Our Investment Process

Our investment process involves thorough screening and intensive analysis through a multi-step process of:

1. Eliminating companies with potential accounting tunnelling fraud and misgovernance risk

This is prevalent in Asian companies with unusual related-party transactions that escape the detection by western-based financial tools and techniques, based on our proprietary fact-based forward-looking fraud detection system that we are grateful to have the opportunity to be invited to present to the top management of the Singapore financial regulator.

2. Analysing the business model for quality, which includes

  • Its resiliency to maintain profitability and protect market positions through up/downturns in the economy and to allow the companies to better manage rapid, sometimes disruptive, technological change
  • Strong leading market positions with proven records across business cycles as this enhances pricing power and creates the foundation for sustainable good profitability, as well as an attractive position in the value chain without being dependent on specific suppliers or customers
  • Continuous innovation and R&D to achieve and ensure strong market positions, create new categories of growth and profitability over time
  • Long runway and addressable market to compound growth from solving pressing problems for their customers
  • Exposure to service and after-market sales to improve the understanding of customer needs, build customer loyalty, and also offers attractive profitability, additional growth opportunities and increased product penetration; prudent stewardship and allocation of capital
  • Ownership changes
  • Strong balance sheet and robust cash flow generation that can be used for reinvestment into the business, for example in R&D and market expansion, to capture attractive opportunities, as well as steady cash distribution to the investor

3. Selecting entrepreneurs and owner-operators with values & passion for their business

This is seen through their thought leadership and value-add to the community whilst serving with integrity, and the corporate culture they build.

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.

Got a question?

+65 6225 8480 +65 6235 0332 info@8iholdings.com

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