David Webb, a Hong Kong corporate-governance advocate, has earned his gadfly reputation attacking the back-room dealings of the territory’s clubby tycoons. Less is known about his other passion: value investing.
Once an independent director on the Hong Kong Exchanges & Clearing Ltd., the operator of the city’s stock exchange, Mr. Webb splits his time between picking stocks to buy with his own money and his public-service activities.
Last year, Mr. Webb drew public attention to irregularities in the shareholder vote for a US$2.1 billion buyout of Hong Kong telecom operator PCCW Ltd. led by tycoon Richard Li. That prompted an investigation by Hong Kong regulators. An appeals court, siding with the securities regulator over Mr. Li, scotched the takeover.
Mr. Webb has also pushed (so far unsuccessfully) to force Hong Kong-listed companies to report financial results quarterly, rather than twice a year.
As an investor, Mr. Webb, 44, focuses pretty much exclusively on Hong Kong small-cap stocks. His approach can be described, he said in an interview, as ‘value with a governance overlay.’
That means meticulously combing through stock-exchange filings to evaluate a company’s business and cash flow, but also examining the political connections of its directors and shareholders. He carefully tracks the details they disclose, and those they don’t.
He says there is a lot of overlap between investing and his advocacy work: the good stocks he keeps for himself and the bad ones he flags for the public and regulators on his website, Webb-site.com.
The site is filled with unflattering bits of information and analysis about Hong Kong-listed companies. A recent post lambastes mobile-phone company SIM Technology Group Ltd. for buying real estate in northeastern China’s Shenyang city not related to its core business and only telling shareholders four months after the deal was done. The company responded that it knows Shenyang well from having operations there and the noncore investment is a good way to deploy surplus cash, given low interest rates.
Another post points out that Yang Wenjun, chief executive of China Mengniu Dairy Co., lists a masters of business administration from a discredited mail-order diploma school. Tracking fake degrees is a favorite tool of Mr. Webb, who studied at Oxford University, to highlight misleading disclosures and intellectual insecurities. Mengniu declined to comment.
He doesn’t invest in fixed-income products and rarely buys shares overseas because he believes global markets are highly correlated. ‘I find enough to chew on in Hong Kong,’ he says. Mr. Webb holds about 30 names in his portfolio at any time and sticks to smaller stocks that aren’t tracked by researchers at the major investment banks.
Asked about his take on the market today, Mr. Webb says he believes the Hang Seng Index will end the year ‘significantly lower’ as interest rates rise, China’s property bubble deflates, and banks’ balance sheets see more bad loans. He says the three largest Chinese state banks, which make up 38.6% of the Hang Seng Index’s weighting, will face huge loan losses over the next three years because of the lending splurge during the financial crisis.
As part of Beijing’s banking reforms ahead of listings, the government ‘cleared out the bad loans, but not the bad lenders,’ Mr. Webb says.
Another stock he is down on is Internet company Tencent Holdings Ltd., which he calls the most overvalued stock in the Hang Seng Index excluding the Chinese banks, with a price-to-book ratio over 21, a trailing price-to-earnings ratio around 50 times, and a dividend yield of just 0.24%.
‘I don’t think their business model is as sustainable as the market seems to think,’ says Mr. Webb, who previously worked as an investment banker. ‘Perhaps that’s why they are hoarding cash.’
So far, Mr. Webb says he has no plans to manage other people’s money. ‘I enjoy my life as it is, with the freedom to spend as much time as I want on pro bono activities and family,’ Mr. Webb says. ‘A fiduciary duty to shareholders would change that.’
韦伯曾担任香港交易所(Hong Kong Exchanges & Clearing Ltd.)的独立董事，他现在一边用自己的钱购买自己精选的股票，一边从事公共服务活动。
在被问到如何看待今天的市场时，韦伯说，他相信，随着利率抬升、内地楼市泡沫破灭、银行坏账增加，到今年结束时香港恒生指数(Hang Seng Index)将大幅走低。他说，在恒生指数中权重达38.6%的中国三大国有银行，将在未来三年因金融危机期间放出的天量贷款而蒙受巨额贷款损失。
另一只不被韦伯看好的股票是腾讯控股有限公司(Tencent Holdings Ltd.)。他说，腾讯是除了内地银行以外被高估得最严重的恒生指数成份股，市净率超过了21倍，以过去一年的收益率来计算，市盈率约为50倍，而股息收益率仅为0.24%。