Hedge fund investors’ investment strategies give us a very good investment insight. You will have a good insight for investment through the investment philosophy and investment principles of various asset management companies.
J&J Investments’s investment strategy does not include financial information such as operating profit. Instead of evaluating financial information, j&j Investments evaluates how firm and robust a business model is.
The way in which J&J Investments evaluates the robustness of its business model is whether it has pricing, whether it can diversify its product portfolio, and whether it will generate the most sales in some countries, such as China.
For example, when a global oligopoly system was formed by Samsung Electronics, SK Hynix and Micron at the end of a long chicken game in the semiconductor industry, J&J Investments shifted from a passive position to an aggressive investment. This is a good example of the investment style of j&j Investments.
The investment point of j&j Investments at the time was that the quality of profits would have been expected to increase as the price control of the surviving companies increased, and that the semiconductor would be a beneficiary of the fourth industrial revolution.
It also gives good grades to companies that succeed in business diversification. This is LG Innotek’s representative. Although LG Innotek is an IT company, it has transformed itself into an auto parts company that manufactures light emitting diode (LED) lamps for automobiles, creating new corporate value.
GVA Asset Management emphasizes the flow of cash. In other words, it is important to focus on the cash flow earned every year. It focuses on “free cash flow” excluding investment costs from operating profit before depreciation(EBITDA), which is a typical indicator for determining cash flow.
GVA Asset Management assigns the concept of “free cash flow” instead of “net profit” in Return on Equity (ROE, net income divided by equity). This concept determines the investment if the percentage is greater than 10%.
According to the GVG Asset Management, this strategy is useful when determining the situation where you can not recover your trade receivables, and when you have invested in your equipment and you have no cash in your company.
RyukyoungPSG Asset Management uses the cash flow of companies as the basis of investment decision. They use net cash, P/B and ROE as key indicators to determine cash flow.
RyukyoungPSG Asset Management is especially interested in the ratio of net cash to total market capitalization, because cash accumulated during that time not only demonstrates the stability of the company, but it also provides a basis for increasing investment and dividend growth in the future.
PBR and ROE are indicators used to find stocks that earn higher profit margins than valuations. And another indicator is dividend yield. Being able to pay is equivalent to having a steady cash flow.
Trinity Asset Management has the principle of investing heavily in leading industries. They have invested in leading industries with this principle, and it has been said that it has exceeded the market average return rate not only in the rising market but also in the crossing market.
Trinity Asset Management decides to invest in companies whose profit trends are visually confirmed, companies that are decided to be delivered to a forward company, or companies that are highly likely to be delivered. And companies with a strong influence in the parts and materials market can be included in the investment.
Trinity Asset Management does not take into account the PBR when selecting stocks because PBR does not reflect the R&D or marketing expenses necessary for corporate growth. In other words, if the PBR is below 1, it is undervalued or if it is high, it does not judge that it has entered the overvalued area.
Tiger Asset Management has an investment style that values value investment and adheres to value investment principles. They invest in growth stocks and dividend stocks that meet these investment criteria. If they meet the criteria, they will consider aggressively investing in small stocks with a market capitalization of less than 30 billion.
Of course, they strictly observe investment principles established by type. In dividend investment, whether dividend yield (dividend per share/share price) exceeds 5% is the most important criterion. Among companies with a dividend yield of more than 5%, we pick out where cash is big in the hands each year.
A company with a lot of cash accumulated inside it is likely to continue to increase dividends, and investing for business expansion will increase its share price.
The relationship between earnings growth and PER is also important. If the PER is somewhat higher but the PER is lower than the company’s profit growth rate, investment is considered.
For example, if a company grows steadily at an annual average rate of 40%, it can be judged that investment is not a problem even if the PER is 30 times higher. However, if the PER exceeds the profit growth rate, it sells stocks without any hesitation.
DS Asset has a typical value investment style and will not dispose of its stake until once it has decided that it will maximize profits once it makes a decision on funding. To do this, DS Asset carefully determines the value of the company in various ways and makes a decision to buy stocks carefully.
Lime Asset Management mainly selects growth stocks whose operating profit is expected to increase in mid- and long-term. In addition, among large-cap stocks whose stock prices have fallen for a long time, we find the cause of the stock price decline. And if the cause is likely to disappear in the near future, invest in it.
They will take a short position on stocks that have sharply dropped in operating profit, stocks that have skyrocketed due to certain news, and stocks that have been affected by government regulations. In the case of stocks that are damaged by government regulations such as distribution, insurance, and telecommunications, it is difficult to expect a rise in share prices.
Fides Asset Management invests mainly in Vietnam stocks. They use a strategy to select and invest in companies with high dividend yields and high growth potential and high market share.
This content is based on the “Investment Note of Hedge Funds” of hankyung.com