While reading the piece by Prof Mak and pondering over some recent posts in this forum about privatisation issues, I am of the view that it is more worthwhile in identifying and investing in companies that are likely to offer revenue & more importantly earnings growth(based on the due diligence) rather than undervalued companies(e.g. based on NAV or low valuation awarded by the mkt)
I am pretty sure these have been expounded in this forum already - certain issues for such undervalued stocks include stock may continue trading consistently at a discount to NAV for a long time, mgmt rewarding themselves with high compensation, etc. A retail investor's capital may be stuck a long time before receiving any significant rewards(and which may or may not happen). This is excluding the considerable effort to monitor the company / industry / competitors day in day out till that windfall comes.
Personally, I do not really buy the idea simply that mgmt has substantial shareholdings("skin in the game") means that their interests are aligned with opmi; I think there are contexts to be considered and both parties' interests are unlikely to be fully aligned e.g. owners/mgmt strive for a sustainable long term company(and can pay themselves well in the meantime while the cash in the company accumulates) whereas retail shareholders are probably more interested in the returns relatively. Perhaps this cld be one of the reasons WB like to buy entire businesses - the CEO will align with the investor-owner's interests.
Granted that long term value investing is also about patience, but I think it has to be set in the right context. Investing in APPLE and reaping the rewards as the company grows from strength to strength over the years is different from investing in a company hoping for a high exit offer or high dividend payout from its cash holdings(although such incidents do happen in real life).
It is unfeasible to expect to be able to spot the Googles(Alphabet) and Amazons AND invest a notable amt at the super early stage but I think as long as one is reasonably sure(based on due diligence and WB's idea of competence which I have come to interpret as deep in-depth knowledge*) that the earnings of a target company(possessing sound financials e.g. balance sheet) has a more than fair chance to be able to X (dependent on individual expectations) times within the next 5-10 years(ideally long runway but may not be realistic given the rate of change in our world today), it would likely be a fruitful investment not least because the mkt will likely to reflect its valuation accordingly.
*young WB had an executive in Geico explaining and teaching him abt the insurance bizness & I wld imagine that is just the start of the build-up of his superior industry knowledge
-------------------------------
Time to reset corporate governance in Singapore ?
https://governanceforstakeholders.com/wp...-p6-15.pdf
"....It is clear that the "comply or explain" approach has not worked as well as we had hoped. One of the reasons is that our environment is different from the UK, where institutional investors play an important role in challenging corporate governance disclosures and practices of companies. Shares of UK listed companies are mostly held by institutional investors and therefore such investors have considerable influence there.
This is not the case in Singapore. There has also been little pressure on institutional investors here to exercise their stewardship role, notwithstanding our adoption of a stewardship code.......
The other significant change over the past 15 years is the increase in proportion of companies listed on Catalist since it was launched. These are generally smaller and lower quality companies, with little institutional investor following and regulated under the sponsor-based regime. I am skeptical about the sustainability of the Catalist regime and believe that it should be reviewed. To be it bluntly, I do not see sponsors looking out for the interests of public shareholders in many cases..."
Forum: In-person AGMs with shareholders and board present needed
https://www.straitstimes.com/opinion/for...ent-needed