First purchase after refined understanding, Tsit Wing in October 2006 and Food Empire in November 2006

With refined understanding about investing, most importantly in how to understand and value a business, I made new purchases, two stocks trading above NAV this time.

In October 2006, I bought Tsit Wing (coffee and tea distributor) at 30 cents. I estimated its intrinsic value to be about 60 cents, cost of capital at 10%. Tsit Wing was able to conquer a substantial market share of Hong Kong and was venturing into China. I thought then that if Tsit Wing could survive so well in Hong Kong, there must be something it did right to maintain its market share, something considered as competitive advantage? I would realise later there wasn't much competitive advanage about Tsit Wing.

In November 2006, I bought Food Empire (coffee distributor) at 53 cents. I estimate its intrinsic value to be about 75 cents, cost of capital at 10%. This business was brought to my attention by a fellow value investor. By then it was trading at 53 cents, its nearly 1.7 times NAV. However, the fact that it operated in emerging market in Russia, Ukraine, Eastern Europe (not popular China, India) fascinated me. There were so many brands in these countries, yet the coffee provider, Food Empire (foreign to the market it operate in) could conquer a substantial market share showed that it should possess some competitive advantage over rivals, at least in term of branding.