JL Warren Capital LLC is a leading independent equity research firm that focuses on Chinese companies and the Chinese economy. We employ a company-specific, bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through meticulous due diligence and proprietary financial models, our research methodology helps us pinpoint valuation inefficiencies.
We believe that the equity market is essentially inefficient – an idea that squarely contradicts one of the great canons of modern finance theory, Eugene Fama’s efficient market hypothesis. This theory asserts that financial asset prices fully reflect all available information at all times. Therefore, no one can systematically outperform the market by using an informational advantage – one can only beat the market through luck. The spectacular and repeated failure of this hypothesis has barely dented its popularity, even following the devastating financial crisis that erupted at the end of 2007.
We believe that market inefficiencies can exist when any of the following forms of knowledge are lacking: data, information, understanding or creative intelligence. Information consists of patterns and regularities in data; understanding comes from testing these patterns in the light of hypotheses and theories; and creative intelligence arises when one leaps from analysis using established facts and theories to new, original insights. It is precisely these kinds of insights that help successful investors form investment decisions.