April 22nd, 2013
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Healthcare is one of those subjects I obsess about. The dollars are huge (e.g., $3 trillion in the USA). It is uber- complicated. And as the government is perpetually involved, things are always economically contorted. You can find ridiculous profits and ROIC’s in healthcare, such as you would never find in free markets. It is politically distorted capitalism writ large – which I like.
Healthcare deals also tend to scare off lots of smart investors. Human disease is inherently complicated. Healthcare services largely defy attempts at standardization. And healthcare investing requires a mix of business, clinical and policy knowledge – a pretty rare combination. So lots of smart investors just stay away. If you have a room of 100 investors, virtually everyone will have an opinion about Wal Mart and Apple. But as soon as you mention a medical device company, 90% go silent. There is just a lot less competition for healthcare investments – which is a big thing in private deals.
And if you add China into this discussion (i.e., clinical + business + politics + China), you pretty much eliminate the other 10%. When it comes to China healthcare investments, I usually find myself the only person in the room with an opinion.
The article is continued here (page 11)
April 22nd, 2013
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Venture capital is one of those areas where foreigners can invest in China from a position of strength. Having expertise in a cutting edge technology and / or having access to global markets is usually more important than having capital. And these are deals where foreigners can often trump local venture capitalists relying on guanxi. High technology venture capital is a particularly effective long-term investment strategy for foreigners in China.
It also happens to be one of the most rapidly growing sectors in the economy. Overall GDP growth may be slowing (likely 7% in 2013) but the technology and internet economies are surging (+15%).
This month, we spoke with Richard Hsu, Managing Director of Intel Capital overseeing investments in China. Based in Beijing, Richard and his team have invested over $650M in +100 Chinese companies since 1998. We spoke with him about his strategy, recent investments in Cloud Union and ZZNode Technologies, how the investment landscape has changed and where he sees the opportunities going forward.
Jeff: How do you approach investing in China? What gets you on a plane quick if you see an opportunity?
Richard: At the end of the day, we’re a strategic investor. Our investments are aligned with what our businesses are doing. We’re not going to go invest in something just because it can be a great financial opportunity. But we also can’t go and invest if it has nothing to do with our business. That’s the first filter we look at: Does a particular business have something to do with our industry and how does it help our overall strategy? Is this company going to help expand the overall market for our products? Is it going to enhance Intel’s capabilities?
The second filter we go look at is “Is this particular investment going to make money for us? Is it a viable, long term company? Does it have a realistic business plan?” That’s where we start converging with the traditional financial investor approach.
The interview is continued here.
April 22nd, 2013
Articles this month include:
- A Value Added Strategy for Mexican Private Equity - An interview with Roberto Charvel of Vander Capital
- The Relapsing Remitting Sclerosis of China’s Healthcare System
This month’s newsletter can be downloaded here.
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All thoughts and feedback appreciated.
February 15th, 2013
By Jeffrey Towson, Kevin Tetarenko, Ehab Tantawy
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What Happened to the New Silk Road?
In 2007, the “new Silk Road” was born. It was headline-making vision for how the Middle East and Asia would reconnect after 700 years of political and economic separation. It was a grand vision – a historic re-opening of ties that would be a game-changing new geopolitical axis.
And the economics of this vision were both simple and powerful. Oil-rich GCC countries would integrate with rapidly rising and energy hungry Asia. The new Silk Road was to be the beginning of massive movements of oil, capital, infrastructure projects and people. Read The Rest →
January 29th, 2013
Articles this month include:
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December 4th, 2012
Jeffrey Towson at Guanghua
- Jeffrey Towson at Guanghua
Guanghua Press release – Chinese version. The link is here
由光华管理学院和麦肯锡公司（McKinsey & Company）合作的校企课程——当前中国投资与战略专题（Current Topics on Chinese Strategy and Investment）于本月18日晚热烈开讲。今年是该校企合作课程开设的第三年，与前两年一样，该课程一开讲便立即受到MBA同学的追逐和热捧。
课程第一讲由Jeffrey Towson先生主讲，Jeffrey Towson先生在从事投资行业的同时还在剑桥大学任EMBA课程教授，他是畅销书的作者。他的研究领域集中于新兴市场（中国，中东，拉丁美洲等），以及他们与西方日渐增长的互动关系。
Jeff一开场便向大家提出了Carlos Slim及其名下公司、迪拜塔和中国移动的问题。在新兴市场中，这三者都在自己的行业领域中处于全球首位或者接近全球首位（Carlos Slim还是是世界首富）。随着Jeff的讲解，这些在新兴经济国家里读MBA的学生们，很快就领悟到了问题的要点——新兴经济体在过去十年中获得了巨大的经济增长。
接下来课程进行了对上海迪士尼项目的案例分析。同学们分组讨论并扮演不同的角色——上海市政府、本地开发商和合作伙伴、迪斯尼和国际合作伙伴以及中间人：投资银行和顾问。问题集中于讨论项目对各方的利益、动机、挑战、以及合作利益。
几轮讨论之后，大家一致认为该项目有利于各方合作从而获利。接下来，Jeff抛出一个问题：如果上海迪士尼项目的规模增加一倍，两倍，或膨胀至迪拜乐园（上海迪士尼项目的12倍）的规模后是否还能一样获利呢？规模如此巨大但已经被证明并不经济的项目是否会使中国经济受重创呢？中国经济未来注定会面临迪拜似的崩溃吗？由于中国的内部需求潜力和对其面临的挑战的意识，Jeff并不认为中国经济注定要崩溃，这让在座的同学们松了一口气。
Jeff对新兴市场的洞察与他丰富的投资经验让这门课充满了与时俱进的味道并且具有权威性。他独特的讲述风格牢牢的吸引着、激励着大家去思考。同学们没有被牵着鼻子走，而是通过讨论和思考，共同领悟了课程的中心思想。
December 4th, 2012
(Reposted from the Peking University Guanghua Webpage. Here the link)
Jeffrey Towson at Guanghua
On Oct 18th, at Guanghua School of Management , students gathered for the “Current Topics in Chinese Strategy and Investment” class by Jeffrey Towson. Jeff is an investor, best selling author (USA Today and Inc. Magazine) and Clinical Professor for Investment & Strategy at Guanghua, focused on emerging markets (China, Middle East, Latin America) and their increasing collision with the West.
The class opened with questions on three entities: Carlos Slim, Burj Dubai, China Mobile- three emerging market entities that are (or have been, but still close to) #1’s in the world. Being in an emerging economy themselves, students quickly catch on to the point – the tremendous growth of these entities and their economies.
Read The Rest →
December 4th, 2012
I found my life got dramatically more effective – and a lot less anxious – at two key moments.
The first was when I realized I didn’t really understand business. I could quote past studies. I could fill charts with data. I could recite various pieces of wisdom from various people. But my understanding was like a patchwork quilt of other people’s thinking. It wasn’t a real understanding of the underlying mechanics. Not really. Just descriptions of various outcomes.
So one day, I just went back to mathematics, the only thing I was ever a natural at in life. I dropped all my business training and started to look at investing as one giant math problem. I discarded all the language and began creating my own. I stopped thinking about security analysis and started reframing everything as uncertainty analysis.
And suddenly everything clicked (key moment #1). (continued)
The full article is available for download here.
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December 4th, 2012
I’m writing this month’s letter from Hohhot, Inner Mongolia. It is a reasonably pleasant day here. Big, big blue skies. And chilly, of course, as the wind comes blowing in from the grasslands.
Hohhot is one of those places that gives you a real sense of China. It is the Omaha of the People’s Republic. There is nothing sexy about it.
Most of the demand for most goods and services is local. It is neither a big export economy like Guangdong, nor is it a flashy, capital attracting frenzy like Shanghai. People lead fairly standard lives: a good family, a nice apartment, a good job during the week and movies and restaurants on the weekend. Second-tier cities like this give you a real sense of the Chinese economy.
Three things in the past day have caught my attention here. 1. The shopping malls are just packed.
These are not the Grade A shopping centers of Beijing or Hong Kong. (continued)
The full article is available for download here.
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December 4th, 2012
Apologies. I had a lot of teaching this month so this is late. But articles in this edition include:
This month’s newsletter on global value investing is available for download here.
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