulk of the seeds goes into producing food to feed cows and pigs, not humans. So before labelling Monsanto evil, perhaps we should all stop eating meat first?

Regardless, Monsanto is in a huge growth industry, we need more pigs and cows to feed humans and we need faster food production. Monsanto believed that long term topline CAGR should be in the mid single digit range. With its merger, it would also be able to extract a billion Euros of synergies and it would continue to be a price and product leader, while extending its R&D prowess and distribution network to global farmers. Is it a wonder why farmers and scholars hated the deal? It was said this could be a marriage made in hell. So better hedge by owning them as minority investors right?

Bayer's pharma business

Okay, let's talk about old German Bayer. Bayer has two interesting businesses. It has a pharmaceutical arm that had produced 2-3 hit drugs with EUR 16bn in annual sales. The current largest contribution is Xarelto, a blood thinner which was very successful but its patent would expire in a couple of years. The second drug is Eylea which is used to cure certain eye conditions. Both drugs are blockbusters but investors are concerned that there might be nothing left in Bayer's pipeline which means that this business could be worth very little going into 2025. I am no pharma expert so let's assume that might be true. The key question is should this business be valued next-to-nothing? We will go through the math later.

The last business is Bayer's consumer over the counter drug business which has long standing branded drugs such as Aspirin and Claritin generating EUR 6bn in sales and 1 plus billion EBITDA annually. Bayer has tried to beef up this business with M&A but synergies were lacking. It most recently bought Merck's consumer business but with little results. This is partly another reason why investors didn't feel comfortable about another big merger with Monsanto.

Bayer's consumer business

Now putting everything together, we have two stable cash cows generating EUR 6bn in EBITDA and c.5bn of free cashflow (FCF). In the past five years, Bayer's standalone free cashflow was EUR 2.8bn, 3.2bn, 3.8bn, 5.8bn and 5.2bn. Monsanto's FCF adds another USD 2bn which brings overall FCF to EUR 7bn if not 8bn. Bayer today trades at EUR 68bn implying more than 10% FCF yield. Dividend yield is also closing in on 4% as a result of its stock price collapsing.

Recall that Bayer bought Monsanto for USD 62.5bn or EUR 53.6bn which means that market is valuing the rest of Bayer's original businesses to be less than EUR 10bn. So is it right to value two businesses generating 2.8-5.8bn FCF at 10bn? Or looking it the other way, the market is saying that Monsanto should be worth a lot less than USD 62.5bn. But this contradicts the fact that Monsanto traded at USD 50bn market cap for years before Bayer bought it. Either way, Bayer definitely doesn't look expensive.

While there are reasons why the market thinks so negatively about Bayer and Monsanto, I believe this is an over-reaction hence a golden buying opportunity. The risk reward is very skewed here. Bayer and Monsanto's free cash flow of EUR 7-8bn is very stable and more likely to grow with the promised synergies than to collapse. Hence as a Bayer buyer today, we stand to earn a c.4% dividend and the reward that it would pop 50% far outweighs the risk that it would fall 50%.  

Next post, we talk about the risks!

Sunday, August 26, 2018

Tangible Thoughts #8: Trade War Beneficiaries

Trade wars happened before, when Japan rose to power in the late 1980s and the 1990s. The beneficiaries were the neighbouring countries that had the capacity and the education level to capture that demand. In the Japan era, it was Thailand, Korea and to some extent China itself. In the Americas, it was Canada and Mexico.

Today, if the same scenario happens, it would be the whole of ASEAN that would capture the shift of manufacturing from China. It would be Vietnam for high end manufacturing and Myanmar, Cambodia and Laos for mid to low end manufacturing. Indonesia would also benefit to some extent.

In today's global village, the beneficiaries would also be global, if US chips cannot be shipped to China, then it would be chips designed and made in other countries. Beneficiaries could be UK, Japan, Singapore, Taiwan and Germany. Global Foundries in the Middle East could also benefit.

As mentioned before, investing is never binary. It is more about creativity and there's always a different way to look at things! Huat Ah! 

Wednesday, August 15, 2018

Book Lessons #3: The Selfish Gene Part 2

This is a continuation of the Book Lessons #2: The Selfish Gene Part 1. Unfortunately, I cannot find any investment lesson in this post, only life lessons!

In the later part of the book, The Selfish Gene, the author Richard Dawkins introduced how altruism sometimes work in nature as it becomes beneficial to both the giver and the taker. The simplest example is what we had learnt in Biology 101 - symbiosis, the direct opposite of the parasitism. It was a good reminder that in struggle between good and evil, there are always examples of good triumph over evil. Though strictly speaking, the main theme of the book is to really move the argument away from good vs evil but rather to think in terms of evolutionary stable strategy or ESS.

Faces of Mother Nature I

In short, there is really no good and evil in the real world of Mother Nature. Is the cuckoo bird evil because of her parasitic way of breeding? What matters is whether evolutionary strategies would achieve stability i.e. the genes would be able to propagate into many future generations. Similarly, in our own lives, rather to think in terms of good vs evil, sometimes it is about having better strategies and think about what's the final endgame that matters for us and for future generations. Having said that, we surely must refrain from deploying too many "evil" strategies! We are here do make the world a better place, not turn it into hell!

One example that brings this out well is the story of the Tit-for-Tat strategy. This strategy became famous after in won over all other strategies in the famous Prisoner's Dilemma game when two prisoners are caught and they can choose to betray the other one or not to. As a reminder, the payoffs are as follows:

1) If A and B each betray the other, each of them serves 2 years in prison.

2) If A betrays B but B remains silent, A will be set free and B will serve 3 years in prison (and vice versa).

3) If A and B both remain silent, both of them will only serve 1 year in prison (on the lesser charge bcos there is not enough evidence).

In just one game, betrayal is always the logical outcome unless you know 100% that the other guy surely won't betray you. However when the game becomes iterative, things get very interesting. We can devise as many strategies as we like. So when competitions for multiple strategies were played via computers, it was discovered that the best strategy is actually the Tit-for-Tat strategy which means that we only betray when we were betrayed previously. In some cases, Tit-for-Two-Tats also work. 

This has found to work in nature as well with birds (again). Birds usually have ticks growing in their feathers and they can pick them off with their beaks but not those ticks on their heads. So birds rely on other birds to help and usually this works on the tit-for-tat basis. If you help me, then I will help you. A bird that keeps betraying would soon realize no one will help it get rid of ticks. Its head will get so itchy that it fails to procreate, or explode, or whatever. Just kidding. But surely they have less energy to procreate when they are always itchy.

Faces of Mother Nature II

Similarly a bird that keeps helping might find disappointment from time to time if the other bird betrays by not returning the favour. The tit-for-tat works because it helps to figure out who the betrayers are and hence avoid them. When it finds a nice guy, it would continue to cooperate as long as the other guy cooperates which works out well and both would live happily ever after, walking into the sunset.

In life, most of the time, it doesn't pay to be the good guy. Hence the phrase, "good guys finish last". Nature has also shown that evil does triumph 58% of the time as shown in the last post (in a population of hawks/aggressive and dove/docile, 7 hawks to 5 doves being evolutionary stable i.e. the ratio of hawks to doves will not change after many iterations) but there is always room for good. In fact, the moral of the story seemed to be that we should be good when it pays to be good and we should fight evil with evil when the situation calls for it.

Interestingly, the Always Betray strategy can beat Tit-for-Tat sometimes when many iterations of the game is played. There seems to be a knife edge whereby Always Betray will win and become evolutionary stable on one side and Tit-for-Tat on the other side. This knife edge depends on how the strategies evolve at the start, if the bad strategies become too populous, then Always Betray will come out winning.

However, once a population succumbs to Always Betray, it will always remain there. If we think back in terms of the jail sentences, everyone will be getting the same sentence. There is no room for "upside" anymore. The Tit-for-Tat strategy is different. Even if there is just a tiny portion of the population that continues with Tit-for-Tat, usually in a local cluster with no Always Betray strategies around, it can grow again and in time crosses the knife edge and converts the whole population to Tit-for-Tat.

The author further explains why Tit-for-Tat is so powerful. First, it is nice, it always begins by cooperating. Second, it is forgiving, it betrays only after being betrayed and it never remembers beyond the last betrayal. Third, it is not envious. It doesn't care if the other guy gets more money or a lesser sentence. Hence it is a strategy that strives to beat the system, not just the other guy. Perhaps that should be the motto how we should live our lives too! 

Faces of Mother Nature III

The truth is, Tit-for-Tat happens a lot in human societies and in nature as vividly illustrated by the author using how the British and German soldiers behaved during WWI and also in vampire bats. Not knowing when the war will end, British and German soldiers started cooperating rather than fight and die in the cold winter. They even celebrated Christmas together! On the other hand, vampire bats are known to donate blood to their kins and sometimes to stranger bats too when these poor bats did not find enough blood to fill their stomachs on unlucky nights.

To end this post, here's quoting the author,

Vampire bats rise above the bonds of kinship, forming their own lasting ties of loyal blood-brotherhood. They could form the vanguard of a comfortable new myth, a myth of sharing, mutualistic cooperation. In fact, they could herald the benignant idea that, even with selfish genes at the helm, nice guys can finish first.


Thursday, August 09, 2018

Chart #14: Live Concerts!

Happy National Day Singapore!

Here's another interesting chart. Sales of concert tickets had quadrupled since 2000. The top concerts bring in $100-200m just in North America alone. Live Nation (LYV US) is just racking it in!


This is the Experience Era. Since internet took over the world, reality now has a different meaning. We treasure what's left that cannot be done on the net more than ever. Hence concerts, live events, theme parks even going to the movies is different. 

"Welcome to the real world, Neo," - Morpheus, in the Matrix

Wednesday, August 01, 2018

Tangible Thoughts #7: Coffin Homes

Just read a disturbing article on this term while research on Hong Kong. A significant proportion of low income families or singles live in these coffin homes because rental has simply gotten too expensive.


Coffin homes are becoming a way of life in HK. The pic above shows typical single man living in his coffin home. The pic below shows a small family living in a slightly larger room.


Families living in a "bigger coffin" spend their time in confined space studying. The picture below shows another family having a meal in their coffin room.


Here's the punchline: is this also the reality Singapore is facing?

Wednesday, July 25, 2018

Value Investing Is Really Like Cave Diving

About 18 months ago, we discussed that value investing could be compared to riding a bicycle up a Finnish mountain. It was a really stretched analogy that was perhaps too difficult for most people to understand. Two weeks ago, the successful rescue of 13 Thai boys trapped in a cave caught the world's and my attention. As with many others, I followed the saga closely. I was woefully saddened when one of the rescuer died and jubilantly rejoiced when they were finally saved! It was truly a triumph for human innovation and a story worthy for Hollywood!

It also opened up my mind to the world of cave diving. This is really an extreme sport that is only suitable for the most courageous as simple mistakes could result in life-and-death situations. Cave diving rescue by extension goes beyond the realm of difficult tasks. It's crazily arduous as we had seen. To rescue the 13 boys, hundreds of people were involved. There were 90 divers, a team of pumpers to pump and drain the water out of the caves round the clock, 24 by 7. 

The logistics people numbered in the hundreds, chefs cooking, doing the laundry, ushers, volunteers and all the unsung heroes, including farmers who allowed the cave water to flood their lands, destroying their crops. They do it because lives are at stake, they needed to beat the clock and the odds to get the boys out alive.

Cave diving and rescue: treacherous operation!

The whole operation was akin to an investing firm, also usually with a few hundred people, asked to generate above average returns to beat the market. Most professional investors fail. They do well in a year or two, only to falter and then forgotten. Rarely we see an investment operation succeed for decades. Hence Warren Buffett, with his 50 odd years of track record is revered and adored not just by other investors but by everyone.

Cave diving, in my mind, is really analogous to practising value investing. It is not easy to appreciate how tough it is. We know it's not a walk in the park but most people certainly don't think it's rocket science. But the truth is, it's almost as tough as rocket science but in a different sense. Cave diving and investing requires a different mentality - taming our minds and most people fail to appreciate that. In cave diving, bad moves result in death. In investing, it's permanent loss of wealth, sometimes, a lot of wealth. The other important learning point: mediation helps in both! The boys meditated for days so that panic did not seize them while they waited for help.

As we had seen in the previous analogy about riding up a mountain, investing requires experience, technical skills and most importantly dealing with uncertainty. The CG above depicted how treacherous the path was from the cave entrance to the boys' location. To some extent, it looked like a stock price chart! Value investing by individuals is no less treacherous in a few ways. Here's the few aspects that we ought to discuss: 

1. Technical Skills: Math and Science
2. Experience and Real Training
3. Navigating in Darkness
4. Build in Contingencies

Investing usually starts with technical skills. I recall how sessions with students interested in investing always involve Excel and modelling. They are very keen to build the most sophisticated models, learn all the intricacies about Black-Scholes, the math and science behind it all. Unfortunately, the stock price wouldn't know how you modelled the firm. 99.9% of the time, the revenue forecast would not match reality. While I don't do cave diving, I believe the theory and technical skills behind would be very important. You need to know scuba diving basics. You need to understand decompression risk. You need to know geology and physics. You need to do your math well, don't get the oxygen content wrong. Because the cave would not care if you don't have enough oxygen. 

Cave Diving = University Math

It is said that scuba diving and cave diving is like primary school math vs university math. Cave diving is no child's play. You need to be proficient to be in the game. In cave diving, there are high risks of getting decompression sickness. This is caused by nitrogen bubbles going into the divers' bloodstream as a result of mismanaged pressure changes with the oxygen tanks. This requires careful calibration. Decompression sickness can result in deathInvesting is not very different, you don't need university math but you do need to know accounting, corporate finance, efficient market theory, equity and bond analysis well enough. Yes, those Excel modelling is important, but it's the building block for something more. It's also all about calibration.

Calibration requires experience. Cave diving and investing is therefore a lot about experience. It cannot be taught in classrooms. After we learnt all the technical skills, we need to apply them correctly in the field. Every cave is different. Some are more treacherous than others and you never know how the conditions will change. Most of the time, visibility is very poor. Caves are dark places. You can use torches but sometimes the water turns muddy! Imagine that!

Real investing also cannot be taught (as with riding a bicycle). You must experience it. You also cannot see the future. You will never know which way the stock would go from today's price. When someone buys his first stock, watching it fall 30% and then panic. That's the experience we are talking about! So always start small with stable names. For every 10 stocks we choose to buy, 4 to 5 would go south, or not make our desired return! That's the best hit rate for most professional investors.

Since we cannot see the future or the cave tunnels clearly in front of us. We have to move slowly and be very prudent. Know the risks well. Never bet the house. Build in contingencies. In investing, we need our margin of safety. This is the most important thing according to the grandfather of value investing - Ben Graham. It means we only buy if the gap between the stock price and the actual value is really, really huge. We want to buy something we think is worth a dollar with 60 cents.

Cave diving contingencies

Navigating the markets and navigating dark caves also share many similarities. The diagram above does look even more like a stock price chart right? If  you are going into a new cave for the first time, you will not know what lies ahead. When there is a fork, you would have no idea which route would lead you forward. You wouldn't know where the water table levels off and you get back to dry land again. You wouldn't know how much oxygen you have in the cave and how long you can take off your mask. In the same vein, when we are investing in the markets, we have no certainty about where the stock will go, where oil price will be next month, or what is the earnings or the GDP numbers next quarter. 

Talking heads are forever predicting. They talk as if they know for sure what the future would be. The truth is, like navigating new cave terrain, nobody has any idea. If people claim they knew, avoid them like the plague. It is also like the weather. Can you say whether it will rain or shine next week? For weather, we now have the technology to predict a week or two in advance, but in the markets unfortunately, there is no way to know, unless you are an insider. But we do know that quality stocks compound over time. These are great companies with strong business moats and strong track records that had proven themselves. Value investing is about identifying these companies.

Since we cannot predict the future. We have to prepare well. This means building in contingencies. In cave diving, it's about having guide ropes and extra oxygen tanks. It's about having good torches with enough batteries in them. The picture above showed how the rescue built in even more safety measures. In investing, we can do two things: always size our bets correctly and always insist on a good margin of safety. Contingencies like buying put options are also available to sophisticated investors but for most of us, they are too expensive and hence not deployable.

To sum up, value investing is about navigating well when there are a lot of uncertainties. We learnt all the skills and theories in the early years but they are barely enough. It's also about many buy and sell calls to hone our acumen and to build on our experience. To most people, it's basically just too hard and hence Warren Buffett's advice to just buy ETFs and forget about stock picking. In this analogy, buying ETFs would be like scuba diving. It's easier and you would certainly have a lot more fun (i.e. earning good returns on your capital). Most importantly, you won't die.

However, to true value investors, the world's stock markets are our caves and every detailed stock analysis, our finest dive. Huat Ah!

Monday, July 16, 2018

Tangible Thoughts #6: Contrarian Thinking

Sometimes the best opportunities come when most people don't agree with you but the one or two trusted smart friends do. Or maybe they also didn't agree but you are smart enough to figure out they were wrong.

Here's two quotes reflecting this:

John Malone: Most of the money I've made in my life has been when other people don't like what's going on. When things are cheap, that's opportunity.

Jack Ma said something to the same extent. If 10 out of 10 people agrees with you, then nothing needs to be done. If there is just one or two smart, close friends who criticize your idea but think there might be something worth pursuing that is interesting.


Monday, July 09, 2018

Book Lessons #2: The Selfish Gene Part 1

I just read the seminar work of Richard Dawkins, The Selfish Gene. I would say this is a must-read for everyone. Not just investors, but everyone. Amazingly, this book was listed as the most influential science book of all time in a poll to celebrate the 30th anniversary of the Royal Society Science Book Prize. To think that it was published in 1976 and I only read it now.

This book put forth so many concepts that it's actually quite daunting to absorb everything. Hence this post serves to really crystallize some the important ideas. Interesting, Dawkins also coined the word meme which became one of my son's most searched word on Google. We spent hours searching for funny Star Wars meme like the one below. Haha!

Star Wars Meme

The word meme came from another Greek word mimema which means imitate. Dawkins used the word to describe how ideas, music, stories can be copied like genes in the human society. This later became popularized into jokes like the one above that is copied and spread rapidly by internet users. The origins of meme is like genes, which according to the book, exist to propagate, by hook or by crook.

For years I have tend to look at the world with dualism lens i.e. good vs evil or black vs white. While I also acknowledge everthing is not binary and no one is pure good or evil. This is a very important concept in investing. A stock is never good or bad, it is about whether it is cheap enough. This book however really opened up my thinking. It argued that there isn't really good and evil. We are all just programs, like computer programs. Our code is written in our genes. Genes want to propagate and deploy strategies to do so. Some are "evil" while others are good or altruistic. The evil strategies tend to do better but when evil overwhelms the system, good comes back.

One of the most interesting examples came from an analogy with hawks and doves to represent aggressive or docile behaviour in a population. I like to think of them as people who would do anything to get what they want (hawk) and people who would to do the right things (dove). We can put different dualism here and but the lesson drawn is important. First though, we must explain how this works. So the analogy goes as follows, if a hawk fights a dove, the hawk always wins, but the doves run away with minor injuries. If a hawk fights a hawk, one would get seriously injured or even die. Finally, when a dove fights a dove, no one gets hurt. 

So in a population full of doves, a single hawk will win all the fights and hence his genes propagate until he keeps finding hawks which he has to fight. Either one of them would be seriously injured or die and thus doves would come back again. This is analogous to a single aggressive corporate climber out to get everyone, but if the whole firm are filled these people, eventually the firm collapses or it gets taken over and the real doers come back to save the day. Hence good firms that we see today likely have a good pool of doers (doves) vs aggressive people (hawks).

Here's where things get interesting. According to game theory, there would be a steady ratio of hawks and doves after many evolutions. This would be 7/12 hawks vs 5/12 doves. Now if you think about it, this tend to reflect our corporate world (or perhaps the real world as well) where aggressive people who do anything to get what they want would be somewhat more than people who are righteous. So most firms are like that and they accomplish little. But great firms would probably have more doves and they go on to achieve great things, create great products, change the world.

The other important lesson for me is also about learning to run away to fight another day. Aggressive players always fight to win until they kill off each other. So the way to beat them is to have better strategies which will be discussed. Again here, while there are good and altruistic strategies, in the world of genes, some strategies are usually quite evil and they would tend to also be more than 50% of the strategies.

Cuckoo Strategy

One of thediscussed strategy was the cuckoo bird strategy. Cuckoo birds do not build their own nests and tend to deposit their eggs in other bird's nests. They can do this because evolution had allowed them to lay eggs that are so similar to other birds' ones that the foster parents cannot tell the difference. Also when they hatch, cuckoo birds can scream louder and also has redder beaks (see pic above) such that foster parents would always feed them until they grow to become adults and go mate with other cuckoos to continue this cycle.

This despicable strategy works until it doesn't when the world run out of foster parents for young cuckoos. It is also hard to beat this strategy because to the foster parents the damage done is not big enough for them to counterattack. Foster parents might lose 1 or 2 eggs because the cuckoo mummy tend to kick out one egg to make space for her own parasite egg. The chicks also lose some food to the cuckoo chicks but that's the maximum damage. Meanwhile, before the cuckoo evolve to build their own nests, this is their only strategy to breed, so that's why they go all out to win.

Even so, nature always find a way as recent studies have shown that some birds began laying eggs that have tell-tale signature that makes them different from the cuckoo eggs. When the mothers figured out which are the cuckoo eggs, she throws them out of the nest. Other birds like the fairy-wren had taught their chicks pre-natally to chirp differently to tell their mothers they are the real deal. This is the evolutionary arms race!

As to the implications to investing, I guess it might pay to know the culture of some companies we are interested to invest in. Do they have a lot more hawks determined to kill everyone? Are their strategies sustainable? These are not easy questions and the answers won't be in annual reports. That's what make investing interesting. It's forever asking questions and trying to understand better!

Stay tuned for Part 2!



Tuesday, July 03, 2018

Chart #13: Race to a trillion

The FT published a series by the same name. The following chart really shows it best. One of them would be the first trillion dollar company in the history of mankind. The candidates are:

1. A Window (Microsoft)
2. A River (Amazon)
3. The Alphabet (Google)
4. A Fruit (Apple)


My bet is on the fruit! At 935 billion dollars just a few weeks back, it's really just a stone's throw away!



Thursday, June 28, 2018

Germany Tak Boleh!

"Tak Boleh" = "Cannot" in Malay

Last night, Germany, the champion in the last world cup was eliminated by South Korea, the worst player in its group. It is now advised that Mongoloids should not visit Germany in the next one month lest we get beaten up by soccer hooligans in Europe's strongest economy. If you really have to go, wear a T-shirt proclaiming you are not Korean. Maybe this is all planned. Both Italy and Spain were also eliminated in group stages after they won the World Cup previously (see below). So, Germany is just keeping the tradition!

Winners, move on!

I believe the lesson here is that we do perform our best when there is nothing to lose. This is especially true in the World Cup. South Korea was confirmed out of the race. It really didn't matter whether they win or lose as they would not be able to advance to the next round. So, with no stress and completely relaxed, next thing we know, they beat the crap out of the previous champion.

We all remember Roberto Baggio's spectacular penalty miss in the 1994 World Cup Final which caused the country to fall into a recession that lasted till today. Just kidding. But it was bad. He was the star and the captain of the team and the ball went way off course. Brazil won the World Cup. We also remember how England exited Europe twice in a week. Then there was Messi earlier this month, missing his penalty in his first game. It takes a lot to perform under pressure and humans are very poor at it. So, when making important decisions, especially investment decisions, please relax. Think of blue skies and beaches.

Ah.. blue skies and beaches

World Cup also brings in another related topic with regard to investing - betting. Remember Andy whose father bet Germany would win the last World Cup with all his savings? He was lucky four years ago, hopefully he didn't make the same bet this time. Actually, he shouldn't. The winnings should last until Andy goes to university. But how should we bet then? Most people probably bet on their favourite teams, Brazil, Argentina, Spain. Some more sophisticated ones try to use data to analyze and then figure out the odds and bet. Like analyzing all the past matches of Germany and South Korea, maybe bet big that Germany would win, then hedge with a smaller bet that Korea might win. Lo and behold, the hedge saved the day.

Speaking of figuring odds, there's this Singaporean guy who became a legend in soccer betting. His name is Dan Tan. Most of us probably never heard of him. I read about him in the New York Times a few years ago. His story was simply amazing. He tried to improve his odds (or rather his edge) by fixing matches. He would pay a few hundred thousand dollars to the referee, linesmen, goalkeeper to do things. Then he bet millions for the outcome he wants. When his story was leaked, that was when the whole world knew that maybe 70% of all soccer matches had some kind of fixes, including World Cup matches and this Singaporean guy fixed the bulk of them! There was once he paid the stadium to shut down the power so that the match would not have more than three goals! This guy is truly legendary.

Of course, he is now in jail. He became the most wanted man in Italy after fixing some matches and the Interpol and the Singapore police worked together to lock him up. Well, technically speaking, they didn't have enough evidence to trial him, so they just locked him up indefinitely. But I guess match fixing will continue until the day A.I. becomes the referee and linesmen and all soccer players are paid so much that it's impossible to pay them to fix matches. This could be partly why EPL is the most watched soccer league, their players are paid too much, nobody can fix the matches and hence it's real and fun to watch.

Ok back to investing, so what's the relevance?

Well. in the world of investing, the idea to improve investors' edge (legally that is) is being implemented by activists. Activist shareholders and funds are pushing companies to do things that would be good for share prices by writing open letters or joining the board of directors of companies to shake things up. Some of them have been super successful. Elliott Management's Paul Singer comes to mind. His fund's performance significantly beat both his peers and the market since 2007 as most of his activism caused share price to rally hard. Although one might argue that some did not sustain because once they made their money, these guys leave and sometimes, there is another mess to clean up. Check out Arconic!

Activists winning the day

As small shareholders, we really don't have the ability nor clout to do such things. There is no way we can influence the share price to move up unless we personally know the CEO and can tell him how to run his business. This is why it is always advisable to go for blue chips, or to be more specific, large cap companies (better to be in the billions, the higher the better) and firms with strong business moats. This would be your branded products businesses and market leaders. I also tend to like firms with no debt. That way, it's harder for them to go bankrupt. The balance sheet is sometimes the last line of defence, like the goalkeeper. We definitely don't want that line to be breached!

Ole! Ole! Ole! Huat Ah!

Thursday, June 21, 2018

Chart #12: Why Property Keeps Booming


Here's another chart that explains why property keeps rising, globally. Since the Global Financial Crisis of 2009, the central banks flooded the world with liquidity to prevent a Great Depression type catastrophe. But this created heaps of cheap money in the system, which had to find its way into assets.

Hence private equity, bitcoins, art, wine and needless to say, property. $7.4trn into real estate in no joke. This is larger than Japan's economy and almost as large as China's economy. It is a wonder now why Singapore property doesn't correct enough for you to buy?



URA property price index charts

The charts above are published by URA and the last few data points showed how the cycle has turned. At the peak of c.150 (top chart), prices fell less than 20% to c.135 for five long years before turning up again. Did it actually correct? Some might ask. Yes it did, but not in nominal terms. Asset inflation caused by monetary easing and global money flooding into global properties did not allow prices to collapse more than 20% in nominal terms.

See also: 
Negative Interest Rates and Property
Sky Habitat Crashing

Friday, June 15, 2018

Buy Pyongyang Property!

12th of June 2018 in Singapore would go down in history as an important day. It marked the first step for North Korea to modernize. Well, if that really happens say a decade from now. Let's hope it happens, lest our $20 million would have gone to waste and this photograph of them sunbathing in our Infinity Pool would be a joke.

Epic moment at our Infinity Pool

Well, to be honest, it was a joke. It didn't happen. Some internet smart aleck photoshop-ed this and circulated it around the internet and Whatsapp. It was a good one, for what it's worth. Now, with forty eight hours passed, it seemed more like it might just not go the way the world wanted. North Korea media just told their citizens that their Supreme Leader got the better end of the stick. They could de-nuclearize step-by-step, with each step extracting more concessions from the United States. So this de-nuclearization for dinners could go on for a long time with North Korea enjoying sumptuous dinners for decades. 

No more tree barks for dinner! 

In the end, it could well be more of the same trick used by Kim Jong Il. We have seen this before. North Korea played hardball, then soften to extract concessions, get red wine and beef into the country, maybe some watches and diamonds as well, only to renegade on their de-nuclearization promises and then continue to fire ballistic missiles again. Meanwhile their population continues to suffer in poverty, with not enough to eat but as they were all brainwashed by propaganda, they continue to believe that their country is the greatest nation on earth.

I am afraid, that's the likely scenario. The document the two leaders signed in Sentosa had really little meat in it. This is very much like the original bak kut teh served to coolies working along the Singapore River a century ago (not the ones we get today full of spare ribs and a pound of fatty meat). Here's the four points from the Financial Times (FT):

1. The United States and the DPRK commit to establish new US-DPRK relations in accordance with the desire of the peoples of the two countries for peace and prosperity. 

2. The United States and the DPRK will join their efforts to build a lasting and stable peace regime on the Korean Peninsula. 

3. Reaffirming the April 27, 2018 Panmunjom Declaration, the DPRK commits to work towards the complete denuclearisation of the Korean Peninsula. 

4. The United States and the DPRK commit to recovering POW/MIA remains including the immediate repatriation of those already identified.

And here's their signatures affirming the four points:

Signed, confirmed plus chopped!

That's $20m worth of ink.
So much trouble for so little.
Poor Singaporeans...
Poor North Koreans...
Is that really it?

Now, for a moment, let's think out of the box. Kim Jong Un knows his country is shit. His people are suffering. He doesn't even have the money to fly to Singapore. He borrowed a plane from China to come all the way here to play a practical joke for the whole world to see. Then he goes back to his old ways, so that he can enjoy Californian wine and US beef which he couldn't get because of the trade embargo that was imposed since he fired those ballistic missiles. He would then be remembered by history to squander the one chance to lift 25 million of his countrymen and women and children out of poverty, as a great idiot, like his father.

What if he was better than that? What if he took this step to secure a new future for his country? Could he had killed his uncle and his half brother to secure enough power in order to take this step? Or maybe the rumour that one of the nuclear tests failed and destroyed decades of work was true. So he had to take this step. He had to take the risk to fly a Chinese plane to foreign soil to do the inevitable deal. Whatever the case, he knows the bright future that lies ahead if he opens up the country. 

He might lose power but gain so much more in return. He would be immortalized as the leader who enriched the whole nation. Just like China, the Asian Tigers, Myanmar and most recently Vietnam before her, if North Korea opens up her economy and modernizes, she would see exponential GDP growth. This would be like those Korean Youtube sensations transforming themselves with makeup (see pic below). If we take another bold step forward bringing South Korea into the picture, we are talking about a unified Korea. This would be a strong nation with 85 million people, with technology and markets which could become the Asia's third largest economy, behind China and Japan. 

From GDP per capita of of $500 to $25,000

Here's another excerpt from the FT:

At one point in his press conference, Mr Trump provided some insight into his mindset when he asked everyone to “think of it from a real estate perspective”. He advised Mr Kim to imagine the potential of his “beautiful beaches” if he were to stop using them for artillery exercises and built condos on them instead.

If and that is really a big if with caveat lodged, North Korea just made the first baby step to become a free market, when the time comes (usually it would take decades for them to liberalize the domestic real estate sector though, Vietnam just allowed foreigners to buy two years ago), then we must really act!

Buy Pyongyang property! Huat Ah!

Here's wishing Happy Hari Raya to all Muslims!

Tuesday, June 12, 2018

2018 Dividend List - Part 4

The last portion of this year's dividend list sees a hopscotch of companies from various segments of the economy. First up we have Berkeley Group, a property name from the UK. Next, European engineering related firms such as Smiths Group Inc and the French/Italian construction company Vinci. Across the Atlantic, US industrials: Emerson Electric, Cummins and healthcare firms: Gilead Science, Amgen, Johnson and Johnson were featured. There is also a paper packaging company: Mondi, a toy company: Hasbro and even a luxury brand: Coach, which is now renamed Tapestry.

Dividend List Part 4 of 4

Given that the lists were ranked by their dividend yield, we are also seeing valuations getting more expensive in this last portion. Most firms here are trading at mid to high teens PE while a few firms are at 20-22x PE. Emerson Electric, a world class automation play, trades at a rich 22.7x PE given that robots and automation taking over millions of jobs continue to dominate investors' and also the general public's minds.

Alongside the onslaught of automation, tech, internet, we would think that Cisco could be a beneficiary but unfortunately the stock has languished for many years and appeared on this screen multiple times in the past few years. Routers and switches, which were the core bread and butter of Cisco became commoditized and the firm needed to fight competition while reinventing itself. It managed to do a bit of that and the stock had recently started to perform rallying from the twenties to $44 today. 

Cisco is now part of a mega important theme: cybersecurity. 

The cybersecurity threat is real from hacking the government databases to phishing millions of accounts off Sony and Target to ransomware to simple fraud like Facebook friends asking you to buy Apple stored value card at 7-11. Cisco is riding on this tailwind albeit security and related services could be just 5-10% of its total revenue. The better way to play cybersecurity might be to buy the ETF HACK. The official name is ETFMG Prime Cyber Security, but the ticker symbol HACK is just so much easier to remember. 

HACK ETF

The listing history is not too long as the ETF only came about in 2014 but it did show early signs of being a compounder. The list of stocks also look like compounders as they mostly deal with software services and hence capable of generating strong free cashflow (FCF) with the exception of one or two names. The top names are: CommVault (archiving database and emails), Trend Micro (antivirus), Palo Alto Network (network security leader), FireEye (cybersecurity expert) and needless to say Cisco itself. This is really an interesting ETF and I would be a buyer if it falls below $37.

The last stock worth discussing is Coach or rather Tapestry as it is now called. I bought into Coach in late 2014 when the share price languished under heavy selling as investors questioned its relevance in the new era of millennials, internet and Michael Kors and Tory Burch. "Coach was the brand that my mother relates to, not me." says the 20 year old millennial female. It didn't help that Coach would be selling its inventory on discount in outlets all over US and other parts of the world. Meanwhile the internet was filled with fake goods, or maybe real ones that were bought off US outlets and then sold in Singapore, Hong Kong and mainland China.

Its new CEO then, Victor Luis launched an overhaul campaign to restructure Coach. He brought in a new chief designer to bring in fresh ideas to supplement the monogram. He stopped the discounting at the outlets and he revamped stores globally to give them a better look and feel for the millennials. Finally, he bought Kate Spade, the millennial brand and change the company's name to Tapestry. Investors were elated and bidded the stock towards $60. I decided to sell so as to fund other US stock purchases. I still liked the story but the valuations no longer look appealing and it's really tough to say if Coach can become the LVMH of US. 

Kate Spade, adored by Singapore's 
Member of Parliament

Lo and behold, the stock crashed 15% a few days after my sale. It was especially lucky because I decided to sell the entire position rather than a half sale as I normally do. This was because the position was not too big and it would make sense not to leave a residual that needed to be dealt with in the future. So, that's really pure luck, not foresight. There is no foresight in investing because the future is simply not predictable. Perhaps the lesson learnt is that buy-and-hold only works for certain stocks, definitely not fashion or tech. With that, we end this year's dividend lists. Hope this helps!

Wednesday, June 06, 2018

Tangible Thoughts #5: Howard Marks

"The key word is calibrate." - Howard Marks

Investing is not black and white, in or out, risky or safe. The key word is calibrate. The amount that you have invested. Your allocation of capital among the various possibilities. The riskiness of the things you own. All these should be calibrated along a continuum that runs from aggressive to defensive.

Howard Marks

Coming from guru Howard Marks, the words and meanings just come alive much better. Investing is never binary. There are always lingering questions and there is always another answer, a better answer. Futures and outcomes are always a set of probabilities, how do we pick stocks with the lower probability of loss, how do we size our bets, how do we time our exits, these are the important details. 

Some quick rule of thumbs I have established over the years:

1. Size your initial bet small, so that you can scale up over time. This works for me because usually I am too early.

2. Don't bet more than 10% on any single bet unless you are really super sure.

3. If you are wrong, it is much better to find another opportunity with similar or more upside and switch to the new name.

4. If an investment worked out, like it is up 100-200%, then good to trim some and deploy the capital to other names.

5. Diversify across at least 20 names in different sectors if your capital allows.

Hope this helps! 

PS: 6th of June is also known as D-Day, the longest day in history. 73 years ago, on Tuesday, 6.6.1944, allied forces reached Normandy beaches of France and launched Operation Overload against the Nazis. Their victory marked the turn of the tide which led to the end of the WWII. Thousands died on that day. Tribute to all who had given their lives to preserve peace in our world.


Monday, May 28, 2018

2018 Dividend List - Part 3

The third part of this year's list consist of consumer names that we know really well. P&G, Harley Davidson, Unilever, Kellogg, Pepsico, Campbell Soup and our very own Thai Beverage. These are truly global household names and we should really have some in our portfolios. It is very rare for them to be featured here, all in the same year. Again, this is a reflection of the market's one sided view that internet, gaming and FAANGs will conquer the world and become Masters of the Universe!

Dividend List Part 3 of 4

On the flipside, non-tech stocks are now deemed next to worthless and hence we see all these great names all being screened out - a rare phenomenon. Some of these names might have issues, for example, Kellogg and P&G had been mismanaged for years and hence seeing very slow growth. But they are still compounders, both stocks had compounded at low single digits for a few years and if and when they find the impetus to improve, usually with a maverick CEO at the helm again and pushing for change, the stock would again become high single digit compounders.

In our own beloved Singapore market, we have Thai Beverage. This is one powerhouse that has compounded seriously. In 2010, Thai Beverage had a S$5bn revenue and S$450m in net profit. Its market cap was S$7bn and it was ranked somewhere in the teens or even in the twenties in terms of market cap. In 2018, it is forecasted to generate S$9bn in revenue and S$1.2bn in net profit, a 3x increase since 2010. Its market cap hit S$24bn at its peak and it became the largest foreign stock listed on the SGX. With restructuring of its group including F&N and its businesses in IndoChina, there could be further upside, The stock trades at c.5% FCF yield today with FCF at S$1bn and market cap at $21bn.

The stock worth highlighting today though is Campbell Soup. The slide below taken from Campbell's investor presentation deck tells the story well. Campbell today is not just a soup company. While that business segment (American Simple Meals and Beverages) contributes the bulk of operating earnings and has the highest margins, the actual Campbell soup business is pretty small. The segment itself includes sauces and dips with brands like Prego and Pace. It also has organic drinks, energy beverages and other brands acquired over the years. With its portfolio of brands, Campbell dominates the American simple meal and soup market which explains its 26% operating margin.

Campbell Soup Businesses

The two other segments are the future growth engines. Campbell has done extensive survey and research showing that the US consumer (and likely global consumers) are going for more organic and more fresh meals but at the same time, they are also snacking more, albeit with "healthier" snacks like better-for-you biscuits and potato chips. Hence the two segments: Global Biscuit and Snacks as well as Campbell Fresh are seeing strong growth that would provide the compounding effect for Campbell. The market thinks that this would take a lot of time, given that these segments are smaller and also lower margins. But that is exactly where a value investor comes in, when others are fearful!

As this post was in the writing, the stock crashed more than 10% as its CEO Denise Morrison resigned, taking responsibility for failed M&As that she conducted in the past few years, including paying almost $5bn for Synder's Lance. She was also criticized for pursuing contradictory strategies of growing fresh and healthy food while buying more snacks companies. Well, we all love to eat healthy but we just can't give up on potato chips and doritos right? So, Denise was right. But I guess she got played out by politics or was just plain unlucky. Meanwhile, the new CEO Keith McLoughlin and new COO Luca Mignini announced a new restructuring to overhaul the company, focusing on new growth segments (which likely include snacks too!). To this end, the company will form an "accelerator unit" to target selling healthy food (and snacks) via e-commerce.

Restructure, overhaul and upgrade are some of the best investment stories around. The next few months would provide important data points to see if Campbell's plan is really working. The downside is that it fails, but because the stock is so cheap, it would likely just stay flat, although it could be a value trap for a few years. But if the restructuring works, this stock would be up 50-100%! Huat Ah!

This author does not own Campbell yet!

Thursday, May 17, 2018

Chart #11: Ikigai

Renamed Chart Of The Month to simply Chart. This one today is an important one. We are talking about ikigai.

Ikigai

Another way to put it - ikigai is the cross section of your values, the things you like to do and the things that you are good at.

To supplement, here's 10 ways to better stay in ikigai:

1. Stay active and don’t retire
2. Leave urgency behind and adopt a slower pace of life
3. Only eat until you are 80 per cent full
4. Surround yourself with good friends
5. Get in shape through daily, gentle exercise
6. Smile and acknowledge people around you
7. Reconnect with nature
8. Give thanks to anything that brightens our day and makes us feel alive.
9. Live in the moment
10. Follow your ikigai

Thursday, May 10, 2018

Malaysia Boleh!

"Boleh" means "can" or "able to" in Malay.

What a historic day for Malaysia! Dr Mahathir trashed Najib with a snap of his fingers gloved in his infinity gauntlet neatly decorated with the coalition of infinity stones: DAP, PKR, PNA, PPBN and Warisan Sabah. His Alliance of Hope, Pakatan Harapan and its partners convincingly defeated Najib's Barisan Nasional (BN) with 122 seats vs his nemesis' 79 seats. Mahathir's win ended one of the longest reign for a democratic ruling party and renewed hope that Malaysia can one! (i.e. Malaysia can achieve what it wants to achieve.)

Under Najib, Malaysia really suffered with the ringgit falling to a third in value relative to the SGD - one Malaysia ringgit is only worth 33 Singapore cents. The exchange rate was 1:1 in 1965. Also, the market cap of KLCI is at USD 269 billion vs Singapore's STI at USD 440 billion. Given that a lot of its listed stocks are also locked in cross-shareholdings, Khazanah and banks, Malaysia's free float is even smaller at a mere USD 84 billion. This is a tenth of a fruit and smaller than the smallest FAANG which is Netflix at USD 144bn. FAANG stands for Facebook, Amazon, Apple - the abovementioned fruit, Netflix and Google.

The last decade was truly dark for our beloved neighbour.

Ironically, it was partly Mahathir's own doing as he was the one who picked Najib to be the Prime Minister after he sent another of his prodigy, Anwar, to jail. Now he is trying to team up with Anwar by asking the King for a pardon so that Anwar can stand in elections, win a seat and then be Prime Minister. This sounds like a plot from Marvel when your past enemy, who was actually your friend, joins your hero alliance in order to defeat a bigger enemy whom you yourself created. 

Malaysia in a Marvel Plot?

With the country at its brink, real life heroes really assembled to save their Motherland. Teachers, waitresses, workers, drivers in Singapore took leave to rush home to vote. In fact, Malaysians all over the world came to the rescue, dipping their index finger in blood, swearing on their lives to save the country. We hear stories of how everyone beat all odds in order to stop Najib. Strangers car pooling to go home despite vote forms being sent out too late. Vigilantes appeared in front of voting booths to prevent random black boxes with rigged votes getting smuggled in again. It was an epic battle against evil and an amazing race against time. But Malaysians did it!

Malaysia Boleh! 

But Najib is not going down without a fight. It is rumoured that he participated in intense negotiations with other smaller partners in the coalition to coerce them to swing to his side. Candidates are being offered 20 million ringgit each to jump to BN. If he succeeds, he might still hang on to his PM role. After all, his life is at stake - he might get strapped in dynamites and then get blown to bits. Meanwhile, Mahathir declared bank holidays to prevent money being siphoned out of the country. Hopefully, in the end, the democratic process will work, Najib gets justice served and all our Malaysian friends didn't fly, rush, drive back in vain.

Back to the stock market, since Malaysia is closed, nothing much is going on. The ringgit meanwhile weakened after strengthening before the election. With talks of abolishing GST and re-introducing fuel subsidies, investors are also worried about the country's fiscal situation. But never fear, Dr Mahathir is back. Just the face of this legend supposedly made Najib and his cronies squirm like vampires in sunlight. So AirAsia painted all their planes to make sure Najib cannot escape.

A True Malaysian

As to stock ideas, many experts are pitching stocks that benefit from the weakening ringgit while some called upon investors to take advantage of any pullbacks to buy quality Malaysian names. A quick stock list include: YTL, Public Bank, Malaysia Airports, Maxis etc (all Malaysia listed names). Meanwhile, yours truly made a tongue-in-cheek list of stocks below in Singapore with Malaysian stories: 

1. Fraser and Neave: 40% sales in Malaysia
2. Top Glove: World's largest glove maker based in Malaysia
3. IHH: Hospital operator in Singapore and Malaysia
4. OCBC: Teens revenue exposure to Malaysia
5. Silverlake Axis: IT business with Malaysian banks

Malaysia Boleh!

PS: except for F&N discussed in a previous post which is investable (not on Malaysia but on its Vietnam story), the rest are really more for fun, please don't really buy without doing more research.

Sunday, May 06, 2018

May the Force be with Omaha!

It's the Omaha weekend again and this year is special as it also started on May Fourth which is also knowns as the Star Wars Day. In Singapore, someone then decided to organize a Star Wars Run charging people S$80-85 to either join the light or the dark side of the race! The annual Berkshire run, for those investors who are spending this weekend in Omaha, cost roughly S$60 and all are encouraged to invest in ourselves i.e. our bodies, which would be the best investment ever. 

Star Wars Run Singapore!

Well, unfortunately, one run would never amount to any tangible investment that would change our bodies, or our lives. As with everything about value investing, it's about time and consistency, which leads to habit formation, the most important agent of lasting change. The Berkshire Hathaway AGM (annual general meeting) embodies these concepts and this is perhaps one of the reasons why it's so appealing to so many. This year marks the 53rd AGM and a crowd of 40,000 would have descended upon Omaha from all over the world. Many travelled long distances just to listen to the Yoda equivalent of the investing universe utter a few words of wisdom, with the hope that the experience would help internalize some of this wisdom.   

Alas, all sentient beings have a lifespan and Yoda eventually become one with the Force (and became capable of influencing the weather). Warren Buffett, mindful of his own time, used this year's AGM to pass the baton to two of his lieutenants: Greg Abel and Ajit Jain. At the same time, he emphasized that Berkshire Hathaway is a corporation and hence immortal and Berkshire Hathaway's culture had been well established and the firm would continue to thrive without him and his trusted #2 Charlie Munger. So, keep calm everyone!

Keep calm!

It could be said that Warren Buffett's success also boils down to time and consistency, which is essentially habits. The time to form a habit is surprisingly short - just 21 days, according to various research. But to consistently do it for decades would take effort, determination, grit. Warren Buffett pretty much did the same things for 53 years and hence got to where he is today. His essential habits were reading and thinking hard. These are exactly the habits that true value investors must acquire early on in life. Buffett probably spent six to eight hours reading everything from newspapers to annual reports, every day for half a century. 

Thinking is a slightly different exercise. While there are times we should sit down and think alone, most thinking require discussing with like-minded friends, writing down our thoughts and ironically more reading to better understand the issue at hand. It is also important to be calm while thinking and hence many astute investors practice meditation or engage in other activities to calm down our monkey minds. 

It is not clear how Buffett calm his mind from what we know about his lifestyle. Perhaps it's bridge that he plays every night, or simply his meals which is always the same (hamburgers or steaks) and hence maybe when he eats he is really just eating with his mind spacing out. Nevertheless, it's important for serious investors to really find an activity that can help preserve or enhance the clarity of our minds.

So, we are back to running. Running is an activity at its core, very similar to meditation. The mind is focused on breathing and bringing the body forward. There is nothing else. This has a similar effect of calming the mind as meditation does. Maybe that's why we have a Berkshire 5km run and Star Wars runs. Keep calm and keep running!

May the Force be with you always!