Investing strategies: used by billionaires to amass their fortunes

There are many investing strategies, which investors use. Value investing, contrarian investing and growth investing are mostly used investing strategies. Let’s briefly study them.

Value investing is the most successful investing strategy. It was founded by Benjamin Graham, mentor of Warren Buffet. In this strategy investors see for underpriced securities based on some formula other than market price. This formula for ascertaining the value of the security is generally some multiple of income of the corporation. Value investors usually have to wait for longer in order to realize the full value of their assets.

Along with Warren Buffet many other successful investors follow the value investing strategy of investing. According to researches value investing proved to be the most successful way of investing.  Many billionaire investors favor value investing over other forms of investing. Warren Buffet, Howard Marks, Seth Andrew Klarman, Charles Brandes, Walter J. Schloss, Irving Kahn, Mario Joseph Gabelli, Michael F. Price   are some of most successful value investors.     

Another strategy is contrarian investing. Contrarian investing is buying when other people are selling and selling when other people are buying. Every up and down in the overall stock market or some specific share price offers opportunity of selling and buying to these contrarians respectively.  Warren Buffet is also sometimes referred to as contrarian investor, owing to the obvious reason of many similarities between contrarian and value investing strategy. Other famous proponents of contrarian investing are Michael F. Price, James Beeland Rogers, Marc Faber, David Dreman, Mark E. Ripple, and William Albert Ackman.

Growth investing is another strategy which many successful investors use.  Those who follow growth investing strategy invest in companies that show above average growth even when their shares seem to be highly priced. Unlike value investors, growth investors buy stock in companies that are trading higher than their intrinsic value-assuming that the intrinsic value would grow eventually exceeding current valuations. These investors focus on capital appreciation. Venture capital funds can be classified as growth investors.   

Growth of Islamic Finance in Pakistan

Assets of Islamic banks have doubled in the last four years and SECP is now considering amending laws and giving tax relief to enable them to issue sukkuk bonds and real estate investment trust.

“The assets in Islamic banking (in Pakistan) have doubled, jumping from Rs837 billion to Rs1.6 trillion, from 2012 to 2016, now accounting for 11.7% of the total banking assets,” said Securities and Exchange Commission of Pakistan (SECP) in a handout on Saturday.

Read more about Islamic Finance

Non-banking financial institutions (NBFI) enjoy more support in religious classes of the country than Islamic banks. This is evidenced by stronger growth of assets in Sharia-compliant NBFI. The market share of assets in Islamic NBFI has grown from 14%, in 2002, to 33% now.

 “The SECP has recently conducted two consultation sessions with market participants to facilitate issuance of sukuk and real estate investment trust (REIT),” said Usman Hayat, head of the Islamic Finance Department at the SECP.

“The SECP is analyzing industry proposals and it shall consider making appropriate amendments to the relevant regulations, further reducing the cost and hassle for both issuers and investors. The industry proposals pertaining to tax issues regarding sukuk and REIT are being referred to the FBR,” he added.

At present 21 banking organizations are offering Islamic banking services in the country through 2,322 branches in 112 districts across the country.  “The SBP has a holistic approach to the promotion of Islamic banking and is providing enabling policy environment, Sharia governance, risk management, and capacity building,” says Ghulam Muhammad Abbasi, head of the Islamic Banking Department at SBP.

The assets of Islamic financial institutions are growing at a rapid pace but it is yet to be seen as how Islamic is the Islamic finance.

Using customers' money for your startup

Beijing has the world’s costliest rental housing, according to a survey of 15 global cities, with average prices more than 1.2 times average salaries, says a report by the Global Cities Business Alliance, a UK-based not-for-profit organization. The rise in rent, in developing countries like China, India, and Pakistan, has provided developers an opportunity to make money out of thin air.

What they do is to purchase a piece of land and then announce construction of residential plaza or shopping mall over it. Advance booking is announced for residential and commercial units. The advance money collected is then used for completing the project. Unheard in many developed countries, realty development is one of the most lucrative areas for investors.

The use of customers’ money for growth isn’t limited to realty sector only; entrepreneurs can use this method to grow their startups in other areas as well. Take the example of TutorVista, which successfully leveraged this customers’ money model of financing. It started when Krishnan Ganesh hired three teachers and provided them with VoIP internet connection, PC displaying a digital whiteboard along with webcam. It quickly became a 100$ per month tuition service.

Dell is another example of customer funded business. Michael Dell, founder of Dell, started by selling customized PCs to small businesses. The core percept in his business was to collect cash before having to lay out money on chips and computers to be sold. 

Customer funding provides many benefits to the startups. Usually, startups receive higher valuations if they performed successfully for an extended period of time, without external funding. Additionally, strong cash inflows, from customers, allow entrepreneurs to focus on proving business model rather than wooing investors.

In this model of business funding, balance sheet shows more current liabilities than current assets. In accounting term it is called negative working capital. Ironically positive working capital is assumed to be good as it poses less insolvency risk to the business.

Not every startup can be run using customers’ funding. Capital intensive projects need to rely on traditional way of financing. 

Pakistan's Logistic Giant

Agriculture sector contributes a lion share in Pakistan’s GDP. But presently Pakistan’s 40% agricultural produce is lost because of bad logistic infrastructure. And this company is experimenting with ways to provide logistic services to Pakistani agriculture sector with only three to four percent loss.

Starting from four employees, it now has over 400 people as its employs. With 700 customers including many national and multinational companies, it takes care of whole process of logistics including shipping, trucking and warehousing.

The company was started by Abid Butt in 2005, who earlier worked for a French logistic giant Geodis. At that time, in Pakistan, no one was available to provide end to end solution, so initial idea was to provide all services including trucking, warehousing and shipping etc by the same company. This led the company’s name being e2e supply chain management (pvt.) ltd. i.e. end to end supply chain management (pvt.) ltd. In 2011 butt’s company had around 76 million us dollars in annual revenues. The company grew 1918% from 2008 to 2010 and was nominated as Pakistan’s fastest growing private company by AllWorld network in 2012. Initial investment in e2e supply chain management (Pvt.) ltd. was arranged by him and his friend and was 1 million rupees (nearly 20000 us dollars at that time) each.

Company’s founder Abed butt is a LUMS graduate with a major in economics and also holds an MBA from INSEAD. After graduating from LUMS, Pakistan’s leading business school, Abid worked for Maersk. Later on he joined Geodis, and was posted in Paris.

He started his business from Karachi, Pakistan’s industrial and commercial heart. He started his entrepreneurial career by resigning from Geodis, risking a steady career growth. At that time he was making 15000 euros per month.

Related Links

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money matters jang

Asia Pacific millionaires

Asia pacific has surpassed North America in largest number of millionaires. According to the Asia pacific wealth report 2012, a product of capgemini and RBC wealth management, there are 3.37 million millionaires in the region. This number surpasses that of North America, the land of largest economy.

According to the report the total combined wealth of all millionaires in the region is 10.7 trillion us dollars.

The report attributed this growth in number of millionaires to two factors.

1. healthy GDP (gross domestic product) growth
2. strong base of entrepreneurship

In past few years Asia pacific has grown significantly. The world’s fastest growing economies are china and India both situated in the region and both are growing significantly for more than a decade. According to the report Asia pacific economy, excluding Japan, is expected to grow 6.1 percent in 2012 and 6.6 percent in 2013. These high figures are expected to be driven by growth in Indian and Chinese economies.

This high growth number of millionaires has led to high demand for wealth management services. And wealth management companies are facing acute shortage of wealth management professionals. 

related link 

capgemini

Pakistan’s fastest growing information Technology Companies.

Following are the companies that topped the Pakistan fast growth 25.

1. NayaTel. Founded by three university friends in 2004, now has over 500 employees. Nayatel’s network offers ultra broadband Internet, modern telephone and digital video services to business and household users. It is the state of art fiber wiring serving 6000 household and business units. Now nayatel has over 500 employees.
2. i2c Inc. is an electronic payment processing, point of sale activation solutions and prepaid application service Provider Company. It was founded in 2001, and currently has more than 250 employees. It has offshore office in Lahore Along with this it has sale and support offices world wide.
3. TradeKey.com is world’s fastest growing online trading platform. It was founded in 2005. With in short span of 4 years it has established itself as among top 5 online B2B marketplaces. Tradekey has a member base of over 5.7 million businesses from 240 different countries. It has offices in Saudi Arabia, china, and Pakistan.
4. Arpatech is an information technology company established as a small software house in 2004. It focuses on software development, business process management and network and security services.
5. Sofizar is a business to consumer Internet Company. It started in 2004 and in 2009 it had annual revenue of 20 million us dollars.
6. Abacus Consulting is one of the largest professional services firms in the region, employing more than 2000 employees. It has offices in Lahore, Karachi, Islamabad, and Dubai. It offers wide range of products and services.
7. Folio3 is a proud name in Outsourced Software Product Development. Folio3 has worked with larger clients including many fortune 500 companies.
8. Corvit is a trusted business technology advisor and strategic partner offering solutions spanning the entire spectrum of Information and Communication Technology. Corvit was established in 2000.
9. Multilynx was a company established in 1996, by Mr. Nuaman Mazhar and Mr. Hamid Chaudhry. It is a system and networking solution providing company.
10. Rozee.pk founded by Monis Rehman. It is Pakistan’s largest job portal. 5,000 companies, many of them multinationals, actively post openings on Rozee.pk