Vol 16 – A Purely Commercial Transaction & Buffet’s Mistakes (Part I)
- Ann Yu
- Mar 9
- 10 min read
Updated: Mar 16
March 9th, 2025
Hello there!
This week, we’re shining a spotlight on two remarkable gentlemen who, despite being over 90 years old, continue to make waves across the globe.
We’ve also heard your curiosity loud and clear – what exactly does Jadewell Family Office do? Are we bloggers writing (occasionally) interesting articles, stock brokers trying to pitch stock ideas, or perhaps the private bankers eager to help you open an account?
Well, it’s time to clear up the mystery! We’ll explain our value propositions and what differentiates us from other service providers you’ve seen before.
Category | Contents for this Week |
1) Deal of the Week | |
2) History Buzz | |
3) Fun Facts |
Key things to watch for the upcoming week:
China/HK - Earnings | Mar 14 (Fri) – AIA (1299.HK), Li Auto (2015.HK) |
US – Earnings | Mar 10 (Mon) – Oracle (ORCL) |
US – Eco Data | Mar 12 (Wed) – US CPI Mar 13 (Thu) – US PPI |
Other Events | Mar 11 (Tue) – Japan 4Q GDP Mar 12 (Wed) – Bank of Canada Rates Meeting |
Deal of the Week – CK Hutchison’s Port Sale – A Win-Win-For-All Deal
After a lifetime of dealmaking, 96-year-old Li Ka-Shing has once again made headlines with a deal that shook the world.
Earlier this week, CK Hutchison (0001.HK, CKH) announced that it had reached in-principle agreements to sell off the bulk of its Global ex-China ports business, including the two most politically sensitive ports in the Panama Canal, to a consortium led by BlackRock from the US. In return, CKH will receive cash proceeds exceeding USD 19 billion.
While CK Hutchison insists this is “a purely commercial transaction,” it’s clear that Donald Trump’s recent comments played a significant role.
The Panama Canal, an 82-km artificial waterway built by the US in 1914, cuts across the narrowest point of Panama, connecting the Atlantic and Pacific Oceans. This allows ships to avoid the lengthy and dangerous journey around Cape Horn at the southern tip of South America.
After decades of US control, the Canal’s ownership and management were transitioned back to Panama in 1999.
However, Donald Trump isn’t pleased with this arrangement. During his January 20th inauguration speech earlier this year, he claimed that China essentially runs the Canal by controlling the surrounding ports.
There are 5 ports along the Canal. CKH (aka China, in Trump’s eyes) owns the most important 2 ports – the ones at both ends of the Canal.Trump even refused to rule out military action to reassert US control over the Canal. For him, the Panama Canal holds paramount importance as 75% of the cargo passing through it is either destined for or originating from the US, making the US the largest beneficiary of this critical maritime route.
Therefore, this timely CKH deal appears to be a win-win for all parties involved – Li and CKH gets to offload these sensitive port assets at a handsome premium, Trump regains control of the Panama ports as he desires, Panama keeps good relationship with US (their biggest trade partner), and buyer BlackRock secures dozens of ports worldwide as its largest infrastructure investment to date.
Additionally, this move helps ease Republican pressure on BlackRock’s CEO, Larry Fink, over the company’s past embrace of ESG investing and diversity issues.
Back to CKH, investors holding CKH shares were left in awe by the staggering USD 19 billion price tag of the recent deal – a whopping 75% of CKH’s current market cap.
Ports business accounted for just 9% of CKH’s revenue and 15% of its EBITDA, as of first half of 2024.
Prior to the deal’s announcement, analysts had valued CKH’s ports business at around USD 10.5 billion only. Also, this USD 19 billion deal price, which is almost 13 times of EBITDA, exceeds the global valuation average of 10 times.
Now, investors are buzzing with anticipation about what the company will do with this massive cash windfall.
JPMorgan analyst predicts that CKH might distribute 10-20% of the cash proceeds as special dividends (similar to what they did after selling partial holdings of Watsons in 2014). This could potentially boost the stock’s dividend yield from around 5% currently to an impressive 14%!
The rest of the cash? Possibilities are aplenty. CKH might use it to repay debt (as they did after selling European tower assets in 2020-21), issue bonus shares (reminiscent of the 1999 sale of British mobile-phone company Orange), or save it for future acquisitions.
Meanwhile, MorningStar is even more optimistic, forecasting a special dividend payout of HKD 25 per share. Based on CKH’s current stock price at around HKD 50, this would translate to a jaw-dropping 50% dividend yield, though MorningStar didn’t detail the calculations behind this prediction.
No worries, we should find out more details soon enough at CKH’s upcoming earnings announcement on Mar 20th.
For investors, another big question is: What will CKH look like after the sale? The answer is a company that’s less diversified but also less exposed to geopolitical risks – a trade-off that could be quite favorable.
UK remains CKH’s largest market, accounting for less than 25% of its EBITDA, but this number is poised to grow. Just last month, CKH made a preliminary bid of GBP 7 billion to acquire a majority stake in Thames Water. Additionally, they’re eyeing a bid for Viridor Ltd., a UK waste management firm valued at another GBP 7 billion.
When it comes to CKH’s business segments, infrastructure and telecom continue to generate stable results. However, the retail segment (think Watsons) is navigating a challenging environment in China.
For your reference only. Not investment/product recommendations.
History Buzz – Buffett’s Mistakes (Part I)
Warren Buffett published his annual (and possibly the last) letter to shareholders a few weeks ago. It ignited a lively discussion about making mistakes – a topic Buffett has never shied away from addressing.
As a wise man once said, while we can’t replicate others’ success, we can certainly avoid repeating their mistakes.
The Boy Buffett
Warren Buffett was born in Omaha, Nebraska, in 1930. His father, Howard Buffett, was a US congressman and an avid stock investor. Guided by his dad’s financial wisdom, young Warren started trading stocks at the age of 11.
Buffett later pursued his Master’s degree at Columbia Business School, where he studied under the renowned economist Benjamin Graham, who taught him the concept of “Margin of Safety.” It refers to the gap between a company’s intrinsic value and its stock price. Essentially, the larger the Margin of Safety, the better the investment opportunity. Buffett kickstarted his investment career by diligently applying this principle across various stock brokerage houses, achieving remarkable success. By 1962, his savvy investments had made him a millionaire.
The Biggest Mistake – Berkshire Hathaway
The same year in 1962, Buffett stumbled upon another investment opportunity – a struggling textile manufacturing company named Berkshire Hathaway.
To give you some context, the US textile industry was having a tough time in the 1960s. Increased competition from foreign manufacturers with lower labor costs and the sluggish adoption of new machinery by US textile mills led to mounting losses.
Seizing the opportunity, Buffett began buying Berkshire Hathaway’s shares at USD 7.60 when the company’s book value was USD 19.46 per share (talk about Margin of Safety!).
His initial plan was to sell the shares at a profit. In 1964, he offered to sell his holdings back to Berkshire at USD 11.50, a deal verbally agreed upon by Berkshire’s CEO at the time, Seabury Stanton.
However, when Buffett received the proposed transaction details in writing a few weeks later, the price had dropped to USD 11.375. This infuriated Buffett!
Instead of accepting the slightly lower price, a determined Buffett bought even more of Berkshire’s stocks at much higher prices, just to take control of the company and fire Seabury Stanton, the unfaithful CEO.
By the time Buffett acquired a majority stake in the company, his average cost had risen from USD 7.60 to nearly USD 15 (much less Margin of Safety now…).
“It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price”, said Warren Buffett.
In hindsight, Buffett admitted that taking over Berkshire Hathaway was his biggest mistake. Much of his capital got tied up in the company at that time, and looking back, he realized that he could have earned an estimated USD 200 billion in compounded investment returns (per Buffett himself as of 2010) with those funds.
Another Mistake – David Sokol
Given Buffett’s age, the market has always been concerned about his succession plan. While Greg Abel (interestingly, he was born in 1962, the same year that Buffett started buying Berkshire shares) is the clear successor for Berkshire Hathaway now, the road to finding the right heir wasn’t without its bumps for Buffett.
Before 2011, Buffett had his sights on another potential successor: David Sokol. Often dubbed Buffett’s “Mr. Fix-It,” Sokol also played a pivotal role in Berkshire’s USD 230 million investment in BYD after a due diligence trip to China in 2008.
But things took a turn in January 2011 – Sokol presented Buffett with the idea of acquiring a US chemical company called Lubrizol for USD 135 per share.
What Sokol failed to disclose was his personal purchase of USD 10 million worth of Lubrizol shares at USD 104 just days before the pitch. He made “himself” a tidy USD 3 million profit after Buffett agreed with the proposal and bought Lubrizol.
Later that year, Sokol resigned, and Buffett confessed to making a “big mistake” by not thoroughly questioning Sokol before proceeding with the investment.
Next week, we’ll dive into two more of Buffett’s notable missteps – about missing out on golden opportunities and paying out dividends (!?). Stay tuned, because it’s bound to be a captivating discussion!
For your reference only. Not investment/product recommendations.
Fun Facts – What does Jadewell Family Office Actually Do?
As Buffett’s two mistakes above illustrate, “conflict of interests” lurks everywhere! When someone pitches you an idea or a financial product, is it genuinely in your best interest? Or simply because they get a higher rebate or commission from it? 🤔
In our nearly 20 years of working experience at top tier foreign banks, we’ve faced situations like these countless times – not just conflicts of interest, but more frequently, instances of “information asymmetry” between banks and clients, or fund managers and investors.
While everyone needs to make a living, we believe it should be done within reasonable limits.
Jadewell Family Office stands out as one of the few investment advisors in HK proudly operating on a “retrocession-free model” – no under-the-table financial benefits here! We put this commitment in writing with our clients. 📜
We’re also NOT a hedge fund or someone who wants to take your money and invest on your behalf. What we focus on is a significant under-addressed client need: regular check-ups and analysis of your “overall” financial portfolio.
Given the sophistication of clients in HK, many hold multiple bank accounts, online broker accounts, or fund accounts. However, no one really has the time or patience to sit down, analyze, and monitor all these holdings on a consolidated basis regularly – and this can cause problems in the long run.
For example, we’ve helped clients spot bank account statements with incorrect booking records, single out funds that no longer align with their initial investment goals, and identify alternative strategies that can be deployed in a more cost-efficient way to achieve better performance than their existing holdings. 🔍💡
“Just like you need regular check-ups for your physical health, your investment portfolio also needs regular check-ups and monitoring.”
Jadewell Family Office – Pricing Sheet updated as of March 2025
We offer 3 different kinds of services to our clients:
🌟 “Light” Family Office Services 🌟
Regular portfolio consolidation and analysis (monthly or quarterly for less complex portfolios)
Line-by-line transaction review
Sharing market insights, colors, and whatever that’s happening out there
Ideal for clients seeking simple and straightforward advice.
✨ “Semi” Family Office Services ✨
Includes all features in the “Light” service
Filtering and discussing ideas/pitches you receive from banks or other service providers “anytime”
Access to Jadewell’s proprietary investment solutions
Perfect for clients who need timely discussions and feel bombarded with all the ideas out there.
🚀 “Full” Family Office Services – A Trustworthy Gatekeeper 🚀
On top of all features of the “Semi” service, we go the “extra mile” for you.
Sourcing specific investment ideas/solutions based on your instructions and preferences
Customized weekly updates
Succession planning across generations (not just vehicles like trusts but also investment experience sharing/coaching for younger generations)
Tailor-made for clients who want a trustworthy hand with their diversified and complex wealth.
For your reference only. Not investment/product recommendations.
About Jadewell Family Office
Jadewell is committed to offering proactive, customized services akin to a “single-family office,” yet within the ease of a “multi-family office” environment.
Ann Yu
Co-Founder and CEO
Jadewell Family Office
FOR INSTITUTIONAL & PROFESSIONAL CLIENTS ONLY – NOT INTENDED FOR RETAIL CUSTOMER USETHESE ARE NOT STOCK OR PRODUCT RECOMMENDATIONS
This document is intended for informational purposes only. It should not be considered as advice or a recommendation for any specific investment product, strategy, plan feature, or any other purpose in any jurisdiction. It is educational and does not represent a commitment from Jadewell Family Office to participate in any mentioned transactions. Any examples used are generic, hypothetical, and for illustration purposes only.
This material is insufficient to support an investment decision and should not be relied upon to evaluate the merits of investing in securities or products. Users should independently assess the legal, regulatory, tax, credit, and accounting implications, and work with their own financial professional to determine if any mentioned investment is appropriate for their personal goals. Investors should ensure they have all relevant information before making any decisions.
Any forecasts, figures, opinions, or investment techniques and strategies provided are for informational purposes only. They are based on certain assumptions and current market conditions and are subject to change without prior notice.
All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted.
It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
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