Churchouse Letter
March 2015             by Peter Churchouse

Double Digit Returns for Decades

Investing in a track record of business & investing excellence

An investment legend who's delivered Warren Buffet-like returns for 3 decades.
An unprecedented company restructuring will unlock huge value for shareholders.
A company with a global stable of reliable, cash flowing and defensive businesses that will be able to pick off more opportunities in Europe.

Back in the late 1980s, I opened my morning paper over breakfast and read about a huge deal.

Technically it was three deals, but who cares? I had just moved to Hong Kong, and they would create a huge amount of value here by converting big patches of industrial space into apartments.

The group behind it was no surprise. It is still famous for its big, bold deals.

But this was a particularly aggressive set of transactions that would add billions of dollars in value to the company and its shareholders.

Basically all three deals involved taking energy-company operations that sat on prime urban land, relocating them, and then converting the land to high-value residential and commercial space.

One of the deals involved the power station that provided all the electricity to Hong Kong island, with a population of about two million people.

The deal moved the power station a mile or so away onto a nearby island.

The plan was to turn the old power-plant site into nearly 10,000 apartments to house 31,000 people. Along with that came two shopping centres and all the facilities that a mid-size town needs.

The other two deals involved moving oil- and gas-storage facilities and redeveloping the land for housing and commercial use.

It was an intelligent, bold and profitable move by a company that has for decades shown time and again its operational expertise and business acumen…


Warren Buffett is the investment icon of our times. That much we all know.

It’s an investment cliché: If you had invested US$100,000 with Buffet 25 years ago, it would be worth US$3.1 million today.

Berkshire has been a great investment. Since March of 1980, it has produced a compound annual return of 20.91%, versus 9% for the S&P 500, and 7.9% for the MSCI World Index.

Notably, the Berkshire Hathaway return is purely from capital growth. The company pays no dividend.

It’s ironic that the Oracle of Omaha loves companies that spin off lots of free cash flow and pay hefty dividends to shareholders. He doesn’t do that! But he sure as heck builds value for his investors.

In this edition of The Churchouse Letter, we’re talking about company whose components boast a much longer track record than Warren Buffet.

Over the 29 years we have price history for, this company produced an annualised total return of 14.2%* (just under Warren Buffet’s 15.8% over the same period).

*Dividends reinvested for more accurate comparison to Berkshire Hathaway.

Under the Radar

This is a large company, with footprints all over the world. It is not well-known to the general public. But most European consumers have purchased goods from this company.

Just about every American and European consumer has benefitted from one of this company’s core activities.

The company is based in Hong Kong and run by a venerable Chinese gentleman, a legend in his part of the world. He is “Asia’s Warren Buffett.” The local media simply call him “Superman.”

It is a company that should find a place in any truly diversified global, long-term equity portfolio.

And recent events give us even more cause to own it.

A Tough Choice

Asia is huge, and its rapid rates of growth virtually second to none. It has a massive population. It is more and more linked to global markets. So you might think it’s easy to find great Asian companies that are exploiting these opportunities.

I can assure you that it is far harder than you think.

Yes, growth is rapid, and there are large numbers of companies that are emerging, growing quickly, and making good profits.

But there are very few big, well-established companies that really encapsulate all the features we like to see in our long-term investments.

We want companies that are both entrepreneurial and well-run. We seek out companies that gamble – but only on sure bets, taking calculated risks that won’t fail when emerging markets go into crisis mode, as they often do.

We look for companies that operate with globally acceptable standards of corporate governance. These must be companies that deliver consistent shareholder value through different cycles.

It is hard enough to find companies in developed markets that do all of this. In emerging markets, it is virtually impossible.

The company we’re talking about here is one that I’ve followed in some capacity for 35 years.

To toot my own horn, I have some insider knowledge of this company from my days as an investment banker.

I have always been impressed by the company's ability to get it right in every business it enters.

Throughout decades of growth, it has kept its nose clean.

It has not borrowed too much money to build its business.

It has a history of employing the best people to run its businesses. That’s the exception among Asian companies, which like to stack their ranks with friends and family, regardless of ability.

It has used fast-growing businesses to fund investment in new ventures, new sectors, new countries.

The senior management has a nose for strategic moves. It also shows great tactical skill in executing big-picture macro ideas.

There have been missteps along the way, for sure. But they have been few, and never big enough to derail the train.

The company I am referring to right now is actually two companies that are on the verge of a massive restructuring...

Speaking of double digit returns, your should take a look at the performance of The Churchouse Letter's open recommendations!

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