Investing For The Long Run With Top Management

There are many factors to consider when one invests in a stock. One can look at
industry dynamics, balance sheets, products, and of course management. In my
opinion, the number one factor is management. I’d much rather own a bad company
with good management than a good company with bad management. Eventually,
things will reverse.

If you look at the most successful companies over the last few decades, they have
all been led by top CEOs. When you think of top companies, consider the successes
of Berkshire Hathaway and Warren Buffett, Facebook and Mark Zuckerberg,
Hutchison Whampoa and Li ka-shing, Oracle and Larry Ellison, JP Morgan and
Jamie Dimon, Amazon and Jeff Bezos, or Alibaba and Jack Ma.

All of these companies have delivered big returns to their shareholders because they
had great CEOs with huge stakes in their companies. Their success became the
company’s success and as a result shareholders made a great deal of money. It’s
like going to the race track and betting on the top jockeys or betting on Michael
Jordan and the Chicago Bulls. There are just some people that are proven winners
and you get to own a piece of their success by buying stock in their companies.
As I look around Thailand, one company that has really caught my attention is Gulf
Energy Development Public Company (SET:GULF). Gulf Energy is led by Thai
energy tycoon Sarath Ratanavadi, who has a current net worth of almost US$5
billion. He took the company public in 2017 raising more than $700 million, in what
was Thailand’s biggest IPO in a decade. Shares of Gulf Energy Development, in
which he has a 72% stake, have nearly doubled since its IPO.

Driving Gulf Energy’s growth and stock price been an aggressive expansion program
lead by CEO Sarath Ratanavadi. He plans 150 billion baht ($4.6 billion) of
investment in power plants over the next four years. The firm is studying projects in
such countries as Myanmar, Laos and Vietnam, where faster economic growth will
boost demand for electricity.

Southeast Asian nations are enjoying an economic boom, spurred by a global
recovery that’s buoying exports. Sarath said the investment plan will focus on gas-
fired electricity and probably cover acquisitions of existing power plants and green-
field projects. Gulf Energy generates almost all of its power from natural gas and will
double output to 4,647 megawatts by 2024. Gulf Energy also has a $483 million joint
venture with the Oman Oil Company for a 326 megawatts power project in Oman's
Duqm Special Economic Zone.

What I like about Gulf Energy is that it is focused on fast-growing economies where
new power sources are in great demand. I can easily see Gulf Energy becoming a
US$10 billion, US$20 billion, and even US$50 billion company over the next five to
ten years. But in order for this to happen, it requires top management. I believe
Sarath Ratanavadi can deliver and why Gulf Energy Development Public Company
looks like an ideal long-term investment play.