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Richard Lawrence

lines on the record: 85
first: 2017-08-14
most recent: 2017-08-14
sittings or episodes: 1
sources: podcast

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“Do more, do it faster, have a bigger, as big an impact on the world as you can outside of work and pick your cause and really go for it. And you can't take that money with you.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I guess I'm more philosophical about it. You know, we're going to have our successes. We'll have our failures. I really think that I don't take it as personally successes or failures that I used to. I think that's a good thing because a lot of this is, there are certain things that are out of our control. Bear market starts tomorrow. It's not my fault I think I'm more philosophical about that, which is probably a good thing.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“I guess the most profound book I've read, particularly in recent years, is probably The Economics of Climate Change by Lord Stern that showed that this thing is really real. It's motivated me and will continue to motivate me for the rest of my life.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, 69 was, you know, I was a young, impressionable young boy. That's right. And that's where, you know, puppy love really happened.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Today, you know, there's lots of different risks that are evolving, right? Geopolitical risk. I'm really, you know, it's so funny for me to sit here as an American and say that I think today as we sit here in July 2017, President Trump's the biggest risk to Asia. I mean, that's just wild, right? But it really is. I mean, he doesn't understand North Korea, in my view. He doesn't understand the importance of China and how China should be a natural strategic ally of the United States the way Europe is. They share a lot of the same beliefs, and they're a natural ally in a bigger, more dangerous world. So those big, big risks”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, if I could have one thing to do over, I would have realized that I should have hedged the currencies in Asia when current accounts went above 5%. But, you know, Buffett was saying, oh, just buy, don't look at the economy. Just buy stocks. I said, well, that's good, but that wasn't all that helpful, you know. It's a cumulative ball game here.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, we were probably at an unlevered free cash flow rate of about 11, 12 higher with the best energy assets in the country, best utility assets in the country, sells their utility, sells their electricity way below coal, nuclear, gas, wind, solar. So it was cheap, right? So we didn't say anything for a year. And that's generally kind of our modus operandi. We do not go look for trouble, but we do try to play a positive role for business. It's just to help people understand how we think. Now these guys had no experience. I was the first foreign investor in the company. Back then it was still a $20 billion company.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think it's always then what are you paying? What do you get? When we were buying this thing at $7, $7 Renmin B, it was like, okay, we can take that risk, right?”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Enough to have netties listed in New York to be a really great company. You got to, and so I think they've embraced that as well, and I think that when you look at the business, if you combine that buy-in, which is unusual for state-owned enterprise, but when you look at that buy-in and you combine it with the fact that it's the finest energy asset in China, it's the finest infrastructure asset in Asia. It's the lowest cost producer of clean energy in a country that's choking on coal. This is really an important asset period in China.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Cash flow after maintenance capex. So, I mean, it's just a huge amount of free cash flow that they generate. And how do you allocate that between retaining it, paying off the acquisition debt, and paying it out to shareholders? And we said, you know, up until now, you don't have that right. And you need to think about that. And so when they announced the acquisition where it was very clear it was fair to everybody, it was clearly a creative to per share values. They also announced an 85% increase in the dividend and guaranteed it for five years. And no one in my time in Asia had ever guaranteed me dividends except for one Filipino guy, Fred Yuteng Su years ago. And so, you know, it was clear to me that they were listening. And the third thing we talked about then was the importance of them becoming a blue chip. Because China needs China Yangtze power. They need blue chips domestically.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“And to their credit, as we got deeper into the corporation, they were really interested listeners. They were, you've got to give these guys credit. They were taking it in. They had kind of their poker face they'd give with me. And it was very clear that, you know, I was a foreigner and not a member of the Communist Party, but they were listening. And so we talked to them about three things, how to make this acquisition fair for everybody. I wasn't looking for some special deal. I wasn't looking for a short-term hit. I said, you know, just do it fair, fair for the parent, fair for shareholders, fair for bankers, fair for employees. Then we said, look, if you can do that, then the next thing you really need to think profoundly about is how are you going to allocate this free cash flow? Because now post acquisitions, about $6 billion of gross free cash flow, 5.6 of net free.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we found CYPC in 2013, they couldn't explain the business to us, but the numbers came off the paper like crazy. 98% of their net free cash flow was free because they had so little maintenance requirements on maintaining the dams. So we understood it financially. It was selling really cheaply, right? But they had at the time, Ted, a legal commitment on the part of the parent to sell in two huge dams that they were building further up on a tributary of the Yangtze River. And I said at the time the risk to the stock was that they mismanage that. And so we started a process, which we often do, of talking to management and explaining to them really how they should be thinking about doing this acquisition.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, I remember one time going to John Bush and saying, you know, John, I'm going to be out of the office. I got to go to a dentist appointment or something like that. And John said, look, Richard, if you're not in the office, I'm going to understand that's for a good reason. So you don't need to ask permission. I was a 25-year-old. But that's the way I believe, you know, and we've been lucky in Hong Kong. And what a great place. The culture is hardworking, entrepreneurial. There's a real self-policing aspect to people's work at Overlook that's been just brilliant. And so today we have there are 11 of us that run Overlook, four in the back office and seven on the investment team. And we do basically everything. So we're very efficient”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“I have been blessed. I've had very little turnover of senior people around me. I always say if we can just execute the model, everything's good. If individuals try to change the model, they're better off working somewhere else. So we have other people that are working elsewhere. But I've been very blessed by having really a loyal group of people around me. So that's that. Also been blessed that I'm surrounded by adults.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then we took it out and we've segmented. Okay? If you look at internet stocks, there are different businesses, in my view. They're extremely profitable. They can scale their growth and they bring a lot of growth into our portfolio, right? But it's not realistic to think they're going to sell it 14 times earnings like the rest of the other parts of our portfolio, right? So we separate that out. We're trying to get apples to apples now within it. And I think this will be good. You know, it's not an enormous innovation, but it's...”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Here in the United States, I think portfolio has got very complicated about 20 years ago. You know, they just people ran different balance sheets on businesses, where it was up until recently Asia, everybody had, you know, good guys had good balance sheets, bad guys had balance sheets, and bad balance sheets and whatnot. But in the last four years, particularly as we began to get into infrastructure typified by China Yangtze Power, we realized that whereas we had been collecting dollar-weighted valuation characteristics on the portfolio for all these years, that became distorted. CYPC or China Yangtze Power had debt. Well, it should have debt. If there ever was a business on earth that should have debt, that's it. But likewise, it depreciates its dams over 26 and a half years, but they're going to last over 150 years. So that's wrong too. So PEs didn't work. And so we went to valuing it like an office building.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there's this idea of innovations, right? We've brought, we've incorporated a lot of innovations that are designed to give insight into stocks, pricing power is a classic example of that, right? So you have to have a group of people around you that are intellectually hungry, intellectually interested in their challenge, competitive, and are searching for ways to get insights. And it's strictly just intellectual drive that brings these things and they can come along. We've had a lot of innovations that we've incorporated but then discarded. But I want to be really clear, we haven't invented any of this. We picked it up from all the great investors, people I knew, people I didn't know who had just written, we picked it up and we cherry-picked this to put it together so it felt right to me. It's not fair that any of my...”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I had an early perspective into the 2 and 20 hedge fund. I mean, in 91, 92, that was all just emerging. And I looked at that. I said, man, that's not going to last. And so even with me at one and a half, I thought, wow, that's not going to last. So I want to get ahead. I always felt that I'd rather cut fees than have fees cut on me or lose investors because I haven't cut fees. And I really didn't think these high fees would last. And so I just started cutting. And what I do is I cut after good years. After bad years, I don't cut. I don't want to show a sign of weakness. And as I tell my investors, I'm too pissed off to cut the fee. But after good years, why not?”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that is having relationships that you can replace your biggest investor, you know, and having that in reserve. Now, thankfully, you know, I've lost my biggest investor twice, but I don't lose many investors along the way either because, you know, I'm here in New York and in Boston, et cetera, et cetera, twice a year. We really work hard at transparency on what we're doing, which I think reinforcing the model of what we're doing. So my investors have very good understanding that in good times or bad, Richard's pretty much the same.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“So there has to be something more to it because as you mentioned earlier in the Asian financial crisis, you lost your largest investor. In 2008, you lost a different largest investor. But those are the moments that usually dominate the difference between the capital dollar return and the time weighted return. It's not just the cap because there had to be something about this notion of excess demand. Otherwise, you wouldn't have been able to fill those big holes. And that would have really hurt the cap way to return.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“But the whole power of it is really this capital way to return. So if you look at funds, don't look at the time weighted return, which is the NAV, the per share NAV over time. Look at the capital weighted returns because so many of the big funds, the brand name funds, they did really well with small amounts of money and then they raise huge amounts of money due very poorly and destroy the capital way to returns. And so it's been documented that if a fund has, say, for example, a 10% time way to return, the study has shown that the capital weight of return is about 2.5. So it's a really meaningful discount or discount.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I don't like creating excess demand, but I understand the value of having relationships with people who might come in at some point in the future. You know, and realistically, if they're in a wait list, you know, for a year, they can usually get in in some way. People do retire or get sick of me, tire of me, angry at me or whatever.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, we had a hard cap at the beginning, and then I, you know, someone would want to come in and I'd raise the cap and offer it up to other people so that everyone could protect themselves kind of like a rights issue. And then about 20 years ago, I came up with this idea, let's limit the amount to, I think it was 12% of the last four years average NAV. So in big years, I bring in percentage-wise less. And in bad years, I can bring in percentage-wise more. And so you're kind of adding a counter-cyclicality to the business. And that 12% meant that we could raise about 7 or 8% new money a year. And with that, the capital way to returns, which is how the investors have done, not how the funds NAV is done, how the investors individually in totality have done, the time and capital way to returns now were the same. Over 13510, and so forth.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“No, and I evolve the cap. But the other thing as we began to manage the $30 million running into a lot of friends, they said, well, man, I just got $3 million on the fax machine. I don't know where to do it, you know, in these bull markets. And I was able to size my positions and hold them. And so there wasn't chaos in my portfolio. And so that was another. So we have operated with a cap for 25 years.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“A meaningful experience for the investor that they're in there and they've made a big commitment. Most of my investors have had to wait at least a year before they get in. And so they can feel whether it works or not. Is there too much volatility with Richard or not? So that's been great. And so people are making the decisions to invest with Overlook for the right reason.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it kind of shocked me the question because I really wanted to invest because I like investing. I wasn't really thinking about the business side. And I said at the time, I said, well, Crosby, I'll cap it. I'll cap it at 30 million. He says, okay, we're in. And I was like, wow, that's great. And then maybe a month or two later I came back to my dad's office at 610 Fifth Avenue. And his secretary said, I got the call from so-and-so in Switzerland. And he said he wants you to reserve space and your fund for him. And he didn't even know the guy. But he said he's heard there's a cap and he wanted to reserve space before the cap filled up. And that was like, wow. But then, of course, so it's been good in creating”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I had never seen a cap. I'd never thought about a cap. I never knew what a cap would do for me. And I was at the university club here, I think it's on Fifth Avenue, having a lunch with a guy by the name of Crosby Smith. And I had no investors at the time. And Crosby looked at me over a lunch and says, well, why aren't you going to be like every other fund manager and just raise AUM?”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the last way we do it is really, of course, this is the best, is when we have more ideas than we have space in the portfolio. And if you're really limited to 22 names, if something's got to get in the portfolio, you're going to go shoot something. And that's the best. Really, as I always say, the lifeblood of a fund management business is new ideas. And so when you can execute on new ideas, you keep all the rot and the complacency out of the portfolio.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, you can always track it back to the guy, right? Or the woman running it, right? That's inevitably who the villain is. But the mistake was made in any number of areas, you know, mistakes, mistakes. You know, if I blame you for a mistake, then the next mistake is definitely going to be mine and you're going to point your finger at me and say, hey. Or you're going to say, well, bag Richard, I'm not going to take risk. Let him take all the risk. And you can't have that in money management firm. The other reason we sell is when the macroeconomic conditions that I talked about earlier, LD ratios, current accounts, fast loan growth, no forex reserves, when those flash red, we get out of Dodge.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“But as stocks go up and up, they're getting bigger on the portfolio, you just rebalance them down. And then one day when they do go down, now you have the capital to really go back in. And if you didn't, when they come back down, they're still too big, which is a really big failing of people. So we rebalance. Of course, we often sell when we realize we made a mistake. And, you know, it happens. You don't bat a thousand in this business. And when you make them, sell it. Don't argue about it. Don't point fingers at people internally. And don't look back.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Through hard lessons, I've learned that that doesn't really suit me all that well. And that's where selling is an intensely emotional time. It's much more controversial than buying. And that's where rebalancing is so perfect because, and I'm so thankful to Charlie Ellis for teaching me this, but it's completely unemotional event.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the stock went So, the stock was at 36. I have written research reports at 19 telling people to buy it, at 16 people telling people to buy it, and finally at about seven, where I really got dogmatic about it. I said, you've heard me before, but you really, you got to buy this thing. This is good. And it went from seven on its way to zero, of course. So sometimes you get tomorrow's price, right? That is just a fabulous feeling.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I kind of fumbled my way through the rest of the hour I was with Leon. I walked out and I had to lean up against the building. I was so shaken because it was a marvelous trade of Leon that he knew more about me than I did. And no one had ever told that to me directly. And of course he was right. And so we set about in a very disciplined manner now to read everything. How do we sell? And so, you know, a common friend Charlie Ellis, you know, winning the losers' war, talking about rebalancing. Well, that was an easy one. Then I hark back to a day in 1983, one of our stocks was one of the original hard disk drive manufacturers called Tandon Corp out of California. And one day, John Bush came back from lunch and sold every one of his clients out of the entire stock. And I had been massively bullish on this thing.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so we've kind of solidified it down to about five different ways we sell. And I've had a lot of people, you know, around me that have known how to sell. I remember a lot. But the story on selling that I'd like to share is with a guy by named Leon Levy. Leon was one of the founding partners of Odyssey partners. Leon was one of the great minds of Wall Street. It worked at Oppenheimer before. And he was one of my early investors. And I'd come see him over on 54th Street or something, and he had this beautiful woodlined office with Greek statues and stuff. I mean, it was crazy. And one day I came in there and Leon looks at me and says, Richard, you don't know how to sell securities.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“We looked around Asia and said, who has this pricing power? And we might come up with 50 companies, but out of 50, some of them had fake pricing power, right? But boy, there were others, you know, and sure enough, when we knew something like TSMC, TSMC was gold standard for pricing power. And so we said, well, what else had that financial characteristics, particularly that equation, that we were looking at? And so, you know, the period 08 to 2013, in our view, was just pricing power portfolio period and pricing power is just crazy. And then I got into the inflation and then 0708 happened and we had deflation. I realized that pricing power is...”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so I'm thinking about it. I'm thinking about it. And I realize that it was pricing power and they were passing on the prices and they were able to do that. And so we did a lot of profound thinking about where's the pricing decision made, where is it reflected on the income statement, how do you standardize pricing across a whole host of companies or industries? And so we began to be able to index pricing power. And I'd have to kill you if I gave you the equation, Ted. But, you know, people can think about it, you know, and so we don't say pricing power casually. We know, you know, and sure enough, in 0607, which was a time of turmoil”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I was in 2006, I was increasingly worried about rising inflation globally, particularly in Asia. And I went back to the conditions in the early 80s where it was very inflationary. And the great stock in the early 80s was a company called Cap Cities Communication. And there was a sister, kind of a cousin of Cap Cities called Multimedia Inc. that ran TV stations and radio stations down the southeast. And they had pricing power. They were moving up their pricing every year. And so I said, now I'm worried about inflation. What was it about multimedia?”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, we talk about it's reflected in high profitability, right? Whether we look at operating return, which is EBIT over operating net assets of the business to see what is the real driver of that fact, what's the profitability of the factory or the retail or whatever? But the key criteria in that whole thing, the way you get high profitability was with pricing power. And pricing power is a phrase that's kind of loosely used on Wall Street. And the next time someone says, Oh, I invest in companies with pricing power, you can say, How do you value? How do you value pricing power? Or how do you calculate pricing power, right?”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think it's the confluence of everything. You know, I get kind of, in one sense, I'm not a greedy individual for money, but I'm greedy for superior businesses, management, valuation, long-term run, you know, long-term runway. I want all that. That's the way at the end of the day, when we summarize, does it have a superior business? Does it have the management that can get it, you know, et cetera, et cetera?”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so we have that discipline also, which is forcing us to cross T's.is. And a lot of times you get halfway through a spreadsheet and you just chuck it out, man. I've seen enough. I think all of those disciplines help.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Stocks, right? So you want to on the one hand improve your odds, but don't dilute it so much and then we don't, I have a history or I have a policy that I don't want to talk about a company until I or one of my colleagues has done full financial forecast on the business. And I think doing income statement balance sheets and cash flows customized but standard template, you know, they're not templates, but they're customized for the business, but I know exactly where all the numbers are that I want to see. So we can read them very fluently. Doing those are a pain in the neck. And if I say, what is the 2020 balance sheet look like? Unless you've done a lot of work on the business, you don't know what the answer is on that. And that'll become obvious in the spreadsheet.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have a bunch of rules say I don't really like rules per se. I was a little rambunctious as a kid, right? But we have disciplines, procedures, processes. One of them is we visit 400 companies a year. We do analysis on 30 to 40, and we end up buying three or four or five. I like the odds, you know, buying one in 100. I like the odds. But then people say, well, if you saw 800, you'd have even better odds. Well, if you see 800, you don't know what you're seeing. So this idea of what I call purposeful meetings. So I'm in your office or Mr. Wong's officer, whoever's office, I am there for a reason, intentionally there. I'm searching for something. That cleans out a lot of the sloppiness. And if you do that 400 times a year, you're going to find your stocks. Of course, if you do it 20 times a year, you're also going to get your three or four.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“But I went to the CFO and I said, well, who's looking after my interests? I said to them, Who's looking after? He says, well, the independent directors are. You know, I might have rolled my eyes because, you know, I've never been able to rely on independent directors. But he goes, would you like to meet him? And no one in my entire history in Asia had ever offered to introduce me to an independent director. So, yeah, I'd like to meet the guy. And it was really a sign what we found, whereas that not all these companies, but a lot of these companies were really struggling to figure out how to do it correctly. But they didn't know there was no role model and they were searching for answers, Ted. And, you know, that was mana for us.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“I tell you one of these apocryphal stories. I was in an office in Shanghai. I'm in a conference room and there's two financial guys. He was the Communist Party member taking notes I found out later, right? So that was a little creepy”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“I used to say, really. But I always said, Ted, that I would never buy China because China was China. And by 2013, we were buying China on our terms. These things were mostly single digits, high yields, high cash yields, good growth. And we were buying them on our terms. And we're going into these companies and literally we are the first or second foreign investor in these companies. And not a big population of really good A-shares, but there was enough for us.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it took me a while to figure it out, but we then figured out that really dams are the best infrastructure asset in the world today, that their reinvestment requirements are almost nothing. And so they're essentially financial assets. And when we figured out what China Yangtze Power was, then we said, well, if this is this good, what else? And then what else? And then we found YU auto parts. And then we found Shanghai Airport. And then we found this. And then we found that. And we say, okay, well, that one's not good enough. Let's get rid of that and let's get this one in. And it started rolling. And then at times, Chinese companies listed and Hong Kong got cheaper. And so we could pivot into that. And it just rolled and rolled and rolled. The investors were very disturbed, I have to say, if they're honest, they would say that, look, Richard, you've been coming in here for 20 years telling us the Chinese banks are bad. And in fact, I'm not sure that's actually as true.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the first thing happened was there was a good problem where we had had a lot of consumer stocks in Southeast Asia, Hong Kong, and whatnot. And they all got up to 30 times earnings. And I kind of don't know how to make money from 30 to 40 PE. So we literally, we sold them all, literally within six-month time, we built up cash and we were looking around. And my colleagues and I, we didn't have an idea what, we didn't know what we were going to do. It was sort of a scratch your head time. And during that, you know, ASAR says we were screening and looking A-shares were popping up. And one in particular, we came across and began to really think about, which was a company called Shiny Yanksy Power. It owns the Three Gorges Dam. And there's no, as we say, it overlooked, there's no dam analysts on Wall Street that you can call up for advice on what a dam is.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“What are we meant to be doing with our money? What do really intelligent investors really do? And so it's not just pure speculation. And with our involvement, we are creating, I think, Chinese blue chips now.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“The fault is that when you think about what are Chinese blue chips, well, you could say neties listed in New York, 10cent listed in Hong Kong, Alibaba maybe even listed in New York. And so these local investors haven't really known what a good investment is. And so they go back to technical analysis, short-term momentum trading, and everything else. And so over time, that had created enormous inefficiencies that are now being resolved. And now we're in the early stages where we're building blue chips just like we're building blue chips in China. Now the way we built blue chips in Thailand or Indonesia or Taiwan years ago. And I think now that process has started, you have Shanghai, Hong Kong Connect, you've got Shenzhen, Hong Kong Connect, you've got Bon Connect, you got now MSCI, and all of this is helping the local Chinese investor figure out.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think China has now really over the last four years really come on for us as a business. For many, many years, we exported out of China. We sold to China. But we really were very peripherally involved in Chinese stocks. They had really high valuations. It was the flavor of the month for everybody to get into the China boom. And I think booming conditions often don't lead to good equity returns. And so we were fine outside of China. But now four years ago, we really pivoted and put what's today, the bulk of our money into China, particularly A-shares. And in many ways, China today is just like Asia 20, 25 years ago. The local investors are largely punters. There's largely short term. They don't really have the sophistication, but it's not their fault, Ted.”
2017-08-14 · Capital Allocators · Richard Lawrence – Compounding in Asia (Capital Allocators, EP.21) · IDENTIFIED FROM THE TRANSCRIPT · source