We believe financial markets worldwide manifest a considerable sense of irrationality and inefficiencies. In light of this deduction, we endeavour to identify undervalued securities with virtually zero risk given an adequate horizon for fundamentals to reflect. Based on our historical observations, these opportunities emerge from time to time particularly in an ambiance of extreme pessimism – where stocks trade below net cash per share, commodities sell below production costs, underdog companies with excellent growth prospects overlooked etc.
On top of financial analysis, we place equal emphasis on quality of management, corporate culture, ESG (environmental, social and governance) issues, and a company’s competitive position in its industry. An imperative process in determining the quality of management is to examine how effectively a company’s strategy is executed and how closely results align with their target. We favour companies with organic growth over those that show signs of ‘empire building’; and companies that adopt performance-based compensation policy, i.e. salary and perquisite awards constitute a smaller of managers’ compensation package. We also conduct regular scrutiny the competitive forces of a company and give predilection for companies that operate in a niche and/or specialised market.