[INVESTMENT] MEMO - 29.06.2021

We are going to enter July 2021 soon. Today, let’s talk about a behemoth, APPLE INC.

APPLE INC.

Apple was founded by Steve Jobs, Steve Wozniak and Ronald Wayne in year 1976 in a garage. When they started Apple, they only have one intention, i.e. to sell their Apple 1 personal computer. Apple was then incorporated by Steve Jobs and Steve Wozniak as Apple Computer, Inc. in year 1977. 

To cut the story short, in year 1983, Jobs invited John Sculley (former CEO of Pepsi Cola) to become the CEO of Apple. But along the way, Sculley and Jobs both had different vision for Apple. In year 1985, Jobs left Apple. In year 1997, Jobs retuned to Apple, the company that he founded. He focused on bringing the company back to its glory and profitability. 

Subsequently, he launched iPod, iMac, iTune etc, which became huge success for Apple. Believe it or not, I owned a iPod during my college year and I still kept it in my drawer till now though, it is still functioning well, I rarely use it. 

NOW

Apple started with Apple 1 personal computer in year 1976. Today, we all know Apple has been growing to a behemoth of the world having wide range of innovative products and software which changed the world.

BUSINESS 

Apple basically has two (2) business segment: -

1. Products; and
2. Services.

Products consist of iPhone, Mac, iPad, Wearables, Home and Accessories. Products are still the main source of revenue (about 80%) of Apple.

WHAT I LIKE ABOUT APPLE

What I like about Apple is its strong brand. On top of that, Apple managed to maintain its high profit margin based on premium pricing and also its ability to adjust the price in certain market condition. Apple has an effective innovation technological capability. Some features in Apple products or devices are exclusive and once you have get used to the interface and usage of Apple products (like iPhone) you may have difficulties of changing them to any other brand product.

Apple has no competitors? Not quite so. If you look at the innovative products and devices of Apple, it seems that Apple is applying the Blue Ocean strategy where they have gone beyond the competitive markets by entering into a new unexplored market. iTune, iPod and iPad are the great examples. They developed and created new features along their products to make an eco-system out of them.

GOING FORWARD

Going forward, investing in Apple, I started to think whether or not Apple can still have its following strength in currently economic environment: -

1. Strong brand;
2. High profit margin; and
3. Effective innovation products and service.

Tim Cook has been leading Apple since year 2009 where he took over the role of Chief Executive Officer from Steve Jobs. In an interview, this what Tim Cook had said in year 2009:-

 

“We believe that we are on the face of the earth to make great products and that's not changing. We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution. We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot. And frankly, we don't settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we're wrong and the courage to change. And I think regardless of who is in what job those values are so embedded in this company that Apple will do extremely well.”

Has he kept his vision and promise? Has he walked to the talk? I will let you to decide.

PORTFOLIO PERFORMANCE 

No investment from me in June. Since the inception of our fund in May 2020, we have been up close to 42.33%. We are still able to maintain our risk level at 4 as can be seen from the “average risk score”. 

Stay safe.

Norman Liew 
MNMLH 
29.06.2021

[INVESTMENT] MEMO – 23.06.2021

 “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.” - Ronald Reagan (1978)

In this Memo, I am going to talk about the book that had influenced my life and the way I see about money $$: RICH DAD, POOR DAD by Robert Kiyosaki.

RICH DAD, POOR DAD

I picked up this book when I was in college age. I was not really sure whether this is a good book for me to read during that time, but just bought it from a local bookstore as it seems like the contents are written in simple English. When I finished Chapter 1 of the book, I was stuck to the book and could not get ride ot it.

There are several points that struck me: -
- Being rich is a freedom;
- Rich people make money work for them, the poor works for money;
- A job is only a short-term solution to a long-term problem;
- Pay yourself first;
- Financial education is a key to success.

Another great knowledge I learnt from this book is: the difference between ASSETS and LIABILITIES. 

ASSET VS LIABILITY

The author challenged the conventional definition or view of asset and liability. He says that basically most things that we own is not an asset (especially our residential house) but a liability because this residential house does not produce income for you if you stay in that residential house yourself. Unless you rent/lease out your residential house and you can make income out of your rental, then your house can be termed as an asset.

Most people would easily fall into a trap that things like cars, land properties, jewellery are assets. He explained that while they have its own value but they never going to generate any income if they are only for your personal usage.

CONCLUSION

Though this book has some controversial, but the philosophy stated in this book had a huge influence on me and subsequently the way I see the world, especially in investment.

PERFORMANCE 

As of today, there is no investment from me in June. Since the inception of our fund in May 2020, we have been up close to 41.50%. We are still able to maintain our risk level at 4 as can be seen from the “average risk score”. 

So far my investments in PingAn, Bauzun, Tencent and Alibaba are slightly down. But I am not too worried at the moment as their fundamentals are still rock solid.

Stay safe.

Norman Liew 
MNMLH 
23.06.2021

[INVESTMENT] MEMO – 14.06.2021

Hello for the month of June and Happy Chinese Dragon Boat Festival!

The Dragon Boat Festival (端午節) is a traditional holiday which occurs on the 5th day of the 5th month of the Chinese Lunar calendar. On this day, we eat Chinese rice dumpling to celebrate this special holiday.

In this special day and also in the month of JUNE, let’s briefly talk about an amazing Chinese company named ALIBABA which is also founded in the month of June.

ALIBABA

Alibaba, also known as Alibaba Group is a Chinese company founded by Jack Ma with his 17 students and friends in HangZhou, China on 28th June 1999. Since then, Alibaba has grown into a business behemoth and has setup its footprints all around the world.

A lot of people compare Alibaba with Amazon, but I honestly think that, though their business nature may look similar (as they are both strong in e-commerce business), they both actually have different business model. Alibaba does not sell products directly to consumer and they are asset-light (they are a digital marketplace for merchants and consumers) whereas Amazon does sell products directly to consumer and it focuses its infrastructure and inventory.

Alibaba has the following business segments: -

1. Core business in its digital retail and wholesale marketplace;

2. Cloud Computing;

3. Digital media and entertainment; and

4. Innovation Initiatives and Others.

Alibaba has been able to stay in growth mode despite a slowdown in its core e-commerce business. What really excites me is Alibaba's cloud service/computing businesses as they showed solid growth. 

Lately, Alibaba’s cloud unit has pledged $1 billion to support startups in Asia. Alibaba said that the funds and resources would go towards boosting digital skillsets for one million professionals in Southeast Asia. The cloud computing industry is the future to go. With such investment, I strongly believe that cloud computing in Asia will be the “next big thing” and in tandem with the organic growth of its businesses in other segments, we can gain from such investment massively from Alibaba.

More excitingly, Alibaba cloud plans to open its first datacenter in the Philippines by the end of this year by offering a range of services such as Elastic Computer Service, storage, and content delivery network. Further to that, and will also build an innovation center in Malaysia to offer support and resources for local startups to expand. 

RISK

Alibaba stock has been on a downtrend and I believe this is because of the increased regulatory scrutiny (on Chinese antitrust law) and also the geopolitical tensions between China and USA.

Having said that, I will still maintain my outlook in Alibaba and bet on its cloud business and China’s economic growth.

XRP RIPPLE

Last month, I have allocated 2.5% out of the total value of my portfolio to invest in XRP Cryptocurrency. The risk of such investment is cautiously calculated and also mitigated through my other investments in great companies. I am not worried about its volatility at the moment. 

PERFORMANCE

As of today, there is no investment from me in June.

Since the inception of our fund in May 2020, we have been up close to 42.51%. We are still able to maintain our risk level at 4 as can be seen from the “average risk score”.

Sometimes, the best investment is not to make any investment decision, but keep observing. 

Having said that, I am currently looking at adding some more position at APPLE. I may write more on that and also on the topic of hyperinflation.

Happy Dragon Boat Festival! And Stay safe.

Norman Liew

MNMLH 

14.06.2021