China's Warren Buffett

Published in Investing on 5 August 2011 someone you may never have heard of.

"Vision is perhaps our greatest strength. It has kept us alive to the power and continuity of thought through the centuries, it makes us peer into the future and lends shape to the unknown." (Li Ka-shing)

If you are going to be a world-leading investor, what is the one skill, above all else, that you need? 

Well, in my view, you need to be able to look into the future. You need to be able to spot trends and see how this affects the business world in years to come.

Warren Buffett was able to do it -- for example he bought into Coca-Cola (NYSE: KO.US) in 1988 during a bitter price war with arch-rival Pepsi because he could see the company becoming bigger and more successful year after year after year.

And another renowned investor who I think has this knack is Li Ka-shing, who has been in the news recently because of his recent take-over of Northumbrian Water Group (LSE: NWG).

But just who is Li Ka-shing? Is he one of booming China's nouveau riche? Well, hardly -- in fact he has been around a very long time.

A little history

Li Ka-shing was born the son of a teacher in Guangdong province, China in 1928. In the midst of the Second World War he became a refugee as his family fled to Hong Kong to avoid the turmoil on the mainland. Li has lived in Hong Kong ever since.

Unlike Warren Buffett, who started his investing career by buying stocks and then only later bought whole companies or large chunks of companies, Li Ka-shing has tended to either create his own company or acquire companies.

He started out as a teenager selling plastic flowers and, showing the first signs of his brilliant entrepreneurial skill, he made a fortune doing so, becoming the largest seller of plastic flowers in Asia.

He then turned his attention to real estate. He called the Hong Kong property boom, and also showed a Buffett-like ability to spot a bargain, by acquiring a large amount of land in Hong Kong after the 1967 riots, when property prices had plummeted. By 1971 Li had named his property company Cheung Kong (Chiang Jiang or the Yangtze River), after the longest river in China. It grew into one of Hong Kong's biggest property developers.

In 1979 Li acquired Hutchison Whampoa from HSBC (LSE: HSBA), creating a huge conglomerate with interests in a wide range of industries. He foresaw the boom in world trade and made billions as one of the world's largest operators of container terminals.

An astute asset trader

Li Ka-shing now has interests in hotels, telecoms, finance, retail, ports, energy, biotechnology... the list seems endless.

The billionaire also has a great skill in investing in new businesses, building them up, and then selling them off for a tidy profit. He is one of the world's most astute asset traders.

For example, in 2001 he sold his interest in Orange to Mannesmann Group, banking an astonishing £9bn profit. In 2006 he sold 20% of his ports business to Singapore rival PSA Corp., making a £2bn profit on a £3bn deal.

Today Li Ka-shing's companies make up 15% of the market capitalisation of the Hong Kong stock exchange. His net worth is £16bn.

Superman returns

Li Ka-shing is perhaps as renowned in East Asia for his business and investing prowess as Warren Buffett is in the West. Whereas Buffett is often called The Sage of Omaha Li is frequently referred to as, simply, Superman.

And there are other similarities. Both have reputations for leading modest lifestyles. And both are noted philanthropists.

So why, then, did Li buy Northumbrian Water? Well, he has been purchasing a range of regulated water, power and road assets in the UK, Australia and Canada. He may be a billionaire, but he is doing the same thing that many of us at The Motley Fool have been banging on for months about: he is investing defensively, and he is investing for income.

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shinygoldcar 05 Aug 2011 , 1:17pm

Did anyone notice (does anyone remember) when Cheung Kong bought the electricity distribution network from EDF only last year?
Guess who else owns an electricity distribution network in the UK? Berkshire Hathaway!

rober00 05 Aug 2011 , 5:32pm

Guess who else owns an electricity network in the USA? National Grid!!!

shinygoldcar 07 Aug 2011 , 11:05am

@rober00 touche!

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