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What Could Investors Learn From The Disappearance Of “China’s Warren Buffett”

Guo Guangchang, known to some people as the Warren Buffet of China, is the co-founder and chairman of Fosun International Ltd that is listed in Hong Kong.

Fosun owns investment in pharmaceutical, steel, private equity, insurance and banking businesses.

His success story is widely known in China, where he is reckon to personify the nation’s fast rise embracement of entrepreneurialism. He grew up on a farm in Zhejiang province, studied philosophy at Shanghai’s top university, Fudan. With three fellow alumni he founded a business in the early 1990s that soon accumulated vast assets. His fortune was recently estimated at around US$7 billion.

The recent disappearance of Guo has, however, raised concerns about the future of Fosun. Moreover, it raises an important question – is it better to bet on a good business or good management?

Good business or good management

Warren Buffet once said: “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”

This exemplifies his preference for good business over good management. With a track record of compounding his wealth by 20% for 60 years, his words are widely followed by investors.

Yet, we could argue that betting on Warren Buffet himself, in other words the management, was the best decision an investor could have made. After all, he took a bad textile business and turned it into a world class company which owned a wide range of good to great businesses.

Nevertheless, Warren Buffet himself also confessed that buying the textile business was one of his worst decisions in his investing career. It was his later decision to re-invest capital from textile business into 2 other good businesses – National Indemnity and Sees’ Candies that had given Berkshire Hathaway the platform for future growth.

But what is a good business?

It is one that produces products and services that are needed and desired and has strong barriers that prevent new competitors. Within the Straits Times Index (SGX: STI), we can find example of good companies. These include DBS Group Holdings Ltd (SGX: D05), Wilmar International Limited (SGX: F34), Singapore Telecommunications Limited (SGX: Z74) and Singapore Exchange Limited (SGX: S68).

If an investor can consistently invest in good business at reasonable price, he could stand a good chance of delivering good long-term investing returns.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.