INVEST THE VALUE-INVESTING community, of which I am proud to be a part, is still trying to get its head around technology stocks. We have historically scorned businesses like Apple and Amazon as boom-and-bust miscreations of the millennium, but enough time has passed that it’s clear this scorn is misplaced. Indeed, companies like these are the General Motors and Coca-Cola of our generation. However, when we evaluate tech stocks we risk being seduced by a business’s rapid growth or by its management’s charisma unless we use the same old-school, value-based framework handed down by Warren Buffett and his teacher Ben Graham. This framework encompasses many variables, but it ultimately seeks to answer two questions: How good is the business I’m buying? And am I getting it at a price that will deliver a superior long-term return?
So how should a value investor assess Tencent Holdings? The company, No. 237 on this year’s Global 500, is a conglomerate with a $425 billion market capitalization. It’s a Chinese mashup of Facebook, PayPal, Spotify, and WhatsApp. As the comparisons suggest, the businesses it owns are excellent. Virtually everyone in China who owns a smartphone interacts with Tencent almost every day. Still, as much as I admire what Tencent has accomplished, I worry about it as a long-term investment. As Buffett said in this magazine in 1999, the key to investing lies in determining not only the competitive ad