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Interesting Top Holdings from Robert Karr
Posted by: Mara Kohn (IP Logged)
Date: February 14, 2012 05:20PM
Robert Karr is the founder of Joho Capital in 1996. He gained much of his knowledge from the legendary Julian Robertson.
Joho Capital’s main target investments are public equity markets across the globe. The firm primarily focuses its investments in Japan and other Asian markets. The firm typically employs a long/short equity strategy for its portfolio investments.
Robert Karr tends to hold very concentrated positions in the area of new technologies. His portfolio turnover is small. As of January 2010, his fund, Joho Fund Ltd. -A-, has gained an annualized 22.15% since inception in October 1996. Over the lifetime of the fund, his largest loss was 19% from November 2007 to November 2008.
Google Inc. (GOOG):
Google Inc. (GOOG) is an American multinational internet and software corporation specialized in internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products and generates profit primarily from advertising.
Why did Robert Karr invest in it? Google has expanded into new segments as it has been mentioned before. They include cloud computing, cloud based applications and mobile among others. Most importantly it holds $42b of cash and is permanently adding between $3 and $4b each quarter. Google has always used cash in positive things. Furthermore, Yahoo Finance has shown the average analyst estimate for 2012 to $43.90 and the forward P/E of 14.3. Most importantly, since the market crash, the firm has been trading at around $630.
Google's rapid growth since its incorporation has triggered a chain of products, acquisitions, and partnerships beyond the company's core service. Google's products have also extended to the desktop segment as well.
SINA Corporation (SINA): Internet media is Sina’s primary service in China. Due to its reputation of reliable online news, it has attracted a well-educated and relatively wealthy user group. This has paved the way for representing an ideal venue for advertisers. 70% of its revenue comes from online advertising.
SINA can benefit from the growing in e-commerce and online entertainment and to the fact that China represents the largest Internet population of the world. Besides, growing internet usage in China, its type of consumers, and the recent partnerships with companies such as PepsiCo, General Motors and BMW for advertising makes SINA an investment target for smart investors. Online advertising revenue in the country stood at $3.2 billion in the first six months of 2011. This meant a 101% increase y/y. The growth in the segment exceeded 80% for the fourth consecutive quarter. For the future, online ad spending in China is expected to increase 24.0% year over year to $4.6 billion in 2011. By 2015, ad spending in China is expected to increase at a five-year (2010-2015) compounded annual growth rate (CAGR) of 25.0% to $11.3 billion.
SINA still has room for rapid growth given the launch of 3G and 4G mobile phones. With this new development, the number of Internet users using mobile phones to access the Internet increased 29.6%. The increase in mobile users will boost the need of wireless services, thus helping SINA to grow its MVAS business. SINA will also be benefited by the issuance, by the Chinese government, of 3G licenses to telecom operators. SINA has also announced a technology licensing agreement with Microsoft Corporation for delivering mobile value-added services to the Chinese market.
SINA s micro-blog Weibo has gained massive popularity over the last couple of years. SINA has issued a virtual currency, Weibi, which allows microblog users to buy virtual items and services provided by third-party application developers. SINA has also introduced an English version of its iPhone App and expects to launch an English version of weibo globally by the end of 2011.
New Oriental Education & Technology Group Inc. (EDU): New Oriental’s main services are the provision private educational services in China. It owns more than 54 schools and 400 learning centers all over China. Its services include educational services such as language training, test preparation courses, K-12 education and professional certification preparation. It currently has a leading position in the private education market.
Robert Karr was likely drawn to EDU because EDU has a huge potential for revenue growth since in China there is an increasing need for most Chinese families to count on high-quality private education services apart from traditional education classes. Another reason for investing in it is EDU´s leading position in this field, as many wealthy Chinese families are willing to send their children abroad and this fosters the demand of these kinds of services.
KT Corporation (KT): KT Corp. provides fixed-line telecom services in South Korea. It has 19.2 million customers, including 3.2 million voice-over Internet protocol subscribers. It also provides broadband services with 7.7 million customers, wireless and pay television services with 16.4 million subscribers and 2.8 million customers, respectively.
In addition, it has 38 non-telecom businesses that it consolidated for the first time during the first quarter of 2011. The firm focuses on these non-telecom businesses and wireless data as a substantial growth strategy. Management also expects non-telecom businesses to grow to 45% of total revenue from 27% by 2015. The mobile date market in the region is rapidly growing and KT can clearly benefit from this regarding its wireless segment.
Despite government intervention, KT has been recently enjoying a base growth of 58.8% and solid free cash flow is still rapidly being generated.
Hexcel Corporation (HXL): Hexcel’s main area of business is space and defense, commercial aerospace, as well as some industrial end markets. Some of its products are advanced structural materials, including lightweight, high-performance reinforcement products. The firm has a strong presence overseas since more than half of its revenue comes from international sales. Commercial aerospace is the firm's largest business segment, contributing half of total revenue.
Hexcel's lightweight, high-strength, carbon fiber components are increasingly deployed in low-weight planes, including Boeing's Dreamliner 787 and Airbus's a380 and a350. With the increasing production of these planes, Hexcel sales increase. In the last quarter sales represented a 30% rise vis-à-vis the prior year. Airbus accounts for 41% and Boeing accounts for 42%. Hexcel is also relying on prior-generation planes which represent most of its commercial revenue and rising production.
The defense segment accounts for 25% of the company's sales. The segment is expected to increase due to an increasing demand for helicopters and Osprey V22s. Future military sales will also benefit from increased carbon fiber composite use in planes. Hexcel’s profit outlook seems quite solid since commercial sales are expected to rise to 26.7% year-over-year in the second quarter. Also, operating margins and net income are expected to rise to 14% from 13.3% and 62%, respectively. Last but not least, given investors reward 2012 earnings estimates at 24 multiple, shares could trade at $31.68 next year.
Guru Discussed: Robert Karr: Current Portfolio, Stock Picks
Stocks Discussed: GOOG, SINA, EDU, KT, HXL,
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