We’ve constantly been sharing a list of our recent reads in our weekly emails for The Good Investors.
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But since our readership-audience for The Good Investors is wider than our subscriber base, we think sharing the reading list regularly on the blog itself can benefit even more people. The articles we share touch on a wide range of topics, including investing, business, and the world in general.
Here are the articles for the week ending 01 June 2025:
1. Shanghai After 16 Years: Three Transformations – Thomas Chua
I’ve recently returned from my trip to China, visiting Suzhou, Shanghai, and Hangzhou. The journey took me down memory lane—my first visit to Suzhou and Shanghai was in late 2008. That 16-year gap gave me a unique lens to measure just how dramatically China has evolved…
…The streets were immaculately clean. No scammers in sight. No need to guard against pickpockets. I even observed people using their valuables to reserve seats—similar to Singapore (though I don’t encourage this practice).
For such a transformation to occur, two factors must work in harmony: competent law enforcement and improved living standards.
My sense is that China’s tech ecosystem plays a crucial role in supporting law enforcement—everything leaves a digital footprint that can be traced, making potential perpetrators think twice…
…My second revelation came in the shopping districts. With the exception of Apple and Lululemon, once-dominant Western stores—Nike, Starbucks, and Under Armour—stood nearly empty.
This isn’t about consumers growing bored with Western offerings. Starbucks continues performing remarkably well in Japan, Bangkok, and Singapore despite nearly three decades of operations. The reality? Competition in China is ruthless…
… Their strong performance in China isn’t guaranteed—it must be continually earned. Currently, Lululemon’s China team operates with significant autonomy from North America, with freedom to customize products and store designs for the domestic market. This differs from their cookie-cutter approach in North America, and they’re crushing it in China…
…China has evolved from producing cheap knockoffs to creating exceptional products.
Beyond high-quality EVs like BYD, there’s DJI dominating consumer drones and handheld vlogging cameras, plus mobile phones like the Vivo X200 Ultra and OPPO Find X8 Ultra—phenomenal devices by any standard.
2. Investing in Iraq – yet more gains to come? – Swen Lorenz
Iraq’s oil and gas reserves are staggering: with current proven reserves of 140bn barrels, Iraq is the fifth-largest oil country on Earth.
Remarkably, with only about USD 3 per barrel, Iraq has extremely low production costs, cheaper even than those in Saudi Arabia. Only Iran can currently produce even cheaper oil…
…Why the cost advantage?
In Iraq, oil tends to be near the surface and therefore quite easy to access…
…Iraq’s oil reserves could be even bigger than what is known today. The country’s Western desert has seen little exploration so far, and some believe it will contain even more oil than the rest of the country. Estimates often cite 300bn barrels of oil in Iraq…
…BP had closed down its last operation in Iraq in 1974, following the nationalisation of the oil industry.
Yet, despite the best efforts by the US and UK governments in the early 2000s, BP and other oil majors weren’t going to get back into the country just yet.
It wasn’t until March 2025 – 51 years after its departure – that BP moved back into Iraq. Remarkably, it’s now re-entering with all the more momentum, even though few outside of the oil industry would have even noticed yet.
Two months ago, BP secured final approval from the Iraqi government to redevelop the vast Kirkuk oil fields. The company committed to spend USD 25bn (!) over 25 years. In the initial phase, it plans to produce an 3bn barrels of oil, but the potential is far greater. According to BP’s press release, “the wider resource opportunity across the contract and surrounding area is believed to include up to 20 billion barrels of oil equivalent.”…
…A few months earlier, France’s Total had begun construction of a gas processing facility, marking the first stage of a major energy project. Although Total had already reached an agreement with Iraq in 2021, subsequent squabbling over contract details delayed construction. With an investment of USD 10bn over 25 years, the project is now finally underway…
…Why the sudden rush by multinationals to invest multi-billions?
Iraq has now remained stable long enough and shown sufficient progress for foreign investment to return. The recent period of relative stability has had a cumulative effect: while few wanted to go in first, everyone is now rushing to get in at once…
…After the tumultuous 2010s, the market had been priced as though Iraq were to disappear off the face of the Earth.
Once investors realised that the country was turning a corner, the reaction was like that of a coiled spring.
What triggered this shift was the flow of information. Investors had been unaware of the changing situation, and once they realised, money started to flow into the market.
In 2023, the Iraqi market rose by 97.2%, followed by 44.8% in 2024 (measured in USD terms). Yet, it has only just returned to its 2014 level.
By some measure, Iraq remains an underdeveloped, underfollowed frontier market. E.g., the market capitalisation of all Iraqi companies stands at just USD 15bn. Relative to the country’s GDP of USD 258bn, that’s a national market capitalisation of just 5.7%…
…Iraq’s ongoing transformation – both politically and economically – does not yet appear to be priced in. Price/earnings ratios are in the mid-single digits but based on depressed earnings, i.e. there is lots of potential for companies to improve profitability through internal measures while also experiencing significant growth.
Currently, there are probably no more than 35,000 investors who have traded on the Iraqi exchange, and less than 5,000 of them could be described as active. Local institutional investors are almost non-existent, and the few foreign investment funds active in Iraq manage a total of just USD 250m…
…In frontier markets, basic industries often offer the best returns, and Iraqi banks are a prime example. In 2023, the total number of bank accounts rose by 51%, the usage of bank cards grew by 22%, and the adoption of e-wallets increased by 68%. The number of shops accepting electronic payments more than doubled, growing 115%…
…Needless to say, Iraq won’t become a developed nation overnight and will continue to face challenges. While oil exports to the US are exempt from reciprocal tariffs, the lower oil price weighs on the country’s income. However, Iraq plans to significantly increase its production. In January 2025, it produced oil at a run-rate of 3.9m barrels per day, aiming to reach 6m barrels per day by 2028 or 2029. If achieved, this volume growth should more than offset lower prices. There are even recent – but speculative – plans to even aim for 12m-13m barrels per day by 2030.
3. What Leonardo’s obsession with water teaches us about longevity – Eric Markowitz
But it’s in his obsession with water — fluid dynamics — where I think his secret becomes clearest.
Leonardo believed water was the “vehicle of nature.” He saw its movements as metaphors for everything: emotion, time, decay, even thought. He studied how it carved stone, how it shaped landscapes, how it sustained life. He used the same drawings of turbulence to explain everything from hair curls to planetary motion. Why does that matter? Because I’ve come to see how systems that last tend to flow, not freeze. They self-correct. They adapt. They look chaotic on the surface, but beneath that turbulence is order. They mirror nature. Which, of course, is what Leonardo saw: longevity isn’t about resisting entropy. It’s about dancing with it.
Leonardo wasn’t just studying fluids. He was fluid. Multidisciplinary. Nonlinear. If he had stayed in one lane — say, just painting or just engineering — he might’ve burned out or faded into obscurity. But he didn’t. He swirled. He looped. He revisited, rethought, revised. Like a river, he stayed alive by never staying still.
So what does Leonardo teach us about how to last?
First: Think like a system. Longevity isn’t a product of brute force. It’s an outcome of design. Leonardo’s mind was wired to see the parts within the whole. The relationship between muscle and movement. Between proportion and perception. Between science and art. He reminds us that siloed thinking leads to short-termism.
Enduring value is built by weaving domains together.
Second: Follow curiosity across boundaries. Leonardo didn’t care if something was “in his field.” He followed the thread. In doing so, he accumulated knowledge that compounded in unexpected ways. His heart drawings influenced his paintings. His engineering influenced his anatomy. If you want to build something that lasts — whether a company, a life, or a legacy — you need to let curiosity be your guide.
4. How Larry Goldstein made $250,000 in 2 hours – Dirtcheapstocks
It’s January 2009…
…Larry finds a tiny little business called Compass Knowledge Holdings (Ticker: CKNO).
CKNO partnered with universities to offer graduate degrees for online learning. Remember, this is 2009. The online learning thing is brand new. CKNO sits in a unique position because it was the only publicly traded online learning platform that was partnered with reputable colleges…
…CKNO was a non-SEC reporting company with a $10mm market cap.
Shares sold for $0.60.
The business was sitting on a mountain of net cash. Current assets were 4x larger than total liabilities.
Despite its overcapitalization, Compass earned a 36% ROE.
Put simply, the stock was cheap…
…The stock would be worth a lot more if it filed with the SEC and a broader set of investors could see how cheap the business was.
But how can you make a company register with the SEC?
There is an obscure rule in public markets. If a business has less than 300 registered shareholders, it can remain “public” without filing financials with the SEC. It’s an odd rule that exists to let smaller companies avoid the cost of filing.
Anyway, Larry decided to register a single share in each of his investors’ names. This was done to increase the number of record holders. Shares held by a single broker come through as one record holder for legal purposes. So, by registering each investor individually, Larry increased the number of record holders.
In response, the company initiated a 1 for 25,000 reverse split in April 2009…
…Anyone owning less than 25,000 shares would be cashed out at $1.45/share.
Not a bad return from $0.60/share in a 3-month period…
…On May 19th, 2009, the split went into effect.
The share count was reduced, and the post-split valuation was $36,250 ($1.45 * 25,000 shares).
To Larry’s amazement, when he checks the quote the morning after the split, he sees shares being offered for $2,000!
This is a 94% discount to where shares traded the day before! And even that price was a steal!
Larry called a market maker, and after double and triple checking, was ensured that the $2,000 offer was in fact for the post-split shares.
Larry was able to buy 100 shares at $2,000 apiece. This purchase effectively valued the business at 0.5x earnings and 20% of net cash.
As it turns out, the seller was UBS. The offer to sell was a mistake…
…After a morning of discussions with FINRA, UBS and market makers, UBS offered to buy back the shares at $4,500 apiece.
Larry decided to take a quick profit and avoid arbitration with an army of UBS lawyers.
So, he sold his 100 shares (after owning them for half a morning) for $4,500 a piece – netting a $2,500 profit on each share.
And that’s how Larry Goldstein made $250,000 in a matter of hours.
He held the remainder of his shares – having owned enough to avoid being cashed out in the reverse split. In October 2010, CKNO sold to Embanet for $209,000/share.
5. Building Blocks of Corporate Accounting: Intercorporate Shenanigans – Javier Pérez
Companies use affiliates—subsidiaries, associates, joint ventures—to pursue legitimate business opportunities. But when pressure mounts and performance stumbles, management can misuse those same affiliates to quietly hide problems. Debt disappears into unconsolidated entities. Revenue magically appears through transactions with related parties. Margins get inflated by shifting costs into partially owned ventures.
Here’s a simple framework to visualize the main accounting tricks enabled by affiliates:
Hide debt: A company creates or uses affiliates where it owns less than 50% — just enough to avoid “control” under consolidation rules (IFRS 10 or ASC 810). Even if the parent funds the affiliate, or guarantees its loans, as long as it doesn’t officially control it, the affiliate’s liabilities don’t show up on the parent company’s balance sheet.
Fake revenue: The company sets up or funds related entities that pose as independent customers. It then sells products or services to these entities, booking it as legitimate revenue. In truth, the cash used by the “customer” may have come from the company itself — via loans, marketing payments, or off-the-books financing.
Boost margins: The parent company sells goods or services to an affiliate or JV it owns, say, 30%. It sells at inflated prices, booking high profits. The affiliate eats the inflated costs, but since only 30% of the affiliate’s loss flows back to the parent (via equity method), the other 70% is “outsourced.” The parent books 100% of the gain on the transaction, but only absorbs a fraction of the cost impact from the affiliate. The result is asymmetric — a sort of profit laundering.
None of these tactics necessarily break accounting rules outright, at least initially. In fact, they often begin by exploiting genuine gray areas—using subtle tricks like careful structuring to keep subsidiaries below consolidation thresholds or cleverly timed transactions that auditors find hard to challenge. Over time, the line between aggressive accounting and outright fraud blurs, often unnoticed by investors until it’s too late…
…On the surface, Pescanova was a solid business: fishing fleets around the world, processing plants across multiple continents, and an ambitious international expansion. The story resonated well with investors, particularly in the mid-2000s, as Spain’s economy boomed. Investors saw steady growth, seemingly controlled debt levels, and consistent profits—exactly what you’d expect from a thriving global player…
…To understand exactly what Pescanova did, you need to know a bit about consolidation rules (remember those from the last article?). Under IFRS (specifically IFRS 10, previously IAS 27), companies must consolidate subsidiaries that they “control”—typically meaning they hold over 50% of shares or exert significant decision-making influence.
But consolidation isn’t always black-and-white. IFRS rules are principles-based, leaving substantial room for interpretation. Pescanova exploited this flexibility ruthlessly, ensuring that many entities—particularly those carrying significant debt—were carefully structured so they appeared outside the direct control of the parent. In reality, these companies were fully funded by Pescanova, directly or indirectly, through guarantees or hidden agreements.
By creating subsidiaries that technically sat just below the consolidation threshold (often just below 50% ownership), Pescanova legally avoided putting their massive debts onto its consolidated balance sheet. These were debts incurred to finance aggressive expansions—like shrimp farms in Ecuador, fish processing plants in Namibia, and ambitious salmon-farming ventures in Chile. Investors saw ambitious expansion, but not the corresponding liabilities…
…Pescanova’s accounting creativity wasn’t limited to hiding debt. They simultaneously inflated revenues through fictitious or exaggerated intercompany sales. Here’s how it worked:
- Pescanova’s parent entity would “sell” products to a shell subsidiary or affiliate at inflated prices.
- The affiliate would then record fake sales (often to other controlled entities), recognizing substantial revenue growth.
- On consolidation, some of these intercompany transactions should eliminate—meaning revenues and profits from internal sales typically disappear when financial statements consolidate. But crucially, if the entities involved weren’t fully consolidated (below 50%), the transactions never canceled out fully.
- Pescanova thus created the illusion of steady revenue growth and robust profitability—despite many sales being little more than accounting mirages.
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