August 2017 – Heyokha Brothers – Investment Management

Heyokha Brothers-Investment Report-2Q 2017

We note how many companies in various industries are being killed-off by innovative tech businesses. We point to the rising fund flows to index ETFs and how this passive investment trend may create more market anomalies – such as divergence in valuation of big-cap vs small-cap firms – presenting opportunities to the true active investors. We point to brick-and-mortar businesses as potential beneficiaries of the O2O trend among online retailers. Lastly, we take inventory of what has been the impact of Indonesia’s agricultural reforms so far, which seems promising.

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EMH, real life case

We recently attended the Maybank Bali Marathon and couldn’t help but noticing an interesting and recurring phenomenon.

To the credit of the event organiser, a good number of portable toilets was made available to the 10,000+ runners who attended this year.

*The very adorable local kids cheering the runners*

Oddly, however, we saw some of the portable toilets having very long queues while others seemed abandoned.

Out of curiosity, we asked the people standing in queue around us what was wrong with the abandoned toilets and it appeared that nobody knew the reason.

At the same time, no one was willing to take the risk of losing their spot in the queue only to learn that the abandoned toilets were “undesired” for a good reason.

In contrast to what a believer in the efficient market hypothesis (EMH) would have expected, we found out that the ignored toilets were actually clean and worked perfectly fine.

We have experienced many similar situations in our lives, of course, but time and time again it’s just astonishing to see human’s tendency to follow the crowds.

But, as the large number of people suddenly queuing behind us showed, it sometimes only takes one contrarian – who desperately needed to take leak – to shift the crowds to the other side…