The Fund’s investment process involves
Step 1: Right Business
Moat, Durability & Longevity
We look for businesses with three factors in particular: an economic Moat, Durability and most importantly, compounding potential.
These three are sources of qualitative insights that are less efficiently priced, enabling us to potentially unearth hidden champions that are mis-priced yet with a long runway of growth.
Step 2: Right Management
Founder-Led with High Ownership; Aligned with Stakeholders through their Values and Passion; have a Track Record showing their capabilities.
As mentioned in the book “Hidden Champions of the 21st Century“:
“If I had to choose one single explanation for the outstanding and continuing success of the hidden champions, it would without a doubt be the personalities at the top.”, our team looks for companies that are Founder-Led with High Ownership; Aligned with Stakeholders through their Values and Passion; have a Track Record showing their capabilities.
Step 3: Risk
Risk Assessment Process, Accounting/Credit & Misgovernance Risks
As with all investments, the team strives to understand what are the key risks involved, with the intent to make better decisions, or rather, how to avoid making stupid ones.
Decision-making is not about making brilliant decisions, but Avoiding Terrible Ones. It is presumptuous to assume that we will not make mistakes and dumb decisions; in fact we may make more, but we aim to be on high alert to avoid the big or “fatal” ones.
We are confident of our Risk Assessment Process which is able to Detect Accounting/Credit & Misgovernance Risks.
“You look at all the successful companies, what is the key? Their brainpower. The thinker, good management, good innovators… Successful CEOs are like gems you find on a beach. There are many pebbles, many beautifully colored ones, but they are all stones. Now and again, you will come across a real precious gem, a real emerald, pick it up, polish it. He must have a set of qualities that fits with the job, has energy, drive, ability to interact with people, ability to get people to work with him in a team.”
– Lee Kuan Yew, founding Prime Minister of modern Singapore, in Hard Truths to Keep Singapore Going
Step 4: Right Execution
The essence of equity investing is – buying (and staying invested in) only those stocks where there is a significant Value-Price gap.
Equity valuation is a continuously evolving practice. In his book Investing – The Last Liberal Art, Robert Hagstrom traces out five phases of valuation – discount to hard book value in the 1930s-1940s, Dividend yield in the 1950s, Earnings and Earnings growth in the 1960s, ROE & Cashflow in the 1980s, and Cash return on invested capital now.
