As a CEO, I held an immediate shareholders’ meeting at the headquarters without any planning. The shareholders were Kang Jin-hoo and Oh Taek-gyu.
In other words, it means that we were sitting facing each other on the living room sofa.
Taek-gyu’s expression was extremely grim. Perhaps my expression wasn’t much different.
“You took it too lightly.”
The market was taking the current situation seriously.
Concentrating on buying put options for specific stocks before the incident is enough to raise suspicions. It is true that the handling of the situation was not smooth. At the very least, we should have diversified the order accounts a bit.
We did not expect things to escalate to this extent.
Taek-gyu seemed to express his confusion.
“We didn’t do anything wrong, did we? The ones at fault are those who created such options to sell. What’s our fault in buying them?”
“Normally, if you make money with a long position, you receive praise, but if you make money with a short position, you start by receiving criticism.”
“What do you mean?”
Expecting price increases and buying is called a long position, while expecting price decreases and selling is called a short position.
Buying put options and performing short selling is a typical short position.
While other investors make money together in a long position, in a short position, you make money alone when other investors incur significant losses.
Therefore, no market participant receives a favorable gaze.
“There isn’t much to worry about, right?”
I shook my head.
“Even if we let this one go this time, what if we face similar suspicions next time?”
Even if a lottery ticket purchased by chance wins first prize in the lottery once, it’s not strange. But if it keeps winning first prize, anyone would find it suspicious.
“So, are you saying we shouldn’t invest in put options in the future?”
“I’m not saying we shouldn’t invest, but we should consider different investment strategies. Short positions have their limits, anyway.”
“Why?”
If a long position follows the market trend, a short position goes against the market trend. Therefore, it is suitable for short-term investments.
“In the long run, the market will definitely grow.”
Since its inception, the market has continued to grow. Of course, there have been many crises along the way: the Great Depression, two world wars, various terrorist attacks, financial crises, and more.
Each time, there were dire predictions of financial collapse and the end of a market economy. However, while the clock can be turned back temporarily, no one can stop its ticking.
Crises were overcome, and finance and industry continued to evolve, learning from their failures.
“Anyway, it’s impossible to bet billions on short positions unless a shock as significant as a financial crisis occurs.”
Building a long position with most assets and using the remaining ones to respond with short positions when things go awry should be sufficient.
I came to a conclusion.
“Let’s make OTK Company the holding company and acquire stakes in other companies.”
Since the advent of finance, countless investors have fought in the market, with some becoming legendary investors.
When considering the most active investor to date, Warren Buffett undoubtedly comes to mind.
Warren Buffett was renowned for his investment prowess from a young age, running his investment company in his 30s.
Contemplating his investment approach, he acquired a struggling textile company called Berkshire Hathaway in full. At the time, textiles were a declining industry, and Berkshire Hathaway was not generating significant profits.
Using Berkshire Hathaway’s funds, he acquired National Indemnity, an insurance company, turning it into a subsidiary. As insurance companies received regular premium payments from customers, they had ample cash reserves. He began acquiring stakes in high-intrinsic-value companies using insurance funds.
This approach may be illegal in today’s stringent financial regulations, but it was less regulated back then. If things had gone wrong, Warren Buffett could have been a colossal fraudster who swindled countless people’s insurance premiums. However, he achieved tremendous success.
His annual return rate was around 20 percent. At first glance, one may think, “Is that all?” but he consistently produced profits for over 50 years, compounding them.
Roughly every 3 to 4 years, assets doubled. The accumulated rate of return so far is about 2,000%.
The failing textile company Berkshire Hathaway became a holding company with stakes in many famous companies, now ranking 5th in global market capitalization.
Excluding IT companies like ENFL or Google, it became the most valuable company. Warren Boat, the largest shareholder of Berkshire Hathaway, has assets worth 90 trillion won.
“So let’s choose growing companies to acquire stakes in. Acquire over half of good companies and turn them into subsidiaries.”
I finished briefing the major shareholders.
Upon which they asked a question.
“What about the rate of return?”
“For now, the goal is 100% within 3 years.”
“Is that all?”
This guy underestimates doubling.
“Doubling 670 billion is over 1 trillion.”
With that alone, our name can rise in the list of Korean richest. We might not make it to the top, though.
“Position it like that, and bet on futures or options according to predictions. As a kind of hedge concept.”
Taekgyu nodded as if pleased.
“I like that. Options are indeed the best.”
“…”
Options are a shortcut to ruin.
Like stealing something you learn late, once you taste options, you’re never quite the same.
“Let’s go with that plan then. What should we do first?”
“We need to find growing companies.”
***
Once the investment policy was decided, I took immediate action.
First, I extracted and analyzed data starting from the top market capitalization stocks that make up the KOSPI 200.
Although I called it analysis, in reality, it was merely examining corporate information, summaries, fundamentals, and consensus from publicly available data on the internet.
If everything goes well, it will be profitable; if not, it’ll be a loss.
I went through all the top 200 stocks but didn’t find anything particularly striking. I reluctantly decided to analyze all KOSPI stocks.
Excluding ETFs, preferred stocks, SPAC stocks, there were about 1000 stocks in total.
Most of the top market capitalization stocks are well-known large or famous companies like Seosung, Eunsung, SSK, Lite, Shinsegi, and more.
As I went down the list, I found mostly unheard-of companies. Some had negative performance for several years and very little trading activity. I worried that some might soon be delisted, and there were even several penny stocks (stocks that can be bought for less than 1,000 Korean won).
Even after examining all the KOSPI stocks until midnight, nothing stood out.
I pushed aside the stack of papers I had read. That’s when Taekgyu handed me another stack.
“Now let’s look at the KOSDAQ.”
“Ugh.”
The number of stocks in KOSDAQ is similar to KOSPI. I never expected so many listed companies.
Unlike KOSPI, which has strict listing requirements and is mainly populated by large corporations, KOSDAQ has lower entry barriers, attracting mostly startup companies.
Therefore, there are many companies with high growth potential, but on the other hand, there are also many companies with inflated stock prices and little substance.
Choosing gems is more suitable for KOSDAQ than KOSPI.
“Let’s sleep now and continue tomorrow. I’m tired.”
“You go to sleep first. I’ll stay up a bit and then go to bed. Could you make me a cup of coffee, please?”
“Okay.”
Taekgyu prepared coffee for me and went to bed.
As I sipped the coffee, I continued to sift through the data.
***
At some point, the day had dawned. I had examined all the stocks in the KOSPI and KOSDAQ markets in two goes, set down the data, lifted and then set down my coffee cup upon realizing it was empty.
Should I have another cup?
I must have had around ten cups already.
Lost in unnecessary thoughts, Taek-gyu walked down from the second floor.
“Did you sleep well?”
“What’s up? Did you stay up all night?”
“It’s time for bed now.”
Taek-gyu asked, looking at the pile of papers on the table.
“Did you find out anything?”
I nodded.
“I’m sure of one thing.”
“What is it?”
“We’re completely barking up the wrong tree.”
Taek-gyu chuckled.
“Did the Oracle tell you so?”
“Do I have to try it before knowing if it’s crap or soybean paste?”
Ever since gaining foresight abilities, my intuition had improved. Even without a hologram appearing before my eyes, I could sense that much.
“Is it about the wrong acquisition plan?”
“I don’t think so. The direction seems right, but the method feels off.”
As much as it would be convenient to display something like ‘Top 20 Investment Picks’ as a hologram, based on the patterns I’ve seen so far, it doesn’t seem likely.
“Deciding on the company to acquire is one thing, but how you take over the stake is also an issue.”
Buying controlling interests or treasury shares in a block deal format is relatively better. However, purchasing shares on the open market presents its own set of problems.
The large conglomerates with market capitalization in the tens of trillions won’t pose any problems, but for companies with market capitalization below 1 trillion won, as soon as we buy shares, the stock price will skyrocket, and conversely, if we sell, the stock price will plummet repeatedly.
It’s like how nothing happens when a rabbit goes into a lake, but when an elephant goes in, the water overflows, and when it comes out, the water level drops.
Taekgyu’s expression showed astonishment upon hearing me speak.
“There’s nothing easy, is there?”
“I know, right.”
As the size of the funds grows, management becomes more difficult.
Taekgyu seemed to have a thought.
“Oh! What about foreign stocks? There are many great companies like Apple and Google. There are also emerging markets like Vietnam, India, and China.”
It was such a good opinion that it was hard to believe it came out of his mouth.
The Korean market cannot be compared to the global market. By looking towards the world, we might find more opportunities.
“It’s something worth considering. But there should be a certain route for that too.”
“Why not hire a finance professional who knows about foreign affairs?”
Even if there is good information, there are limits to analyzing it and determining an investment strategy on our own, so I had thought that industry insiders’ help is necessary for swimming in the deep waters.
“But is there someone trustworthy… Huh?”
Taekgyu and I looked into each other’s faces.
“Are you thinking the same thing as me right now?”
“It seems so.”
