Superman Li Ka-shing Has Done It Again

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Feb 13 2007
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Superman Li has done it again. Billionaire Li Ka-shing has just pocketed a huge profit from the sale of a controlling stake in Indian mobile carrier Hutchison Essar Limited to Vodafone Group Ltd (NYSE: VOD) for US$ 11 billion (his investment was said to be only US$2 billion). 78-year-old Li has the magic mind of knowing when to buy and sell. In fact this is the basic fundamental that all the investors, regardless of whether its’ stocks, option, futures, gold, currency, properties and others, should know in order to realize the profit. You should know when to lock-in profit. You can never sell at the highest nor buy at the lowest. As long as your investment is making profit and hit your target of profitability, you should take money off the table.

Easier said than done? I bet, or else most of us can take over Li Ka-shing’s seat as the next superman. Through his Hutchison Whampoa Ltd (HKG: 0013) and Cheung Kong (HKG: 0001) flagships, Li owns the world’s largest operator of container ports, the biggest health and beauty retailer, and Canada’s No. 4 oil company. Li is ranked 10 among the world’s richest people in 2006.

Li started the plastic flower business when the demand was high and through years of saving, he expanded his focus to property seeing the opportunity for the ever-increasing migration from mainland China. But instead of becoming a merely local-champion, he expanded his business overseas to become a global player in countries such as Canada, Europe, Australia and China.

He tried his luck in America but his close relationship with Chinese government was not liked by the previous Clinton administration. Li was a member of the boards of directors of the China International Trust and Investment Corporation (CITIC). CITIC is the bank of the Chinese army (People’s Liberation Army, or PLA), providing financing for Chinese army weapons sales and Western technology purchases.

Though his empire is family-own, he includes foreign expertise as part of his top management team. In 1999, he sold Hutchison Whampoa’s Orange cell-phone business in Europe to Mannesmann at the height of the telecoms boom at a profit of US$ 15 billion. In 2006, 20% of Hutchison’s ports business was sold to Singapore’s PSA Corp at a profit of US$ 3.12 billion. He just knows when to take profit off the table. Have you heard of money-make-money theory? If you hold and never cash-out, your limited money can never grow at a larger scale. This is perhaps the difference between Li and Warren Buffett. While Li create business and sell it for a mind-boggling profit, Warren invests in value stocks whose company’s business he understood and holds on almost forever.

However while Li is indeed a superman who doesn’t looks like he’s going to retire soon, I’m worry on his successor. While his elder son Victor Li is low-profile, the younger Richard Li known for his Pacific Century CyberWorks (HKG: 0008) investment is a person who likes flamboyance and taste for the limelight and doesn’t seems to have a dispassionate character of his father. Nevertheless both do not have the equal ability to sniff good investing opportunity.

“Wealth will not pass beyond three generations” warns a Chinese proverb. Will Li Ka-shing descendant faces the same fate?

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