Many investors dream of buying into a 10-bagger — a stock or investment that pays out ten times the original buy-in. The multi-million-dollar question though is how to spot one? From my personal experience, this is a process and there are a few parts to it. Know when to buy in Nine years ago, I invested my life savings of close to US$600,000 in Halo Creative Design, the holding company of Hong Kong-based luxury furniture designer Timothy Oulton. At the time, I was CEO of Halo, and the opportunity to take a stake in the business as a shareholder was offered to me by its eponymous founder. Today, the company’s revenue is approaching US$200 million per annum, and if I were to cash out now, I’d be making close to 20 times more than what I originally forked out. If you met me back then, you’d probably have said I made the investment at the worst time ever. This was September 2008, the same month Lehman Brothers went pop and the global financial crisis started. The luxury furniture market was badly impacted at a macro level, and Halo had gone ex-growth. Fortunately, as CEO, I had visibility of Halo's future potential. Most importantly, I was working towards a long-term supply deal between Halo and Restoration Hardware (RH), a California-headquartered upscale home furnishings retailer with an annual turnover at the time of US$700 million. I saw that Halo could become a key supplier for RH, that our operational capabilities were improving rapidly, our team and partners were maturing quickly, and were approaching readiness for RH as a client. So there were enough signals for me to invest, irrespective of the world going into meltdown. In the next year, we secured RH as a customer and rapidly doubled our business. Think like the boss In the companies I’ve worked with, upon joining, I’ve always operated like one of the partners or owners. This thinking guides my decision-making process. When I joined Halo in 2006 as Group CFO, I was the first employee to ask for stock options in my contract because I wanted to have a real stake in building and growing the business. I knew there were more things I could do from a business development perspective that would enhance shareholder value. I did not just limit my involvement in the business to management work. Many of the new accounts and business opportunities came through me. I drove acquisitions and my ability to influence the business grew all the time. Understand the team well After almost three years of working together, it was clear that Oulton and I had symbiotic and complementary skills. Oulton is an incredible visionary and very talented from a creative perspective. But he does need people to fill in gaps such as coordinating a team and aligning them towards a distant goal. I wouldn’t spot opportunities as quickly as Oulton, but I could evaluate his ideas and figure out how some of his new concepts could be arrived at. There were certainly times when I had put the handbrake on or ran interference because it was going to be a very difficult project for us to get off the ground, or the idea was not aligned with Timothy Oulton as a brand. He brought us a project about making bespoke guitars and I was able to take that project out of Halo. Oulton now runs and funds that personally. I don’t think he thanks me much for that because it has cost him some money since. But I was protecting the other shareholders. Advocate performance-based remuneration The owners of Halo have always paid ourselves under market value. We recognised that if we do a great job, then the dividends are a reflection of how effective we have been during the year. So we paid ourselves a very low basic salary. If we did a good job, we got a healthy dividend. If we did a bad job, we didn’t get it. Since 2008, the dividends themselves have repaid my investment several times over. Keep your options open When I look at my overall portfolio and assets today, I’ve got this disproportionately large allocation of assets in Halo. Because the business pays healthy dividends, it negates the need for me to have an exit strategy now. In the longer term, I could take some chips off the table because I could do with some liquidity. But Oulton is so passionate about his business that he will never retire. One of the things corporate work has taught me is that unless the majority shareholder wants to exit the company, a complete and total exit shouldn’t be on the cards. Stay up-to-date Like most opportunities, “incomplete data” is something investors have to deal with. But an understanding of how society might be changing and evolving will help you make informed decisions on what businesses will be relevant in the future, and where the trends are moving towards. Also, whether the business offers visibility on its future potential, if it has hired the right people, and a correct reading of signal and trends in the economy, will help you figure out if you’ve got that elusive 10-bagger within your grasp — or not. Written By Luke Evan Jones
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Diageo’s Johnnie Walker partners with Standard Bank to offer ‘Signature Moments’. As both brands and consumers negotiate a new world in which digital platforms drive conversations, traditional marketing strategies are becoming somewhat irrelevant. Instead of creating messaging that is one-way and centered around the brand, marketing and brand managers are being forced to think out the box – and to find new ways to engage with consumers on a more meaningful level. For luxury brands, the key is to speak to why the offering is unique, personal and long lasting. Increasingly, marketers in the luxury and high-end sphere are turning to bespoke brand experiences as a way of communicating this message. “Our consumers are increasingly seeking experiences that enable them to make new discoveries within their passions and interests,” explains Nosipho Mokabela, Reserve Portfolio, marketing manager at Diageo SA, a British multinational alcoholic beverages company. “Brand experiences allow consumers to be part of the brand; creating memories and ‘sharearable’ content as opposed to just buying a product for passive consumption.” For brands, the creation of this content also promotes further engagement via digital and social media channels. There is ongoing interaction, and the development of a digitally-fueled ‘relationship’ between the brand and its key audience. By way of example, Diageo’s Johnnie Walker brand portfolio recently partnered with Standard Bank to create such an experience. Diageo SA hosted an exclusive dining experience for Standard Bank’s Signature Banking clients at The Saxon hotel. The experience presented an opportunity for guests to engage with the brand, where they were taken on a rare culinary-pairing journey that demonstrated the heritage and the Johnnie Walker® BlueLabel™’s pioneering spirit. The evening started with guests engaging with the 1805 Saxon Bar, the only Johnnie Walker Blue Label bar in Africa. Guests were treated to a welcome drink, an exquisite whisky blend made from some of Scotland’s rarest and most exceptional whiskies. “This partnership allowed us access to signature consumers who would appreciate our luxury brand’s offering,” notes Mokabela. “The platform itself [Signature Moments] represents a great opportunity for both brands to share equity in this. We strive to be at the forefront of designing relevant, exciting and one-of-a-kind luxury experiences that are worth talking about. Looking ahead, we hope to offer unique brand experiences backed by strong partnerships that truly bring value to customers and clients.” At a time when marketing budgets are under immense pressure, measurement and proving significant return on investment is understandably very important for any brand. According to Mokabela, the key element for Diageo is to reach many consumers within their target market and then educate them around the luxury brand offering. This strategy, however, is difficult to measure in simple terms and straightforward numbers. “No metric can measure the value of advocacy that we get after consumers have interacted with our incredibly knowledgeable brand ambassadors,” says Mokabela. Looking ahead, she asserts that the use of bespoke brand experiences and strategic partnerships as a marketing tool will only increase – particularly given consumer trends and the shift to personalisation. “Reserve luxury brands benefit immensely from partnerships like this, as this type of marketing is not only on trend but it is also a perfect way to reach high-net-worth consumers who would not find traditional channels of marketing appealing,” she adds. SHANGHAI (Sept 15): Chinese authorities have ordered Beijing-based cryptocurrency exchanges to cease trading and immediately notify users of their closure, signalling a widening crackdown by authorities on the industry to contain financial risks. Exchanges were also told to stop allowing new user registrations as of Friday, according to a government notice signed by the Beijing city group in charge of overseeing internet finance risks that was circulated online and verified by a government source to Reuters. Platforms should also tell the government by Wednesday Sept 20 how they will allow users to make withdrawals in a risk-free manner and handle funds to ensure that investors' interests are protected, according to the notice that was also reported by state newspaper Securities Times. "All trading exchanges must by midnight of Sept 15 publish a notice to make clear when they will stop all cryptocurrency trading and announce a stop to new user registrations," the government notice said. China is cracking down on the cryptocurrency business to try to limit risks as consumers pile into a highly speculative market that has grown rapidly this year. Reuters and other media reported earlier this week that it planned to shut down the exchanges. Shanghai-based BTCChina, a major Chinese bitcoin exchange, said on Thursday it would stop all trading from Sept 30, citing tightening regulation, while smaller Chinese bitcoin exchanges ViaBTC, YoBTC and Yunbi on Friday also announced similar closures. Beijing-based platforms OkCoin and Huobi, which are among China's biggest exchanges, did not immediately respond to a request for comment. The bitcoin price was down 5% at US$3,071 at 1036 GMT on US exchange Bitstamp. The bitcoin price index on trade website Coindesk slid below US$3,000 for the first time in six weeks. Bitcoin fell by more than 10% on Wednesday after a warning by JPMorgan Chief Executive Jamie Dimon that it "is a fraud" and will eventually "blow up". "ILLEGAL FLOWS" Earlier on Friday, a senior executive at China's state-backed internet finance body said that "stateless" digital tokens such as bitcoin posed risks as they could be used for illegal actions, and rules were needed to support the development of "legal" digital currencies. Li Lihui, a senior official at the National Internet Finance Association of China and a former president of the Bank of China, also told a conference in Shanghai that global regulators should work together to supervise cryptocurrencies. "Digital tokens like bitcoin, ethereum that are stateless, do not have sovereign endorsement, a qualified issuing body or a country's trust, are not legal currencies and should not be spoken of as digital currencies," he said. "They can become a tool for illegal fund flows and investment deals." He said there should be a distinction between digital currencies, which were being studied and developed by authorities such as the Chinese central bank, and digital tokens such as bitcoin. Digital currencies developed by authorities could be used for good, with the right regulation, he said. The state-backed internet finance body was set up by the central bank and its members include banks, brokerages, funds and consumer finance companies.
On Wednesday, it urged members to abide by Chinese laws and not deal in cryptocurrencies. Since January, Chinese bitcoin exchanges have rolled out a series of changes to comply with increased scrutiny by Beijing. Still, the industry was thrown into chaos on Sept 4 when China issued a directive banning initial coin offerings (ICOs). China's crackdown "is all about protecting market stability and protecting the interest of investors, so halting these kinds of initial coin offerings is a very necessary action," Li said. Vlad Zamfir, a researcher at the Switzerland-based Ethereum Foundation told Reuters that it was no surprise China is moving against such currencies as Beijing has capital controls that are "in direct tension with the free ability to send any amount of money anywhere without any kind of delay". (US$1 = 6.5440 Chinese yuan) Quit being overly optimistic, says analysts. Fortified by the belief that they will be able to continue working beyond the official retirement age while their expenditure will stay around two-thirds of their current salaries, the prospect of retirement for the majority of Asia investors is one of promise rather than dread. The findings from the latest Manulife Investor Sentiment Index survey, released today, reflect investor optimism about retirement as a time for leisure, travel and being with the family, combined with a little work to top up funds. Investors also tend to anticipate retiring a few years early. These expectations, however, are in many cases overly optimistic, pointing to a mismatch with reality. In three key areas, the survey findings show investors making misjudgments about their retirement with regard to the actual duration of their retirement, day-to-day expenditure during retirement and their ability to work. Longer lives, longer retirement On the upside, many investors underestimate their longevity. Life expectancy data (Note 1) shows that the survey respondents are likely to live up to five years longer than they anticipate. The downside is that their retirement savings will likely run dry before that happens. "Sadly, many are eyeing the wrong target and realize the mistake late in the day, so they end up delaying or trying to delay retirement," said Robert A. Cook, President and CEO of Manulife Financial in Asia. "We see in the survey those in their twenties expecting to retire at 58 and that creeps up to 65 by the time they're in their sixties. As they grow older, they realize they'll live longer. A large number of our survey respondents -- even those who have been actively investing for retirement -- also say they wish they'd started planning earlier or saved more from the outset." Retirement expenditure to exceed expectations Survey respondents said they expect retirement expenses to average 64 per cent of their current income, but in reality they will likely be much higher. This has not yet hit home with Asia investors for whom retirement is seen as a time when they are free to do what they want (48 per cent), enjoy what they have earned in earlier years (41 per cent), and spend more time with family and friends (40 per cent). Attitudes towards retirement are predominantly positive, with the dark cloud of old age and poor health only a top-three consideration for investors in Indonesia (40 per cent) and Hong Kong (34 per cent). "Indonesian and Hong Kong investors are wise to have healthcare costs on their radar," said Michael Dommermuth, President, International Asset Management at Manulife Asset Management. "I think we're all aware of it from personal experience with family or friends, but the reality is that medical prices have risen in Asia at about twice the rate of inflation over the past 10 years. In fact, World Health Organization data shows health spending per person in China has risen nearly six-fold in the last ten years. In Singapore, it's nearly four times higher and in Indonesia it's over five times higher. Healthcare is very expensive and you need more of it as you get older." Ability and willingness to work in retirement overestimated
The Manulife survey also shows more than half (54 per cent) of investors expect to work full- or part-time during 'retirement'; for another six years, on average, until the age of 66. Singaporean investors expect to continue working the longest, with another nine years of 'post retirement' work until age 70. The majority of investors across the region see working in retirement in a positive light: a way to stay active, connected and healthy. Very few say they have no choice but to work, but in reality they may not be able to work whether they want to or not. "Research reveals that elderly labor employment levels are generally well below the level the survey findings point to," explained Mr. Dommermuth. "In North Asia, elderly labor participation ranges from 8 per cent in Hong Kong and Taiwan to 20 per cent in Japan. This could be because although retirees want to work, they may be increasingly selective about the jobs they take, waiting to find a position that is line with their personal interests, offers a flexible schedule and is less physically demanding. Or their ability to work may be limited due to elderly-related health issues." |
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