10 Things I Learned At First State

I spent two weeks at the Singapore office of First State Investments this summer. During this period, I attended meetings/calls with eight companies, and two team meetings. These meetings have allowed me to gain exposure to the banking sector in India, to a few Chinese, Philippine, Indonesian, and Japanese companies, and to understand the importance of good governance. At First State, I noticed that a significant amount of time and effort is spent on deciding whether one can trust the management. I am confident that this will – and has already begun to – strongly influence the way I will think about companies too.

In the second week, I began to understand how profit and loss statements link with balance sheets. This introduction to numerical analysis will serve as a useful base from which I can further my understanding of accounting, and will also allow me to do some more numerical analysis before I make an investment. 


I am very grateful to the entire team at First State, and look forward to more experiences like this in the future. Here are 10 Important Things I Learned:

1. You have to be able to trust the management, and feel that their interests are aligned with those of minority shareholders. Also look to see if there are enough checks and balances in place.
2. A good quality management is risk-aware, honest, open to new suggestions, and willing to acknowledge mistakes.
3. A culture of accountability, which can be created through employee-ownership of the company, is important. Growth opportunities within a company also create a more competitive work-environment. 
4. Questioning an investment thesis is very important. Being surrounded by a group of people who think differently and are willing to ask difficult questions allows people to see things from different perspectives, and reduces the effects of confirmation bias.
5. Investing is an art; there will always be positives and negatives, and the key is to decide whether you think the positives outweigh the negatives or not.
6. Look for companies with a moat, and see how the moat is evolving.
7. Look for a company with a solid long-term track record.
8. High ROCE, good governance and growth are 3 key factors to look at.
9.  Look for structural shifts and changes in consumer behavior and secular trends.
10.  It is difficult to differentiate between what the management wants you to see and what is real.