Investment Process
From identifying an opportunity to deciding what to hold, research connects the price we pay with the business we understand.
ABCD’s equity investment process brings together opportunity screening, investment research, and valuation and monitoring. Each stage tests a different part of the investment case, with risk considered throughout.
On this page
01
Opportunity Screening
A falling price is a starting point for investigation. The question is whether it reflects a temporary dislocation or lasting damage to the business.
Screening looks for a gap between market price and the underlying business. Forced selling, a policy shock or a sector-wide selloff can affect sound companies alongside weaker ones. An earnings reset, pressure on a balance sheet or extreme sentiment may also create a situation worth examining.
Understand what has changed
The first task is to distinguish the market event from its economic consequences. Has the company’s ability to earn changed? Is selling driven by liquidity needs elsewhere? Is the apparent discount supported by an estimate of value, or does it depend on a return to conditions that may no longer exist?
Assess whether the business can recover
Financial survivability matters before potential upside. Debt obligations, cash needs and access to funding help establish whether a business can withstand the stress period. A recovery case also needs an identifiable catalyst and a downside scenario that can be examined.
Permanent impairment and value traps are reasons to screen a candidate out. A low valuation alone does not resolve weak economics, refinancing pressure or an uncertain recovery path.
Before deeper research
The candidate needs a measurable valuation gap, a credible recovery case and enough evidence to investigate the downside. Screening qualifies an idea for research; it does not establish the case for buying it.
02
Investment Research
Research tests whether the investment case survives scrutiny of the business, its finances and the assumptions behind recovery.
A price discount becomes meaningful only in relation to what a company can earn and sustain. Research examines the business model, management’s capital allocation, unit economics and competitive position, alongside the resilience of the balance sheet.
Connect the evidence
Financial statements and company disclosures provide a basis for understanding earnings, cash generation and obligations. Company and industry research can add context: how customers behave, how competitors respond and whether the conditions behind the original dislocation are changing.
The work should explain the market-expectation gap: what the current price appears to assume, what the evidence suggests instead, and why the difference might close. A catalyst needs an economic mechanism and a plausible timeline, rather than an expectation that sentiment will eventually improve.
Test more than one outcome
Bull, base and bear scenarios connect different assumptions to possible outcomes. The downside case tests the consequences of delayed recovery, weaker earnings or a catalyst that fails to materialise. Evidence that challenges the thesis matters as much as evidence that supports it.
Fundamental analysis, alternative data and quantitative tools support this work. Tools help organise and examine information; investment judgement depends on the quality of the evidence and the assumptions made from it.
From research to conviction
The investment case brings together estimated value, catalysts and downside. Its strength informs the level of conviction and the position size considered, subject to the strategy’s portfolio and risk constraints.
03
Valuation & Monitoring
The investment case guides the price paid and the position held. It remains open to revision as the evidence changes.
Set price and size together
Entry valuation compares the available price with estimated value and the range of outcomes developed in research. Position sizing considers conviction alongside potential loss, liquidity and portfolio concentration. An attractive discount does not remove the need to examine what could go wrong.
The exit plan belongs in the initial investment case. It identifies the conditions that would weaken the thesis and the circumstances in which the expected upside would no longer justify the risk.
Follow the business through recovery
Monitoring follows the catalysts and operating assumptions behind the position: recovery milestones, earnings normalisation, changes in valuation and liquidity, and signs that the market is recognising the business differently.
Price movement alone cannot establish whether a thesis is working. A rising price may reduce the remaining opportunity, while a falling price may signal either further dislocation or a flaw in the original analysis. Both require comparison with the business evidence.
Reassess the position
Confirmed milestones can support holding or adding within portfolio limits. Deteriorating fundamentals, a failed catalyst or a smaller gap between price and value can lead to a reduction or exit. When an important assumption changes, the research needs to be revisited.
Hold, resize or exit
The decision follows the remaining opportunity and risk. Capital released from a position becomes available for other opportunities; it need not be reinvested immediately.
Application across strategies
Eclipse Fund
The process is central to Eclipse’s crisis-opportunity equity investing: identifying dislocation, researching the business’s capacity to recover, and managing the position as value is recognised.
Nova Fund
Nova applies equity research within a broader multi-strategy mandate. Options, gold and other instruments need assessment suited to their payoff, market conditions and liquidity. They share the emphasis on evidence, sizing and exit discipline, rather than following a crisis-equity thesis in every case.
Risk throughout the process
Risk informs which ideas receive further research, how much capital is committed and when a position needs to change.
Downside assessment, liquidity and concentration connect individual investment decisions with the wider portfolio. These disciplines continue during the holding period. Estimated downside is a scenario, not a guaranteed loss limit; investments can lose capital.
The Risk Management page explains the wider framework. Governance covers the platform’s responsibilities and standards.