“Fifty years ago, I named my company Cheung Kong Holdings after the Yangtze River that flows through China, a great river that aggregates countless streams and tributaries. These days I think about where this ‘river’ should flow” - Li Ka-shing

ASIAN HUSKY.
In the last few days:
Husky Energy merged w/ Cenovus
Samsung’s Chairman, Lee Kun-hee, passed away
These two seemingly unrelated events left us thinking the same thing:
There was / is a generation of Asian entrepreneurs that attempted to get into almost every business…
…and succeeded far more than anyone would have expected…

Lee Kun-hee (Samsung’s late Chairman) giving his famous Frankfurt declaration in ‘93
Humble beginnings:
Li Ka-shing - long Honk Kong’s richest man - started his career manufacturing plastics
And, Samsung - Korea’s largest firm - began as a dried fish distributor
Today, Samsung - under Lee Kun-hee’s leadership - has achieved the pole position in smartphone manufacturing, television manufacturing, & memory chips… while also owning one of the world’s largest shipyards - Geoje.
Li Ka-shing’s Cheung Kong Holdings has expanded from plastics manufacturing to real estate… to the world’s leading owner / investor in ports.
And, on-the-side, the Li family casually owned 40% of Husky Energy
“I often think that in all these years the Chinese people have only ventured into south-east Asia & relatively few have gone to the western countries in a big way. I believe that what I’m doing can open up more investment channels for Hong Kong & China” - Li Ka-shing
In the West, the consensus management strategy / advice has been to develop an edge from specialization.
The giants from East have differed - going after big prizes, wherever / whatever they may be.
And while West has its exceptions (most notably Buffett & Bezos), the successes out of Asia continue to follow this trend set by Li & Lee.
Monday’s IPO announcement - ANT Financial - is another reminder…
…a $300BN diversified financial institution started by a former English teacher-turned-internet-entrepreneur.
Somehow - in Asia - that sentence fits a pattern.
And, if - someday - Jack Ma causally owns the largest stake in a public O&G firm, we won’t be surprised -

RECOVERIES.
Historically, LGDs / recoveries have been reasonably predictable - enough so that they are built into CLO, leverage loan, & fixed income risk models / methodologies (alongside other variables, such as Altman Z-scores, etc.).
Today, those recoveries are much lower than in the GFC (or prior cycles).
And, it’s more relevant to the oil patch than ever.
We are of the belief that relying on history is a dangerous investment strategy.
These headlines are a reminder - rely on it at your own risk -

OTHER NEWS.
Earnings:
Earnings aside, a few other stories caught our attention:
More on Conoco + Concho
An ET throwback
Libya update
Dea confronts its history (we like that kind of transparency)
An interesting profile of Iberdrola (& their greenfield M&A strategy)

[if you’ve ever been to the Guggenheim in Bilbao, then you’ve seen Iberdrola’s HQ (the tower behind the museum)]
That’s it for today - the Dodgers are 1x game away (& Kershaw’s finally won the big games) - catch y’all next week -