What is Mean Reversion? Mean Reversion is a financial theory that suggests that the prices of assets tend to move back to their long-term average or mean level. Price momentum fluctuates around the average mean, overswinging both up and down before eventually returning to the mean. This theory is based on the belief that extreme… Continue reading
Margin of Safety is a term used to describe the difference between the current share price of a stock and its intrinsic value. In other words, it is the discount at which the stock is trading in comparison to its actual worth. The Margin of safety is not necessarily an equation but a guiding philosophy… Continue reading
What is Intrinsic Value? Knowing whether you are paying a fair price for a stock can be challenging. This is where the concept of Intrinsic Value comes in. It is a measure of the true worth of an asset. This is independent of the Market Value which is determined by what investors are willing to… Continue reading
Stock valuation is the process of determining the intrinsic value of a business. This involves analysing the financial statements and understanding the business model, assets, liabilities, revenue, and other key quantitative and qualitative metrics. By doing so, we can assess whether an asset represents a viable investment opportunity or not. The underlying factor of stock… Continue reading
The Investment Process is a systematic approach to investing, which can be useful for private investors who want to succeed. It’s not only reserved for professionals. You cannot rely on intuition alone in investing. You need a logical reason for why you invest in certain ideas and not others, based on reasoning and facts. This… Continue reading
The Investment Checklist is a valuable resource that private investors should consider adopting as an essential part of their Investment Process. A checklist is used at the bottom of the filter, after generating investment ideas, but before finalizing the Investment Thesis. Its purpose is to act as a pre-thesis due diligence process to quickly sift… Continue reading
An Investment Thesis is a written document that outlines why you are investing in a particular idea. It is grounded in your research and analysis and forms the cornerstone of the Investment Process. The Investment Thesis will help to explain with reasoning why you believe a certain investment is viable and how you came to that… Continue reading
The Value Chain is a sequence of inputs that are utilised in creating a final product or service. It can also be observed from an industry value chain perspective that makes an entire sector functional. A value chain comprises several business activities and processes that a company must undertake to sell a finished good or… Continue reading
The Scuttlebutt Method of Investing can be a critical component of the Investment Process. The idea behind “Scuttlebutting” is to collect important pieces of information from a variety of resources. It is an unorthodox way of gathering intel that forms a Qualitative analysis approach to deep research. Moving beyond the conventional quantitative, financial and valuation… Continue reading
As a part of a rigorous investment process, it is important to assess management quality before buying shares in a company. There are many ways to research and analyse qualitatively how the management team stacks up. If you are entrusting your capital to a company, it is only fair to know who will lead that… Continue reading
