Mission:

Share Knowledge, But Think Independently

Copyright 2015 @HadiKaiman

Life is like a snowball. The important thing is finding wet snow

and a really long hill.

Copyright 2015 @HadiKaiman

Why

How
What
Copyright 2015 @HadiKaiman

The Why: Financial Independence

Copyright 2015 @HadiKaiman

Contents
Investing vs. Speculation
Investing Criteria
What Makes a Great Business
Good Businesses Examples
Bad Businesses Examples
Businesses We Will Cover in Future Sessions
Reading Sources
Copyright 2015 @HadiKaiman

The How: Move From Being (just) a Consumer to an Owner

Copyright 2015 @HadiKaiman

How This Group Will Work: Share Knowledge But Think

Independently

Nourish a network of partners with these

characters: intelligence, energy, and
integrity.

Help each other by sharing:

Country knowledge (Six Flags, Keurig
Green).
Industry knowledge (franchise, hardware
tools, pharmaceuticals).
Real estate investing.
Tax rules (dividends, CGT, deductions).
Avoiding bad investments (as well as
taking advantage).
Legal (Ombudsman, etc).
Superannuation: pros and cons.
Any suggestions?
Copyright 2015 @HadiKaiman

Investing vs. Speculating

Investing is putting out money to

be sure of getting more back later
at an appropriate rate (WB).
Goose with the golden eggs we
want to fatten up the goose so it
can lay more bigger eggs.

Investing

Speculating

Focus on revenue &

profit.

Focus on future price

forecast.

Passive income.

No income.

Businesses.

Items/ collectibles.

Thorough analysis.

Commentators.

How do you know youre not

going to lose your invested money?
Just like any business idea, stick
with your circle of competence
use data (qualitative &
quantitative) to analyse and
execute.
Once youve identified your best
idea (or businesses), dont overpay
for them the stock market is
there to serve you and not to
instruct you (WB).
Copyright 2015 @HadiKaiman

Dont Overpay Case Study: The Walt Disney Company

DIS fell heavily from 5th Aug 2015 after

announcing some subscriber losses

Jim Cramer on Disney (5 Aug 2015): http://video.cnbc.com/gallery/?video=3000403717

Copyright 2015 @HadiKaiman

Should I Sell Once My Investment Has Risen 50%;

Why Hold Forever?

Buffett sold in 1967 for 50% profit

Buffett bought 5% of Disney in 1966

Copyright 2015 @HadiKaiman

If You Have a Golden Goose, The Ideal Holding Period is Forever

If Buffett hadnt sold, his 5% would be worth US$10B in 2015

Copyright 2015 @HadiKaiman

The What: Buy Productive (cash-producing) Assets

Assets produce income and put money in your pocket.

Anything that eats money while you sleep is not an asset.
Copyright 2015 @HadiKaiman

Okay, What About Buying Commodities Like Gold?

All the gold in the world (171,300 tonnes) fits into a cube with 20m (67ft) sides.
50 years later:

Gold still sitting there

eating insurance and
storage costs.

After 50 years, the

farmland & ExxonMobils
wouldve produced
$12T, on top of the
original $9.6T.
-Farmland wouldve
produced $10 trillion.
-Exxon wouldve earned
$2 trillion.
Copyright 2015 @HadiKaiman

Productive vs. Non-Productive Asset: 1967- 2015

1967: Gold vs Berkshire
Hi. My name is Gold. I
dont do much. I just sit
here and pretty, but Ill
protect you against
inflation.

$35

2015: Gold vs Berkshire

$213,000

Were based in
Omaha but were
hungry for
businesses.

Hi. I still weigh one ounce

(despite the storage &
insurance costs Ive eaten
for 48 years). But Im now
worth 29x.

Weve never paid any

dividend. We keep
reinvesting the
money, and were
now worth 14,200x.

$15
$1,000

1 ounce Gold

Berkshire
Hathaway

1 ounce Gold Berkshire Hathaway

Copyright 2015 @HadiKaiman

My Ideal Portfolio: 10-15 Businesses Across 5-7 Industries

Portfolio
%

Industry

Trend

10%

Technology/ Software

Mobile/ wearable devices; cloud

and cybersecurity.

Apple, IBM, SAP, Oracle

etc.

5%

Banking

Mobile payment, rising housing.

Wells Fargo, CBA, etc.

15%

Consumer Products

Rising emerging market

consumers.

10%

Beverages/ Snacks/
Restaurants

Rising emerging market

consumers.

Unilever, P&G, ColgatePalmolive etc.

Coca-Cola, Pepsico,
McDonalds, Kraft Heinz
etc.

15%

Industrial/
Construction

U.S. & China growth.

15%

Healthcare/ Pharma

15%

Entertainment
Content

15%

Energy

Ageing population, healthcare

needs.
Rising global population (7B and
growing)s market for content.
Ever growing demand for energy,
esp for transport.

Total 100%
Copyright 2015 @HadiKaiman

Businesses

Stanley Black & Decker etc.

Pfizer, JNJ etc.
Disney, Netflix etc.
ExxonMobil,
ConocoPhillips etc.

Acquisition Criteria
1. Great economics with durable
competitive advantage (moat).
Selling products that are eternal and not
vulnerable to tech disruptions.
25+ straight years of increasing dividends
(from increasing revenue).

2. Honest and able management.

Laser focus on shareholders returns
(e.g. Exxons Lee Raymond vs. Disneys
Michael Eisner).
The wolf pack leader of the industry
works on widening its economic moat
everyday.

3.

Selling at an attractive price.

P/E (Price to Earnings) ratio lower than

15-17x.
Copyright 2015 @HadiKaiman

On charitable giving:
Ultimately, this is our
shareholders money
were spending.
On investing on U.S.
refineries: Im not a
U.S. company, and I
dont make decisions
based on whats good
for the U.S.

What Makes a Great Business: A Big Wide Moat.

A moat can be:

Low-cost (Wal-mart),
Brand effect (Tifannys & Co, Walt Disney),
High switching cost (Oracle, SAP),
Strong distribution capability (Coca-Cola, Costco).

Strong moats allow businesses to secure:

Bargaining power in securing raw materials
(McDonalds).
Unlimited pricing power (Sees Candy, Disneyland).
Preferential treatment in emerging products (Coke
with Monster Energy and Keurig Green).

Businesses with narrow/narrowing moats:

High competition (airlines, barbers, cafes).
Highly capital intensive (airlines, infrastructure).
Easily disrupted by technology (TV, Cabcharge).

Moat definition: A deep, wide ditch surrounding a castle, fort, or town, typically filled with water and intended as a defenceagainst attack Oxford Dictionaries).

Copyright 2015 @HadiKaiman

A Wide Moat Can Protect You From Richard Branson on a Tank!

Richard Branson: Declaring a soft drink war on Coke was madness

#1: We had effectively parked our tank on the lawn of the worlds largest soft drinks brand,
and we werent quite prepared for the size or the ferocity of Coca-Colas response, which
included a steep increase in their marketing budget and pressure on distributors not to work
with us.
#2: "The other, more important, reason was the fact that we didnt follow our own rules,
which is a cardinal sin. Virgin only enters an industry when we think we can offer consumers
something strikingly different that will disrupt the market, but there wasnt really an
opportunity to do that in the soft drinks sector. People were already getting a product that they
liked, at a price they were happy to pay - Virgin Cola just wasnt different enough.
Copyright 2015 @HadiKaiman

Businesses We Will Cover in Future Sessions

Copyright 2015 @HadiKaiman

Reading Sources

Bloomberg.
CNBC (Jim Cramer).
The Economist.
New York Times.
Roger Montgomery.
Magellan Financial Group.
Company 10K (annual report) and 10Q (quarterly report).
Books on companies youre interested in:

Coca-Cola, ExxonMobil, Disney, Wal-Mart, Steve Jobs etc.

U.S. Dividend Champion

Copyright 2015 @HadiKaiman

Thank You

Copyright 2015 @HadiKaiman