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Investment Process

  1. STEP1

    Identify the intrinsic value of a company by measuring a company’s – quality of earnings, market growth, and management’s strategy.

  2. STEP2

    Assess the margin of safety between the intrinsic value and the market value of the company.

    Often, the magnitude of the spread between the intrinsic value and market value of a company (or the company’s perceived value) can mislead investors to believe that the greater the value gap (when the intrinsic value is greater than the market value), the stronger the investment candidate.

  3. STEP3

    To avoid value traps, we must take into account whether there is a catalyst to fill the value gap.

Examples of catalysts

Eternal factors – deregulation of industries and / or reforms to accounting systems
Internal factors – changes in corporate governance and / or management strategy

Management Strategy Market Growth Quality of Earnings Predict the future earnings and cash flow Value Gap Intrinsic Value Market Value (Stock price) Catalyst

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