Index
A
Abdulaziz, 148
Abdullah II bin al-Hussein, 133
Abraaj Capital, 129
accelerating out of downturn, 277–278
access, political
effect on transactions, 87–91
for foreign investors and deal-makers, 101
by locals, 104–105
success stories, 91–92
value in godfather capitalist systems, 95
value in state capitalist systems, 92–94
Adams, Scott, 225
added value
search for, 55–59
advanced international capitalism, 70
advantages
short-term versus long-term, 220–223
targeting, 217–220
The Age of Turbulence (Greenspan), 29, 232
Air Arabia, 151
Alfaisalia Tower, 230
Allied Capital, 262
American Express, 271
ABN AMRO, 149
analysis. See balance sheet analysis
Apple Computer, 195
Asia Alternatives Management LLC, 132
The Asian Godfathers (Studwell), 76–78
assets, relationship with earnings, 51–53
avoided cross-border deals, 255–257
avoided geographies, 254
B
Baidu, 151
Bain, 128
balance sheet analysis, 50–51
added value, 54
importance of, 55
relationship between asset value and earning power value over time, 52–53
relationship between assets and earnings, 51
Bank of China, 203
banks, as source of information, 215
Barrack, Tom, 250–251
Barry, Tom, 130
biases. See also reputable capital
cross-border inefficiencies and mispricings, 108–112
disproportionate bias effects for Western investors, 112–114
explained, 107–108
“bird on a rhino” investment strategy, 96–99, 246–247
Bosch, entry into Chinese market, 177–179
Buckner, Kofi, 130
Buffett “Great Company” Corollaries, 42–43
Buffett, Warren, 4, 14, 28, 84, 173, 191, 225, 270
Buffett “Great Company” Corollaries, 42–43
investment in BYD, 115
purchase of PetroChina, 204
purchase of underperforming companies, 239
business models, transforming with capability deals, 155–158
Buttonwood agreement, 267
buyer of choice, 64
buying
“bird on a rhino” investments, 246–247
cheap companies in environments others avoid, 252–257
companies with politically limited competition, 258–263
great companies on their knees, 238–241
potentially great companies, 241–243
small-medium private companies in rising environment, 249–252
underpriced good-to-great stocks, 237–238
C
calculated intrinsic value uncertainties, 39–41
Canary Wharf, 117
capability bench, creating, 216
capability deals
capability keys
explained, 162–167
foreign capability key, 221
foreign versus local, 181–182
goals, 181
capability stampede, 183–184
case studies
Bosch, 177–179
Fiat, 176–177
General Motors (GM), 173–176
Rupert Murdoch, 179–180
Softbank, 180–181
consolidation of capabilities, 154–155
leveraging capabilities into direct investment activities, 271–275
localization of competition, 158–160
long-term private investing in China, 172–173
migration of capabilities, 148–153
short-term private investing in China, 179
tips and recommendations, 184–187
transforming business models, 155–158
value-added deal-making, 160–162
capability gaps, 31
capability keys
foreign capability key, 221
foreign versus local, 181–182
goals, 181
capability stampede, 183–184
capital. See reputable capital
capital bridges, creating, 131–134
capitalism
advanced international capitalism, 70
developing international capitalism, 70
godfather capitalism, 76–78, 95
state capitalism, 71–74, 92–94
U.S.-versus-China competitiveness, 74–76
Carlyle Group, entry into Middle East, 128–130
casino industry in Macau, 156–157
challenges of global investment, 2–3
Chanos, Jim, 80
cheap companies
buying in environments others avoid, 252–257
cautions, 197
China
Bank of China, 203
competition in, 134
emerging-market giants, 93
Google in, 101–102
long-term private investing in, 172–173
Bosch, 177–179
Coca-Cola, 138–140
Fiat, 176–177
General Motors (GM), 173–176
Groupe Danone, 136–138
Morgan Stanley Properties, 126–128
outbound foreign direct investment (FDI), 247–248
percentage share of world commodity usage, 255–256
proposed Shanghai skyscraper project, 120–122
Saudi-China skyscraper project, 203
Shanghai Disneyland, 103
Shanghai’s Liujiazui district, 206–207
short-term private investing in
Rupert Murdoch, 179–180
Softbank, 180–181
state capitalism, 71–74
U.S.-versus-China competitiveness, 74–76
China National Cereals, Oils, and Foodstuffs Corporation (COFCO), 138
China Resources Land, 132
circle of competence, expanding, 232
Citi Property, 126
Clarke, Peter, 267
Clissold, Tim, 141
COFCO (China National Cereals, Oils, and Foodstuffs Corporation), 138
colliding markets, 24
biases. See also reputable capital
cross-border inefficiencies and mispricings, 108–112
disproportionate bias effects for Western investors, 112–114
explained, 107–108
Colony Capital, 250–251
commercial banks, as source of information, 215
competition, 134
limited-competition situations, 101
localization of, 158–160
competitive advantage, 63
Competitive Advantage of Nations (Porter), 73
ConocoPhillips, 149
consolidation of capabilities, 154–155
consumer information, 216
core principles of value investing, 64–65
Cramer, Jim, 113
cross-border inefficiencies. See also reputable capital
explained, 30–31
and mispricings, 108–112
Cross-Border M&A and Investment conference, 267
D
defensibility, 63
defensible investments, 225–227
definitional uncertainty, 38
derivation of value investing, 46
Deutsche Bahn, 95
developing international capitalism, 70
direct investment activities, leveraging capabilities into, 271–275
“direct spectacular” investments, building, 202–203, 245
disadvantages, avoiding, 217–220
distressed companies, buying, 252–254
Dodd, David, 3
Dover, Bruce, 179
downturn, accelerating out of, 277–278
Dubai
as capital bridge to Middle East, 132–133
growth of, 82
Madinat Jumeirah development, 158
mega real estate, 157
Dubailand, 102
E
earnings
relationship between asset value and earning power value over time, 52–53
relationship between assets and earnings, 51
Ecobank, 201
Einhorn, David, 262
eliminating uncertainty, 11, 37–41
definitional uncertainty, 38
intrinsic value uncertainties, 39–41
measurement process error, 38
reading scale uncertainty, 38
systematic error, 39
variance in events, 38
Emaar, 224
emerging-market ATM, 117–123
emerging-market shenanigans
long-term squeeze-out, 141–142
profit shell game, 142–144
entering foreign markets, 212
assessing unique information, 214–216
building partner networks, 213
creating deep capability bench, 216
limited partner (LP) approach, 217
environment focus, 204–207
errors. See also uncertainty
measurement process error, 38
systematic error, 39
Etihad-Etisalat, 111
events, variance in, 38
expanding
circle of competence, 232
traditional value aproaches, 270–271
F
Fairmont Mount Kenya Safari Club, 198
Faisal bin Abdul Aziz Al Saud, 148
Feynman, Richard, 32
Fiat, entry into Chinese market, 176–177
financial statements, 215
Fisk, Robert, 83
Fitch, 262
five keys strategies, 189–190
FocusMedia, 224
Fooling Some of the People All of the Time (Einhorn), 262
Ford Motors, 152
foreign capability key, 221
foreign investors, political access, 101–104
foreign keys, 61
foreign markets, entering, 212
assessing unique information, 214–216
building partner networks, 213
creating deep capability bench, 216
limited partner (LP) approach, 217
Founder, 107
Freeland, Chrystia, 94
Fukuoka Dome, 251
future investment recommendations, 265–266
accelerating out of downturn, 277–278
becoming global tycoon, 268–270
expanding traditional value aproaches, 270–271
leveraging capabilities into direct investment activities, 271–275
new global Wall Street, 266–267
private equity as value-added partner of choice, 275–277
skeptical optimism, 279–280
G
GCC (Gulf Cooperation Council), 133
GE (General Electric), 80
GE Energy Financial Services, 224
Geely Automobile, 151
Geely Holding, 152
Genentech, 271
General Electric. See GE
General Motors (GM), 75, 173–176
global investment. See value point investment
global tycoon investing, 189–190, 207–209
GM (General Motors), 75, 173–176
Gnodde, Richard, 267
good companies, identifying, 191–196
government-skewed markets
“bird on a rhino” investment strategy, 96–99
explained, 67–69
godfather capitalism, 76–78, 95
government and quasi-government players, 79–80
limited-competition situations, 101
mapping new political-economic world order, 70–71
opportunities in, 81–82, 84–86
political access, 87
by locals, 104–105
effect on transactions, 87–91
for foreign investors and deal-makers, 101–104
success stories, 91–92
value in godfather capitalist systems, 95
value in state capitalist systems, 92–94
state capitalism, 71–74, 92–94
U.S.-versus-China competitiveness, 74–76
Graham’s Laws, 34–36
Graham’s Method
Buffett “Great Company” Corollaries, 42–43
eliminating uncertainty, 37–41
definitional uncertainty, 38
intrinsic value uncertainties, 39–41
measurement process error, 38
reading scale uncertainty, 38
systematic error, 39
variance in events, 38
explained, 10–12
Graham’s Laws, 34–36
postulating relationship between price and value, 37
quantifying risk, 41–42, 49–50
Graham, Ben, 3. See also Graham’s Method
great companies, identifying, 191–196
Greenblatt, Joel, 228
Greenwald, Bruce, 52
Groupe Danone, entry into Chinese market, 136–138
Gulf Cooperation Council (GCC), 133
H
Haier, 153
Han Zheng, 93
Harvest Capital, 132
high-performance state capitalism, 71–74
Hong Kong, 132
Hooters, 151
Hotel Des Bergues, 198
Huawei, 153
I
ICICI (Industrial Credit and Investment Corporation of India), 250, 276
IDG, 180
Immelt, Jeff, 233
In-N-Out Burger, 271
increasing velocity, 232–233
Industrial Commercial Bank of China, 267
Industrial Credit and Investment Corporation of India (ICICI), 250
inefficiencies and opportunities, 12, 30–31
instability, perceived instability in global investment, 26–28
intelligent investor, 13
The Intelligent Investor (Graham), 3
interlocking investments, 227–230
intrinsic value uncertainties, 39–41
Investcorp, 276–277
investment worldview
accommodating to changing world, 8
multipolar investment worldview, 8–10
value-based worldview
capability gaps, 31
collision of markets, 24
cross-border inefficiencies, 30–31
large trends, 29–30
localization of global investment world, 22–26
microfundamentalist principles, 21–22
multipolar investment landscape, 23–24
price and value in global landscape, 28–29
uncertainty and instability, 26–28
Western-centric investment worldview, 8
J
Jeddah city center development, 117–119
Jiang Jianqing, 267
Jobs, Steve, 195
K
Kaiser, 271
KHI (Kingdom Hotel Investments), 198–200
Kingdom Holding, 104, 111, 253
Kingdom Centre, 228–230
Kingdom Hospital Consulting Clinics, 254
Kingdom Hotel Investments (KHI), 198–200
Kingdom Hotels, 244
Kingdom Zephyr Africa Management, 130, 200–202, 244
Kohlberg Kravis & Roberts (KKR), 128, 161, 250, 276
Kynikos Associates, 80
L
large trends, 29–30
launching value tank for global acquisition and development deals, 198–202, 243–245
Lewis, Michael, 71
Li Shufu, 152
Li, Richard, 267
Liar’s Dice, 71–74
Liar’s Poker, 71–74
life span of reputational edge, 134–136
limited partner (LP) approach, 217
limited-competition situations, 101, 262–263
link surges, 246–247
Lipton, Martin, 267
Liujiazui district (Shanghai), 206–207
Lo, Vincent, 93
local economies of scale, 221
local investors, political access, 104–105
local keys, 61
localization
of competition, 158–160
of global investment world, 22–26
long-term advantages, 220–223
long-term private investing in China, 172–173
Bosch, 177–179
Fiat, 176–177
General Motors (GM), 173–176
long-term squeeze-out, 141–142
long-term value investing approach, 2
LP (limited partner) approach, 217
M
Ma, Melissa, 132
Macau
casino industry, 99–100, 156–157
investment environment, 204–206
Venetian resort, 156
Madinat Jumeirah development, 158
Man Group, 267
management, 61
margin of safety, 63
Marks & Spencer, 273
Mars Entertainment, 251
measurement process error, 38
mega real estate, 157
Megaworld Corporation, 251
mergers, 196–197
microfundamentalist principles, 21–22
migration of capabilities, 148–153
mispriced value + added value (MP + AV) approach, 48
monopolies, 262
Moody’s, 262
Morgan Stanley Properties, opening of Shanghai office in 2006, 126–128
Mr. China (Clissold), 141
multipolar investment landscape, 23–24
multipolar investment worldview, 8–10
multiprong global investing, 263–264
Mulva, James, 149
Murdoch, Rupert, 14, 179–180, 186
N
NAS airline, 242
Netherlands Trading Society, 148
networking, 63
nonreproducible assets, 202
O
oligopoloies, 262
1 World Trade Center, 76
opportunities
in politicized markets, 81–86
optimism, 279–280
P
partners
partner networks, building, 213
partner of choice, 64
targeting, 223–225
PCCW, 267
Perkowski, Jack, 142
PetroChina, 4, 28, 84–85, 204, 270
Pity the Nation (Fisk), 83
playbook. See strategies for global investment
Plaza Hotel, 198
political access
effect on transactions, 87–91
explained, 61
for foreign investors and deal-makers, 101–104
by locals, 104–105
success stories, 91–92
value in godfather capitalist systems, 95
value in state capitalist systems, 92–94
political deals, 258–263
political information, 216
politicized markets
“bird on a rhino” investment strategy, 96–99
explained, 67–69
godfather capitalism, 76–78, 95
government and quasi-government players, 79–80
limited-competition situations, 101
mapping new political-economic world order, 70–71
opportunities in, 81–86
political access
effect on transactions, 87–91
for foreign investors and deal-makers, 101–104
by locals, 104–105
success stories, 91–92
value in godfather capitalist systems, 95
value in state capitalist systems, 92–94
state capitalism, 71–74, 92–94
U.S.-versus-China competitiveness, 74–76
Porter, Michael, 73
potentially great companies
buying, 241–243
identifying, 191–196
price, 12–13
cross-border inefficiencies and mispricings, 108–112
gaps between price and value in global landscape, 28–29
postulating relationship between price and value, 37
Prince Waleed. See Al-Waleed bin Talal
private equity, as value-added partner of choice, 275–277
profit shell game, 142–144
Q
Q-Cells, 74
Qatari Diar, 95
quality, 12–13
quantifying risk, 11, 41–42, 49–50
quasi-government players, 79–80
R
Rania Al Abdullah, 133
RBS (Royal Bank of Scotland Group), 132
reading scale uncertainty, 38
Ren, Rong, 132
renminbi-denominated (RMB) funds, 127
reputable capital
as asset for investment firms, 126
Coca-Cola, 138–140
Carlyle Group, 128–130
Groupe Danone, 136–138
Kingdom Zephyr Africa Management, 130
Morgan Stanley Properties, 126–128
creating capital bridges, 131–134
emerging-market ATM, 117–123
emerging-market shenanigans
long-term squeeze-out, 141–142
profit shell game, 142–144
explained, 61
importance of, 125
life span of reputational edge, 134–136
use for investors, 114–117
risk, quantifying, 11, 41–42, 49–50
RMB (renminbi-denominated) funds, 127
Rochon, Pierre Yves, 242
Rotana, 229
Royal Bank of Scotland Group (RBS), 132
Rupert Murdoch’s Adventures in China (Dover), 179
S
S&P, 262
Sabic, 80
SAIC (Shanghai Automotive Industry Corporation), 173–175
Saks Fifth Avenue, 150, 229, 274
Sale of the Century (Freeland), 94
Samba Bank, 150
SAT, 262
Saudi American Bank (Samba), 150, 197, 229
Saudi mobile license, 110–112
Saudi-China skyscraper project, 203
screening, 63
“search for the opportunity to add value” approach, 19–20
search for value philosophy, 19
Security Analysis (Graham and Dodd), 3–4, 27
Sees, 204
Senegal Communications, 201
7-Eleven, 150
Shanghai Automotive Industry Corporation (SAIC), 173–175
Shanghai Disneyland, 103
Shanghai GM, 173–174
Shanghai skyscraper project, 120–122
Shanghai Tower, 76
Shanghai, Liujiazui district, 206–207
Sharm El Sheikh Four Seasons, 198
short-term advantages, 220–223
short-term private investing in China
case study: Rupert Murdoch, 179–180
case study: Softbank, 180–181
simplicity of deals, 209–210
SinoLatin, 255–256
Sinopec, 80
skepticism, 279–280
Small Business Administration, 262
Softbank, entry into Chinese market, 180–181
Soros, George, 212
Southwest Airlines, 151
standard value investing calculation, 49–50
strategies for global investment, 235–237
building “direct spectacular” investment, 202–203, 245
buying cheap companies in environments others avoid, 252–257
buying companies with politically limited competition, 258–263
buying great companies on their knees, 238–241
buying or building “bird on a rhino” investment, 246–247
buying potentially great companies and making them great, 241–243
buying small-medium private companies in rising environment, 249–252
buying underpriced good-to-great stocks, 237–238
launching value tank for global acquisition and development deals, 198–202, 243–245
multiprong global investing, 263–264
structuring political deals with guaranteed returns, 258–263
Suntech Power Holdings, 74
sustainable competitive advantage, 225–227
Sutter Health, 107
systematic error, 39
T
T.G.I. Friday’s, 151
Taleb, Nassim, 83
targeting
advantages, 217–220
companies/partners, 223–225
Telefonica, 111
Toyota, 75
traditional value investing
compared to value point investing, 45–46
expanding, 270–271
problems with, 31–34
transactions, effect of political access on, 87–91
transforming business models with capability deals, 155–158
trends, 29–30
Trollope, Frances, 145
Trump, Donald, 199
turnarounds, 253–254
21st century global investment landscape, 3–5
U
UAES (United Automotive Electronic Systems), 177
uncertainty
definitional uncertainty, 38
intrinsic value uncertainties, 39–41
measurement process error, 38
perceived uncertainty in global investment, 26–28
reading scale uncertainty, 38
systematic error, 39
variance in events, 38
underperforming companies, buying, 238–241
underpriced good-to-great stocks, buying, 237–238
Unionpay, 85
unipolar investment worldview, 8
unique information, assessing, 214–216
United Automotive Electronic Systems (UAES), 177
United Saudi Bank (USB), 229
United Saudi Commercial Bank, 100, 195–196
V
V-speed, 233
value
gaps between price and value in global landscape, 28–29
mispriced value + added value (MP + AV) approach, 48
postulating relationship between price and value, 37
relationship between asset value and earning power value over time, 52–53
“search for the opportunity to add value” approach, 19–20
search for value philosophy, 19
value keys, 60
value investing
21st century global investment landscape, 3–5
challenges of global investment, 2–3
classic long-term value investing approach, 2
expansion of, 63–64
opportunities in global investment, 5–6, 12
value keys, 60–62
capability keys, 61
foreign keys, 61
local keys, 61
management, 61
political access, 61
political access. See political access
reputable capital
emerging-market ATM, 117–123
explained, 61
use for investors, 114–117
value point investment
compared to traditional value investing, 45–46
core principles, 64–65
short-term versus long-term advantages, 220–223
derivation of value investing, 46
expansion of value investing methodology, 63–64
targeting, 217–220
value-based worldview
capability gaps, 31
collision of markets, 24
cross-border inefficiencies, 30–31
large trends, 29–30
localization of global investment world, 22–26
microfundamentalist principles, 21–22
multipolar investment landscape, 23–24
price and value in global landscape, 28–29
uncertainty and instability, 26–28
value-added deal-making
capability keys, 162–167
management issues, 160–162
value-added partner of choice, 64, 275–277
value-based worldview
capability gaps, 31
collision of markets, 24
cross-border inefficiencies, 30–31
large trends, 29–30
localization of global investment world, 22–26
microfundamentalist principles, 21–22
multipolar investment landscape, 23–24
price and value in global landscape, 28–29
uncertainty and instability, 26–28
variance in events, 38
velocity, increasing, 232–233
Venetian resort (Macau), 156
Visa, 85
Volvo, 152
W
Wachtell, Lipton, Rosen, & Katz, 267
Al-Waleed bin Talal
ability to identify potentially great companies, 194
assessment of information, 223
bid for Saudi mobile license, 111
building of partner networks, 213
capability deals, 170–172
“direct spectacular” investments, 202–203
discipline and daily habits, 207–209
hotel investments, 268–269
investment success, 13–15
Kingdom Centre, 228–230
Kingdom Zephyr Africa Management, 130
launch of Four Seasons in Egypt, 7
mergers, 196–197
political deals, 260–261
proposed Shanghai project, 120–122
purchase of potentially great companies, 242
purchase of underperforming companies, 239
skyscraper development in Jeddah, 117–119
Western-centric investment worldview, accommodating to changing world, 8–10
When Markets Collide (Mohammed El-Erian), 14, 24
Williamson, Peter, 152
World Trade Center, 76
Wynn, Steve, 156
X-Y-Z
Xu, Rebecca, 132
Yahoo!, 102
You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits (Greenblatt), 228
Zhonglian Automotive Electronics, 177