Strategic Thoughts - Mapping Philosophy into Processes to improve strategic investing
Prepared by: Sing Koo, 2019/11/20
Knowing the philosophy of your investment target is key
Philosophy is explained as “the study of the fundamental nature of knowledge, reality, and existence, especially when considered as an academic discipline”. Enterprise discloses philosophy and business processes in earnings transcripts, s1, 10-K and 10-Q filings. It is apparent that much of an enterprise’s earnings call is reflective of executive team’s philosophy and the financial results are included as numbers and charts in balance sheets. Therefore, earnings call transcript provides the critical philosophy in words by the executive team. For example, if a company’s philosophy practices environmental, social and corporate governance (ESG) in its business model, investments that actively pursue ESG revenue models would consider it as a potential candidate. There are many other derivatives of philosophy constraint business strategies such as risk, value, market space, and growth that affect future financial performance of a company. As executive team devises business strategy, it lays out a roadmap for execution. For competitive reasons, most roadmaps are not available to the general public. During earnings conference call, investors would listen in for hints and ask questions, connect the dots in an attempt to figure out the risk and the reward.
Using Earnings Intelligence to get the High Level Abstractions
Under the limitation of “bounded rationality”, the lack of background knowledge and the lack of timely information on a public company can handicap strategists’ ability to gain a full vision about its investment target. Using information from Earnings Intelligence, one can focus on the “High Level Abstractions (HLA)” to identify factors that affect a company’s growth or decline, business operations and available market. Once identified, one can zoom directly into the associated excerpts for details. This provides the shortest path for strategic investors to gain a detail understanding of various options available for investment.
There are many data abstraction techniques available for strategists to automate this process. The old school of thoughts uses sentiment analytics, word frequencies and data dictionaries. Newer approaches use Artificial Intelligence techniques. We approached this problem by innovating a tribe of AI implementing heuristic and symbolic logic as a philosophy to perform automatic abstraction. Our project code name is “English Language AI NLU Enablement” (ELAINE). The online application is called “Earnings Intelligence” (EI). Leveraging on AI to abstract complex scenarios with a high degree of precision alleviates strategists from TLDR of voluminous earnings call transcripts.
High Level Abstractions are posted on Twitter - SITEFOCUSHQ
As a novel approach to strategic investing, we have been posting via Twitter HLA of earnings call analysis. Annotation to HLA and other details reports are available by invitation only. If you have interest in the EI application, or if you have comments and questions, please drop me a message at LinkedIn to start a conversation.