Monday, May 27, 2013

Navigating the Investment Landscape in Asia and Beyond: Manual of Ideas Interview

I was interviewed in early May 2013 by John Mihaljevic, the Managing Editor, The Manual of Ideas.   Please click here for the splash page and access to the taped interview: Navigating the Investment Landscape in Asia and Beyond

The cut-and-pasted introduction page below.


Navigating the Investment Landscape in Asia and Beyond

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asia investment landscapeInvesting in the local markets of Asia can seem like a daunting task for investors based in North America or Europe. Asian markets have proved quite treacherous at times, including due to economic volatility, corporate governance, accounting, and other concerns. While some Western investors have given up on investing in Asia or have relegated their Asian investments to ADRs or ADSs, others have continued to prosper in Asian local markets.
How can you improve your analysis of Asian investment candidates? That is one of the questions I sought to answer in my conversation with Asian equity research expert Michael McGaughy. Mike is the sole-owner of Kaiko Limited, a Hong Kong-based independent consultancy. The firm provides research, manager selection, and due diligence to institutions and family offices. Mike was previously a managing director at StoneWater Capital, a New York based fund-of-funds that specializes in allocating capital to Asian managers.
Mike has developed a number of unique insights into investing in Asia as a result of his long experience on the ground. He stresses the importance of understanding who the ultimate owners are of publicly traded entities, as incentives play a large role in driving long-term investment returns. He also differentiates between “research alpha” and “research beta”. According to Mike, research alpha covers what is not included in consensus earnings forecasts, while research beta is what most analysts focus on and what constitutes the basis for consensus earning forecasts.
In the conversation below, Mike McGaughy refers to the following companies and people:
  • China/HK: Fosun International (HK:0656), Focus Media, Guo Guangchang; Folli Follie
  • Indonesia: Sinar Mas Group, UIC, Widjaja Family, Eka Tjipta Widjaja, Asia Pulp and Paper (APP), Astra International, Astra Group, Soeryadjaya family
  • Malaysia: Khazanah Nasional Berhad, Petronas, Permodalan Nasional Berhad
  • Greece: Folli Follie, OPAP, Latsis family
Feel free to leave your comments here or contact Mike on LinkedIn.

Wednesday, May 8, 2013

"Sell In May" Search Hits New High. Highest since May 2007

Every May the "Sell In May" term spikes in Google Trends.

It has now hit an all time high, and the highest its been in since May 2007.

May 2007 was close to the pre-crisis high point in the S&P500 index.  It would have turned into a good 'sell' signal' as market was down the rest of the year.

Interestingly one of the lowest points in the last eight years was in May 2008.  Neither May 2007 nor May 2008 would have been good times to invest in the S&P index ETFs.

Tuesday, May 7, 2013

128 Years of Dow Components

Wish I could claim credit for this one...

Despite what appears to be an error, this is a very good interactive graphic where one can roll-over to see changes in the US Dow Jones Industrial Average index since 1884 until now.  Lots of lessons likely to be learned (or unlearned) from this.

I've read it before, but a quick glance shows that no companies have stayed in the index since it was founded.  It is also interesting to see the small number of financial companies in the index until the 1990s.

Some observations:

  • There appears to be an error in this chart.  Johns-Manville, formerly an asbestos manufacturer, is listed as a financial company, but should probably be classified as an industrial (see 
  • The Dow's first financial constituent was in 1928 (not too long before the 1929 crash)
  • Between 1928 and 1981 there were no financial companies included in the index.  American Express was added in 1982 and remains until today. JP Morgan was added almost a decade later in 1991.  There are now four financial constituents of the Dow (The Travelers Companies, Bank of America, JP Morgan Chase, and American Express)
  • The first technology company, AT&T, was added in 1916, removed in 1928, and added back in 1939.  Other early technology companies included in the index were NCR (1929-1932), and IBM (1932-1938, added back in 1979).  There are now seven in the 30 stock index. 
  • The first health care company, Merck was added in 1979.  It is still there, along with three others - United Health Group, Pfizer Incorporated, and Johnson & Johnson. 
  • General Electric has been in the index the longest. Since 1907

Like most big cap indexes the Dow is essentially a momentum based index.  It comprises the biggest companies around.