The comments made by valuelurker last 29/6/2015 are amusing to say the least.

He sounds very much like the team which would throw themselves into a frenzy raising their fist up in the air for having scored a goal – little realizing they just scored an own goal!

Obviously, he’s got it wrong as he has miscontrued the context as to why the articles were written in the first place.

The use of rhetoric is to drive home a point. Some people read things too literally to understand that there's a context to everything discussed.

The only reason Berkshire and Apple were cited in my articles was to demonstrate a simple fact dividends need not rely on cash alone for payment to shareholders.

There’re other ways of paying them instead of making unrealistic demands on a fundamentally good yet undervalued company such as Xinghe Holdings Berhad – to be financially imprudent with money and spend it all on dividends so the shareholders may be happy at the expense of the company’s survival and long-term financial stability – just because it happens to be a Chinese concern.

Nowhere in my article and several responses to comments made by Alphabeta, kcchongnz and JT Yeo et al. did I suggest that Xinghe is anyway comparable to what Berkshire Hathaway or Apple is today.

Yet, valuelurker presumes a comparison was made and believes anyone daring to ‘compare a Chinese company with any one of Buffet’s investments made through Berkshire Hathaway’ must be someone peddling misinformation or possessed by a less sharper mind. In fact, he would ‘cringe’ to see a Chinese company being put in the same category as Buffet himself. The word ‘cringe’ comes from valuelurker himself. You’ll not find it on the comments board now as he had the word scrubbed out. And I thought we’re having a healthy conversation on how companies should better reward their shareholders.

There’s a flipside view of the coin regardless of whether we choose to hear it or not. I take the position of hearing both and would encourage all of you to do the same.

In that spirit of discovery, let’s humor valuelurker for a second shall we? If we’re to make a fair comparison between the said three, let’s consider them based on their individual merits. They share nothing in common as far as their competitive edge in business is concerned. One is a peanut oil and peanut protein cake company and one of the 6th biggest edible oil players in China. The second is a multinational conglomerate that became Warren Buffet’s vehicle for business acquisition. The last has become what is arguably the biggest listed company on earth on the strength and beauty of its consumer technology innovation.

So, what’s the common thread that would bind the said three companies?

Ask valuelurker, he’ll say none. Or he’ll retort with a rhetorical question: how dare you bring Buffet into the picture again? He would blissfully forget the fact that Steve Jobs did a better job in turning around a business that he co-founded in 1970s than Warren Buffet ever did. And he managed to bring back a company from facing a near extinction and propel it into one of the greatest consumer icons in human history. Jobs was the better business owner, manager and investor. Of course, he invested in his own business. Than Buffet himself.

According to Buffet, Berkshire was a mistake. He bought the company 49 years ago in response to a slight by its manager then. Since then he has used Berkshire as an investment vehicle buying entire companies including Geico which became his cash-cow fuelling some of his major acquisitions to this date. Except for its first year since he assumed control and another rare occasion in 1967, Berkshire Hathaway hasn’t paid a single dividend to this date preferring to use all cash to bankroll new acquisitions or fund existing operations.

Apple on the other hand came close to facing a bankruptcy back in 1995 when Steve Jobs returned to save it from a near financial ruin and built it into one of the most recognizable companies on earth. Unlike Buffet, Jobs was a founder and entrepreneur and he was even more prudent with money. He strictly forbade the use of cash to buy back shares or pay dividends to shareholders – arguing the shareholders can reap a higher reward or dividends from the stock market. Steve Jobs saw cash not just for its value today as a lifeblood of business but also as a long-term safety net against events that may spell a financial disaster for the company tomorrow.

Yes, Apple the most successful company on earth – and the best run – faces an uncertain tomorrow. A visionary like Steve Jobs knew this and wasted no cash on dividend and long term investors knew better than to question his judgement while he was alive – after all he’s the guy who almost single-handedly brought Apple back from the brink of death and made it the icon it’s today.

There’s a reason why Buffett chose IBM and not Apple for his first and probably only technology investment. And there’s a reason why Steve Jobs dislikes paying cash for a dividend payout or buying back shares.

That reason lies in the following fact: Apple will need to continuously innovate in order to stay ahead of the game. The day Apple fails to innovate will be the day when it falls. That’s why Apple was profoundly dependent on its cash reserve to not only fund its working capital including a highly focused R&D expenditure but also act as a contingency fund of sorts against an uncertain tomorrow. Remember Apple came close to folding its business back in 1995 before Steve Jobs made a comeback.

Today both companies will cost a tiny fortune to invest for the common investor.

There aren’t many fundamental stocks that are priced low enough to justify our early investments. The cheaper the stock, the greater its margin of safety.

At 7 sen a stock, Xinghe is a very much undervalued stock – one of the 6th biggest edible oil companies in China which pay dividends – which fundamentally compares to what Geico once was when the latter was trading at 2 dollars per share having made a hefty loss back in 1976 (which Buffet lost no time in acquiring 51% on the cheap as he was betting the new management would turn things around which they did) or even Apple when it was trading at around 7 dollars a stock back in 1998 or 2002.

Both Geico and Apple were extremely attractive to enter in 1976 and 1998 respectively given their low cost advantage then. Similarly, Xinghe today is an undervalued stock which offers a great upside potential to any investor who is willing to learn and discover its merits.

The reason no one has noticed in the market is because both analysts and investors are still preoccupied with poor market sentiments on Chinese stocks listed on KLSE.

Hence, it’s time we changed the market mindset for the better by encouraging an open discussion and demanding more mainstream security analysts commence a fair coverage of the stock so that common investors are not deprived of the opportunity to invest early in a profitable company like Xinghe while it’s still cheap.

                                                                                                                                   Ezra, 6 July 2015