Businessman Investor

Touching base with the rational business psyche of stock market investors

Thursday, August 11, 2011

Filipino Value Investors

Bee Happy. Tony Tan Caktiong's Jollibee is now larger than its "langhap-sarap" beginnings. It has acquired restaurant subsidiaries and builds them into strong brands.
A fellow investor once raised a concern on the applicability of value investing here in the Philippines. Paraphrasing his comments: he observed that many Filipino investors try to mimic their US counterpart—then again, do we have the likes of Jim Rogers and Warren Buffett locally? It seems no one here succeeded using value investing alone.

It was a good, stimulating question which challenged the universality and relevance of value investing across borders. Immediately, I tried to reflect on it. My top-of-mind recall pointed to Manny Pangilinan. I didn’t know the knitty-gritty details of his investment checklist/filters, but I thought that when his investment vehicle, Metro Pacific, acquires whole businesses, it's definitely got to be rooted/grounded on the idea of having a return on investment not by way of stock price appreciation but by way of fundamental earnings generated by the business.

Mall King. Henry Sy capitalizes on his SM Malls by acquiring businesses that would have synergistic effects on the bottom-line. His malls exploit the full potential of SMDC condos just across the street.

Further contemplating, I realized I didn’t have to think deeper. Let's look at the obvious wealthy Filipinos. Tony Tan Caktiong—I'd argue he's a value investor. Jollibee has acquired businesses, holds on to them for the long-term, and commits to building them into strong brands (e.g. Chowking and Mang Inasal), and expects to rake up business profits from them—he's definitely interested in and very conscious of the underlying operating realities of his business. Henry Sy—known for being the mall king, he's ventured into diverse businesses; his SM Development Corporation (SMDC), for example, strategically pops out condos near SM malls; also excellent is the synergistic effect brought about by Banco De Oro (BDO)—with select branches in SM malls operating 7 days a week. I can enumerate other rich Filipinos but I think the point I'm making is already dead obvious: they all invest and operate as businessmen and not as market analysts or timers—their businesses are well within their "circle of competence"; they're into them for the long-term, and that's making them richer.

A major difference I would concede is the manner of how they acquired their businesses. Unlike Buffett, for example, who started by investing through the stock market, these rich Filipinos initially founded their own companies. Nonetheless, I'd argue they are still value investors in the sense that they operate as rational businessmen, acquiring subsidiaries for the long-term, well understand and very conscious of the operating realities of their holdings, and think along the lines of having a return on their investments by way of stable, predictable, consistent profitable business operations, as opposed to wiggly market prices or inconsistent, one-time market gains. Simply and quite bluntly, they're business-conscious, not market-conscious.

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