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In Malaysia, the Bahasa term “jaguh kampung” (literally “village champion”) is meant to belittle a person who is so full of himself after achieving some record feat in the country. The idea is that the person should be benchmarking himself globally rather than just nationally.
I fell into this “village champion” category when I first started value investing as I had a track record of bearing the KLCI (Bursa Malaysia index) over several years. Then I started to look at investment case studies and invariably the majority of them relate to US stocks.
I am not sure whether it is the stronger economy or the size of the market, but the stock market returns of many US companies far exceed those in Malaysia. To give you a sense of this, over the past 25 years, the KCLI grew at 3.9 % CAGR compared to the S&P 500 CAGR of 5.8 %.
The chart below is another example. It compared the share price trend of Bursa Malaysia Petronas Dagangan with some of the US Oil & Gas companies with petrol stations operations. It is not exactly apple to apple but you can see the better share price performance of the others. https://i.postimg.cc/FHJ829vj/Petronas-Dagangan.png
Beating the KLCI was not so great. If I had set my sights on the US market years ago, I might have made more even if I just matched the S&P 500.
Moral of the story. To max your stock returns, you should focus on those stock exchanges with the better returns. There is no point being the village champion unless your village is the best in the world.
There are 2 Bursa companies in the service station sector – Petronas Dagangan and Petron Malaysia. https://www.i4value.asia/2023/11/petron-malaysia-is-still-not-value-trap.html#more
The former is about double the size of the latter in terms of revenue. You may think that this may give Petronas Dagangan some advantage
But you can see from the chart below that Petron Malaysia is no pushover and is able to compete. https://i.postimg.cc/T3YhWqkC/Chart-5-min.png
So which would you chose to invest from a fundamental perspective?
The service station business is not a lucrative anymore as the upstream oil and gas business. That is why many of the global oil and gas companies are pulling out of this service station business.
Petronas Dagangan http://surl.li/lynug may see lower sales volumes if the Malaysian government reduces the availability of petrol and diesel subsidies next year, which may expose consumers to the currently high prices for transportation fuels
