Value Investing in Asia

Chapter 1Value Investing in Asia

You're looking for a mispriced gamble. That's what investing is. And you have to know enough to know whether the gamble is mispriced. That's value investing.

— Charlie Munger

We wrote this book to share with you about the practical applications of a value investing approach here in Asia. With many books written on investing 101, introductory concepts of value investing are not the focus of our book. However, we still like to do a quick refresher before heading on to the fun stuff.

Value investing was first made famous by Benjamin Graham, with many considering him as the father of value investing. We believe that walking along this path of value investing will provide you with a disciplined approach in your financial adventures.

To start, we first must draw a clear line between what is an investment and what is a speculation. Even after 80 odd years, the explanation by Benjamin Graham and David Dodd in Security Analysis made the most sense to us. They stated: “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative”. Nicely put.

From where we stand, speculation is more like guesswork without evidence. With its negative long-term expected return, a good example of speculation is a lottery. Buying a lottery ticket and hoping to win is speculation. If you really want to try your luck, no one is stopping you. However, we should ...