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Warren Buffett’s legendary investment prowess wins him fans all over the world.
China is no exception.
At this year’s annual meeting of Buffett’s Berkshire Hathaway (NYSE: BRK-B), the delegation from China numbered 2,000. That’s not counting the Chinese media people.
That is double last year’s figure and forced the company to set up a room for the Chinese that had simultaneous translation of the question and answer session.
In June, Chinese online game developer Zhu Ye bid $2.35 million in a charity auction to have lunch with Buffett. Ye is chairman of Dalian Zeus Entertainment.
This interest in Buffett and his methods is all part of the new financial reality. Lots of Chinese money is flowing outward. Over the past year, about $330 billion flowed out from China and moved around the globe.
China’s Warren Buffett
For me, the most interesting bit of this Chinese capital movement is to watch what the Warren Buffett of China is doing.
He is billionaire Guo Guangchang. Guo is the chairman of China’s largest private conglomerate, Fosun Group. The parent company of the $8 billion Fosun Group is Fosun International Ltd. (OTC: FOSUY).
Guo often has given his thoughts on investing and Buffett. He told the Financial Times that he doesn’t think Buffett has been successful because he is smarter than others, but because of his investment discipline and taking the long view.
In an interview with the German newspaper Handelsblatt, Guo described himself as a pupil of Buffett. He added that he believes Fosun is where Berkshire was 30 years ago.
The Buffett Model
Fosun is building itself using the Buffett model. It’s a model that is centered on insurance, but which then uses the funds from that cash cow to invest in diverse businesses. Guo told Handelsblatt that he concentrates this diversification in three sectors: financial services, health care and consumer goods.
Why those sectors? He said that he wished to fulfill the needs of China’s middle class. Guo said that the middle class now numbers 300 million people and will rise to between 500 million and 600 million people in the years ahead.
But Guo is not just adding Chinese companies to his portfolio. Fosun spent over $4 billion this year alone on acquisitions. Last year, it spent nearly $26 billion in a true spending spree.
He has done much of shopping in Europe, where he is finding many strong consumer brands with a long history. Guo said he likes Germany in particular. He told Handelsblatt, “We are huge fans of Germany and its economy.”
Among the European firms he has scooped up positions in are tourism groups Club Med and Thomas Cook (OTC: TCKGY); fashion brands Tom Tailor and Folli Follie; Portuguese insurance company Caixa Seguros; Belgian financial services company BHF Kleinwort Benson Group; and German bank Hauck & Aufhauser.
Fosun owns One Chase Manhattan Plaza, built by David Rockefeller, in New York. It also owns a stake in Cirque du Soleil. Its venture capital arm is also very active in funding a number of startups around the globe.
But Guo is not ignoring his insurance foundation, a la Warren Buffett. In recent months, he bought U.S. insurer Meadowbrook and Bermuda-based insurer Ironshore. More than one-third of the company’s assets are in insurance.
Take the Long View
Guo Guangchang could do much worse than following Warren Buffett’s methods. And so could investors in following Fosun International.
Current and potential shareholders in Fosun could learn a lesson from Buffett and Guo and take the long-term view.
Fosun’s shares doubled in price earlier this year when the Chinese stock market was going nuts.
Now, like the Chinese stock market as a whole, Fosun has given up those gains. It fell more than 10% on Monday alone.
The sell-off is offering investors a second chance to get in on China’s version of Berkshire Hathaway at a bargain price. Sounds like something that should appeal to a patient, value investor.
Editor’s note: The primary listing of Fosun International Ltd. stock is on the Hong Kong Stock Exchange, and shares may be unavailable for purchase through many U.S. brokers. American depository receipts of Fosun International trade over the counter in the U.S. through the OTC Markets Group under the ticker symbol FOSUY. As of this writing, FOSUY is a thinly traded security.