Dan Bin (但斌, blog) is the founder, CEO of Shenzhen based Eastern Bay Asset Management Co. He admires Buffett and is value minded, although I don’t agree with everything he says “such as buy China Ping’an blindly” (remembers me of Cramer). He was on Shanghai First CaiJing TV interview recently. The interview is in Chinese lasts about an hour, and the videos are in 2 parts.
Interview part 1:
财富人生：东方港湾资产管理 但斌_上(Use this link if embed player does not work)
I am not a big fan of Jim Cramer, and I watch his Mad Money show (CNBC) mostly for entertainment. But he recently comes out this new tech series, which is a kind interesting.
What is new tech?
According to Cramer’s definition, old tech means the traditional sillicon valley stocks: Apple, Cisco, Google are good examples. We all know old tech companies, solve problems for business and consumers. They make the business more effient (Cisco, Oracle), and make our lives more entertaining (iPod, iPhone). Cramer thinks, with the global energy, environment, and food problems we are facing, the New tech, which are mostly old industrial companies, are trying to solve those larger problems.
Carl Icahn is again in the news. This time is about the Yahoo (Nasdaq:YHOO) shareholder proxy fight. Basically Carl bought a bunch Yahoo shares after the Microsoft deal fell through, and he is trying to remove the current Yahoo board, and make the sale to Microsoft. Intelligent observers may say did not Microsoft walked away already? What if MSFT do not take the bait? Well, I think Mr. Icahn has plan B when he has this in mind. If the MSFT deal do not work, and it looks like Google is neither interested nor in a position to buy the whole piece of Yahoo (anti trust issue), Carl can cut Yahoo in pieces and sell it to different companies. So for instance, sell Alibaba stake to eBay (I use this just as an example, not that I know eBay is interested in Alibaba), sell Yahoo Finance to Sina,…anyway you got the idea.
Baidu, Google China
Keso wrote this Chinese article a while back Who is Google China’s opponent? He is talking about the difference between Baidu (Nasdaq:BIDU) and Google, and he thinks Baidu has created a brand and a series of products, and consequently built a moat to fend off Google and other competitors.
This is confirmed by gseeker baidu from readers series: “baidu” real estate, “baidu” fashion apparel, “baidu” KTV. Don’t know how Robin Li (Baidu CEO) feels about people using his company’s name? By the way, gseeker is the best blog about Google in China, in my mind.
Here is a link to Q&A transcript of Berkshire Hathaway 08 shareholders meeting. I believe this is more comprehensive than CNBC’s live blog I posted earlier.
Berkshire first quarter earning
It went down more than 60% over same period a year ago (PDF). But the number does lie sometime, because this is mostly from paper loss of very long term derivative. One may wonder how come Buffett got into this derivative thing? Isn’t that risky?
Well, in a way we are all invovled in this derivative world. Think auto insurance. When we pay premium for car insurance, it’s like buying a put for our cars and the insurance company is selling the put. If the underlying (car) got demaged, we will be paid by the insurance company for the loss. But most of times our cars are fine, and the insurance companies make money. We all know insurance is Berkshire’s main business and Buffett’s expertise area. My point is Buffett is not new to derivative. He is the financial guru of our time. While his main expertise is buying common stocks and business (in which he emphasize the moat, the durable competitive edge), he also has good understanding and made money on bonds, commodity and foreign currency etc. One interesting example I read from his latest annual letter is he bought Amazon Euro (junk) bond after dot com bubble: he got upsides both from the apperication of Euro and Amazon itself a few years later.
Chinese speaking representative in BoA
We went to the local BoA branch, and to our surprise, one of the financial representative speaks Chinese (Mandarin). He said he had worked in Beijing. One thing I heard is foreigners in Beijing tends to learn Chinese, while those in Shanghai don’t. On a related matter, it appears the interest of learning Chinese is rising among foreigners.
Food stocks
Buffett is in the news again yesterday. This time he is playing sidekick (financing) to help Mars to buy Wrigley (NYSE:WWY), the chewing gum company. One interesting Buffett comment I heard from CNBC is “I have doing taste testing of the Wrightly gum for 70 years”.
Fun aside, Buffett and value investing have also been very popular in China in recent years, thanks to the boom/bust of Chinese stock market. There are tons of books on Buffett and his investing strategy, either translated from English, or written by someone who really does not know value investing. I saw a guy (who admires Buffett and claims to be value investor) talked about how great PetroChina is, and encourage small investors to buy at CCTV-2. Now we all know how PetroChina (NYSE:PTR) A share (601857) did.
But I found this one (written by Jingzhou Lawyer, 锦州律师) to be different. I found he has a very good understanding of value investing, much better than many pros in China. So let me quote some:
任何人价值投资的理念是一个三合一的系统。缺少了任何一项都不是真正的价值投资。 价值投资就是：选择强势公司的股，以便宜的价格买入，不轻易交易。
It’s the NBA playoffs season again, and I watched the two games between Phoenix Sun and San Antonio Spur lately. As you may know, I am a big fan of Phoenix Sun/Nash. But they disappointed me again this year: they lost 2 games in a row. The main reason is that Phoenix is pretty much a one-dimensional team: a fast tempo, “Nash passing, Stoudemire dunk” team. After the Spurs sealed the ball from Nash to Stoudemire, Suns lost its touch. I did not see meaningful contributions from other key players (Diaw, Barbosa, Bell), and Shaq is just a bit too old. So what’s my point? In the NBA, the team with the best balance of offense and defense wins (if we exclude referee, luck factor). A team can not win the championship simply by one strategy, one super star,…they need the supporting cast, the defense as well as offense.
Back to the investing. Yesterday we saw a huge disppointment from Starbucks (Nasdaq:SBUX) earning report. It says “it experienced the worst consumer enviroment”.
(picture souce: will work for food)
I closed the Amazon Feb $65 puts last Wed, when I saw the stock dropped to around $68, which is the low point the day after it released Q4 earning.
Lesson learned:
1) short/put a stock is much harder than I thought. I started this trade because I saw EDU, AAPL, and VMW all dropped big after missing earning. But I have hind-sight bias on them: things are always clearer on rear view mirror. I did not know EDU will issue a so-so guidance for this Q; I did not know iPod suddenly stopped growth, iPhone did not sell as fast as Steve wanted, and Mac computers are expensive considering consumer slow down.
This is my very first option buy. After I “buy to open” on this $65 put, I don’t know how to realize the gain, if any. So I called the broker and asked for help online, both came back with answer “sell to close”. That made me more re-assured. The option terminology can make one head spin (I am sure my wife is in that camp), here is some introductions on investopedia.
I thought about it early Jan. after reading from San Jose Mercury News that VMW is the No. 4 software company, in terms of market capital (about $30 b as of yesterday). But I put down the earning date (Jan 28) on my Google Calendar (not Yahoo), and it did not send out reminder email as Yahoo does. So I missed buying the puts before earning. Interestingly, here is today’s price change of the puts options for VMW (expires Feb):
$60: $0.85 => $7.30 (up $6.45, or 759%)
$65: $1.40 => $11.00 (up $9.60, or 686%)
$70: $2.65 => $15.80 (up $13.15, or 496%)
$75: $4.30 => $20.60 (up $16.30, or 379%)
A thousand words 