Investment Philosophy & Process
At the core of APS’ investment philosophy is our belief that sustainable alphas can be produced by generating original ideas, focusing on investigative and forensic accounting analysis, conducting rigorous valuation work, developing clear investment theses and constantly testing them, having conviction in our investments and being keenly aware of the downside risks.
Our investment conviction is derived from our intimate knowledge of every company in the portfolio and by investing like a long-term business owner. We construct alpha-diversified portfolios and we do not seek diversification in the conventional way. We invest for the long-term. We are aware that some of our investment theses might take time to play out, but we expect to be rewarded handsomely with multi-baggers when they do.
We know our limitations, i.e. we know we don’t have the skills nor ability to predict exchange rates, interest rates, commodity prices, etc. and to time the markets. That’s why we don’t spend precious time on these things.
Our investment process reflects our investment philosophy.
Idea generation: Ideas are generated by identifying long-term trends, seeking superior insights, using unconventional sources of information, and looking for contrarian ideas with asymmetric risk-return profiles. By relying on an acute sense of history and investment memory, we endeavor to identify and glean strategic insights from geopolitics, as well as social, economic, and industrial policies. These insights often help generate original investment ideas.
Company research: In addition to the traditional Benjamin Graham style of fundamental analysis, our investment professionals wear two more Hats in researching companies - the Investigator Holmes and Businessman Kuok Hats. We conduct investigative research and forensic accounting analysis to make sure what we see and hear is what we get. We also put on our Businessman Hat to analyze companies in the manner of a savvy businessman.
Portfolio construction: Our portfolio managers construct alpha-diversified portfolios comprising stocks with structural, dynamic, economic, and opportunistic alphas. The portfolios of high- conviction stocks are diversified across more than 10 alpha clusters, where the correlations are low.
Risk management: We define risk as downside risk which can come from three major sources—deterioration of industry and company fundamentals, overvaluation, and debilitation of investment theses. We do not believe volatility or tracking error are true measures of investment risk. Nevertheless, we manage portfolios in strict compliance with client investment guidelines.