Our forward-looking fraud detection system
To build our investment conviction in order to size our bets with prudence, we are vigilant to tipping points in business models that will result in a valuation re-rating or/and potential index inclusion if they are not yet in key indexes.
Using diverse sources of information, we have set daily alerts to monitor corporate developments, longer-term financial and non-financial “catalysts” of our portfolio stocks and potential new stocks, including:
- Earnings and dividends announcement
- Capital management programs such as share buybacks
- Secondary equity offerings
- Turnover of key appointment holders
- Changes in management compensation and incentives
- Ownership changes
- Value chain information on their key customers, suppliers, business partners and affiliates
True value investors do not blindly look for the attributes, such as “rising tide”, “cheap” P/E ratios or attractive yield spreads relative to historic “cycles”, without the guidance of the quality of the management running the enterprises.
Otherwise, it would be akin to fabricating feathered wings and flapping hard – successful flight will not be possible. We are watchful for longer-term fundamental changes, as opposed to reacting to short-term news “catalysts” which could be manipulated to create buzz around a stock.
8I pioneers in incorporating the fact-based forward-looking fraud detection system that combines accounting data, especially footnotes, with a wide array of contextual information – including unusual related-party transactions; money-go-round off balance-sheet activities; governance, group structure, consolidation accounting and ownership analysis; textual and linguistic analysis; analysis of event-based “catalysts” (information-based manipulation) and sensitive market announcements (action-based manipulation in prices and volume) – to provide fresh insights in equity valuation to inform our decision making in investments.