Investment

Philosophy

Value investing is an investing school introduced in 1920s by Benjamin Graham, father of securities analysis, and spread by renowned investors like Warren Buffett. All value investors focus on identifying undervalued securities in the market, but value investors execute value investing with diverse investment philosophies and styles. In InfiniteSpring, four pillars of our investment philosophy are:

A) Business owner mindset. For us, securities are not pieces of paper for trading, but partial stakes in businesses. Value of securities are determined by their economic fundamental of underlining businesses. To figure out business intrinsic value, we must think as the owner of business does.

B) Margin of safety. Investing is about handling the relationship between value and price. We dig for investment opportunities with margin of safety, which means prices are in discount relative to values. In financial markets full of uncertainties, margin of safety would serve as both a risk buffer and a return booster.

C) Awareness of investors’ psychology. Businesses’ values are relatively stable because changes in business economic fundamentals require time. However, market prices are very volatile, which is mainly due to investors’ psychology. Investors are not always rational. When investors are greedy and enthusiastic, they buy with premium prices. When investors are feared and pessimistic, they sell at discounted prices. As a result, there are ups and downs in market. Understanding investors’ psychology, we can be prepared well for or even profit from market volatility.

D) Long-term vision. We develop our investment strategies based on long-term vision for two reasons: 1) Undervalued securities need time to realize their intrinsic value, as Benjamin Graham said:"Over the short term the market is a voting machine, but over the long term it’s a weighing machine". 2) We seek to take advantage of the great power of compound interest. If compounded annually at an average investment return rate of 13%, $100,000 would turn into $ 1.15 million after 20 years, $3.91 million after 30 years, and $45.07 million after 50 years.

We conduct our research and investing with the methodology guided by our investment philosophy. We do research on the fundamental of company to understand and evaluate company’s business model, competition situation, strategic advantages, growth opportunities and risks, management’s quality and strategy, earning’s power, assets quality, etc. With this bottom-up research, we reach an estimation of company securities' intrinsic value. Company securities whose market prices are under their intrinsic values would be selected as investment candidates. Also, we study the macro economic conditions and financial market situations to take the temperature of market and evaluate investors’ mood. Mainly with selected undervalued securities, taking clients’ investment objectives and restrictions, portfolio diversification and risk control into consideration, we construct clients’ portfolios, which are continuously reviewed and rebalanced, and adjustments would be made when they are necessary.