Insight
Superior businesses self-finance growth and maintain debt-free balance sheets
“Superior businesses have free cash flow. They generate cash. They have a large moat. They have high returns on investment, whether you return on equity, operating return, however you want to do it. They largely have debt free balance sheets, and they're self-f…”
Assertion Contradicted
Indonesian, Thai, and Korean equities fell over 95% in 1997-1998
“Indonesia, Thailand, Korea went down over 95% in dollar terms.”
Disclosure
Overlook bought Kingboard at 2.5x and Café de Coral at 6x P/E
“October in 1998, so right towards the end, we had just raised thirty million, so taking us from forty million back up to 50, 60, seventy million. And within one week, we found two companies in Fosan, Hong Kong. Kingboard Chemical at about two and a half times …”
Insight
Fund managers must offer radical transparency to investors during bear markets
“I have created what you call the roadmap for a bear market, so calling every single investor more transparency, more discussion, more You know, give them the detail and the transparency through the portfolio. You can't hide. There's no denying I just kicked th…”
Insight
Companies growing at 30% with 10% ROE will inevitably dilute shareholders
“Because the guy growing at 30% with a 10% return on equity, you just haven't figured out he's going to dilute you because he can't fund it, right?”
Disclosure
Overlook pivoted to put the bulk of its capital into China A-shares
“But now, four years ago, we really pivoted and put the, what's today, the bulk of our money into China, particularly A shares.”
Disclosure
Overlook liquidated all Southeast Asian consumer stocks upon reaching 30x PE
“We had had a lot of consumer stocks in Southeast Asia, Hong Kong, and whatnot. And they all got up to 30 times earnings, and I kind of don't know how to make money from 30 to 40 PE, so we literally, we sold them all. Literally within six month time, we built u…”
Disclosure
Overlook prohibits discussing a stock without completing a full financial forecast
“I have a policy that I don't want to talk about a company until I or one of my colleagues has done full financial forecast on the business.”
Opinion
TSMC was the gold standard for corporate pricing power in Asia
“When we knew something like TSMC, TSMC was gold standard for pricing power.”
Insight
Systematic rebalancing removes emotion from selling and preserves capital
“Selling is an intensely emotional time. It's much more controversial than buying. And that's where rebalancing is so perfect because, and I'm so thankful for Charlie Ellis for teaching me this, but it's a completely unemotional event. But, you know, as stocks …”
Disclosure
Overlook exits markets when macro indicators like loan-to-deposit ratios flash red
“The other reason we sell is when the macroeconomic conditions that I talked about earlier, LD ratios, current accounts, fast loan growth, no Forex reserves. When those flash red, we get out of Dodge.”
Disclosure
Overlook limits its portfolio to 22 names, forcing sales for new ideas
“If you're really limited to 22 names, something's, if something's gotta get in the portfolio, you're gonna go shoot something.”
Disclosure
Every investor in Overlook's fund pays the exact same management fee
“And everyone pays the same.”
Disclosure
Overlook cuts management fees only after good years to avoid signaling weakness
“And what I do is I cut after good years. After bad years, I don't cut. I don't want to show a sign of weakness.”
Insight
Dam depreciation schedules artificially distort China Yangtze Power's P/E multiple
“CYPC or China Yangtze Power had debt. Well, it should have debt. If there ever was a business on Earth that should have debt, that's it. But likewise, it depreciates its dams over 26 and a half years, but they're going to last over a 150 years, so that's wrong…”
Assertion Supported
China Yangtze Power converts 98% of its cash flow into free cash
“98% of their net free cash flow was Free because they had so little maintenance requirements on maintaining the dams.”
Assertion Supported
China Yangtze Power raised its dividend 85% with a 5-year guarantee
“They also announced an 85% increase in the dividend and guaranteed it for five years.”
What-if
Asian currencies should have been hedged when current accounts exceeded 5%
“You know, if I could have one thing to do over, I would have realized that I should have hedged the currencies in Asia when current accounts went above five percent.”
Assertion Supported
Lawrence: Taekwang Industrial depreciated a $600M facility in three years
“In fact, he built a six hundred million dollar spandex lycra facility that were back-to-back facilities, and he depreciated the whole thing in three years. And he was a guy who didn't like to pay taxes, obviously. But as a result, the stock was at two times ea…”
Assertion Supported
Lawrence: Taekwang Industrial's CEO and his mother were jailed for misconduct
“About six years later, I got a newspaper clipping from a client of mine who'd been in Seoul, who had remembered this fight I had, and it was a newspaper clipping where the CEO was going to jail, and not only he put himself in jail through bad behavior, but he …”
Assertion Supported
Lawrence: Ørsted fully transformed into world's largest offshore wind generator
“Orsted used to be called Dong, which was the Danish oil and gas company. And 12 years ago, 10 years ago was classic oil and gas company. And it transformed itself. 100% transformed itself from an oil and gas company into now the largest generator of offshore w…”
Disclosure
Lawrence: Overlook invested in China Yangtze Power, Asia's largest renewable company
“Through an investment we made about six, seven years ago in a company called China Yangtze power. And this is the largest renewable energy company in Asia. One of the largest in the world.”
Assertion Partly supported
In 1985, a $4M shell was Hong Kong's 93rd largest public company
“We had four million US dollars in capital, and we're the 93rd largest public company in Hong Kong.”
Disclosure
Overlook's portfolio dropped from $120M to $40M during the Asian Financial Crisis
“I think at the peak, we turned a 120 into about 40 million. We turned about a hundred and twenty million into 40. We were down 45 and then down to like another 20. 25 before it finally just from exhaustion turned.”
