We embrace value investment principles of Benjamin Graham, Warren Buffett, Charles Munger, Li Lu, and Duan Yongping. Simply put, we strive to own good businesses with good company culture at a good price, by slice or whole. Due to the opportunity sets that we are able to identify within our circle of competence, our current prospective investments will primarily focus on Asia Pacific region.
We strive to attract like-minded, qualifying persons as long term partners. We firmly believe that the seamless web of earned trust, particularly among us and our clients, will give the us a strategic advantage to seize opportunities when they emerge, especially during severe market or economic distress.
We firmly believe in the concept of circle of competence and boundary of knowledge, first developed by Warren Buffett, then elaborated and furthered by Charlie Munger, Li Lu and Duan Yongping. Mr. Warren Buffett believes that through extensive, all-around research and vigorous long-term effort, investors can build their circle of competence, which can give them superior insights and unparalleled understanding of selected industries or companies within that circle. Charlie Munger, Li Lu and Duan Yongping furthered that concept by developing a systematic methodology to define and stress-test that circle. That methodology stresses first principles thinking, avoiding human psychological biases including confirmation bias, and knowing what you do not know.
Over the past 19 years, primarily through professional and investment experience before founding Flowing River Capital, we accumulated considerable knowledge and expertise in selected industries and companies within more broadly defined industries such as real estate, financial services, consumer products and technology, with a global perspective and a focus in Asia Pacific.
We are dedicated to identifying and investing in securities trading at a substantial discount to their “intrinsic value”, estimated by our fundamental and proprietary analysis. We believe that by purchasing securities at a deep discount, we can minimize the risk of permanent loss of capital while maximizing capital appreciation potential.
In the forms of estimated cash flow or potential earnings power, we focus on economic essence to value security rather than relying on “reported earnings”.
As many securities, such as listed stocks that we consider for investments, are of long-duration in their fundamental economic nature, we focus on the long-term (usually in five to ten years or longer) economic earnings potential of those securities.
All things being equal, we prioritize proprietary, authentic information and analysis, including public filings, conference calls, in-person meeting with management, field research, product testing, and expert interviews. We utilize sell-side research on a highly selective basis and rarely rely on it. To facilitate proprietary analysis, we have a strong focus on building long-lasting, broad, and deep relationships across the globe, with a focus on real economy and key influencers.
Many securities, such as listed stocks that we consider for investments, are of long-duration in fundamental economic nature. Therefore, stakeholder value is a long-term driver of shareholder value. Though our investment strategy is not narrowly defined or limited to ESG (Environmental, Social and Governance) investing, we believe that an objective evaluation of stakeholder value is of paramount importance to judge the sustainability of a particular security's future economic benefit, which ultimately drives long-term investment performance.
Consistent with our approach, by and large, we do not intend to enter into transactions that attempt to limit volatility as its primary goal, such as active day-to-day trading to protect short-term performance. Typically, we do not view market price volatility as a fundamental risk, but an opportunity. As Benjamin Graham famously said, “in the short run the market is a voting machine, but in the long run it is a weighing machine.” We focus on “weighing” the security-estimating the investment’s intrinsic value while objectively observing or taking advantage of market price fluctuation. We believe that this approach will yield better returns for clients over the long term than trying to smooth out volatility and improve short-term performance.
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