Investment opportunities lie in future dynamic changes and the amount of value creation, and not necessarily in the shares of large companies or those with past and present superiority.
The quality of earnings is determined by the product of the amount of comparative advantages over competing firms and the period over which those advantages will continue. In other words, it is determined not by exogenous factors such as the business cycle and foreign exchange rate fluctuations, but by how much earnings will continue to grow from a company's own efforts.
When discerning actual value, it is important to understand and forecast objectively a company's past, present and future from tangible and intangible information to the greatest extent possible, without being trapped by established theories or common interpretations.
While stock markets are inefficient, structural adjustments proceed over time. Fundamentals analysis is the method which overcomes the gap between market share prices and the share prices which accurately reflect actual value. Fundamentals analysis creates value added.
The belief that patient long-term buy-and-hold stock investment will be rewarded is an illusion. The barriers to market entry are lowering in almost all businesses, and the rise and fall of enterprises is swift. It is essential to understand the life span and life stage of each company, and to use different investment methods (investment periods and measurement criteria) accordingly.
