Seeking invariants from chaos...
With the accumulated investment wisdom of such giants as Gram and Dodd, Fisher, and Buffet et al, it has become a de rigueur for most investors to focus on high quality companies with consistent operating history and growth prospects. However, precisely because of the wide acceptance of this wisdom and the fact that it has become far easier for all investors to access public company information and conduct routine analysis, we believe outsized returns are mostly likely to be found elsewhere.
We believe that greatest potentials for outsized returns lie with companies going through uncertainties, which include changes in competitive landscape and industry dynamics, new business models, new technologies and products, restructuring, management transitions, and other (real or perceived) risks such as liquidity. These uncertainties make it difficult to apply standard valuation techniques, and the risks associated with these uncertainties are difficult to assess and are frequently misjudged by average investors. These facts, along with wide fluctuations of investor psychology and the impact of momentum followers, provide many opportunities for outsized returns with low risks.
In valuing companies under uncertainties, we are guided by the following fundamental & proprietary models we have developed: