JL Warren Capital LLC is a leading independent equity research firm that focuses on Chinese companies, Chinese businesses and Chinese economy. Our company-specific, bottom-up approach seeks to exploit research edge, with great care to avoid the acquisition of material non public information, and valuation inefficiencies through conducting meticulous due diligence and the construction of proprietary financial models.
Our conviction that the equity market is inefficient squarely contradicts one of the great canons of modern finance theory: the efficient market hypothesis of Eugene Fama. The efficient market hypothesis asserts that financial asset prices at all times fully reflect all available information, and that therefore no-one can systematically outperform the market by using an informational advantage – you can beat the market only through luck. The spectacular and repeated failure of the efficient markets hypothesis has barely dented its popularity, even following the financial crisis that erupted at the end of 2007.
We believe that market inefficiency exists when any of the following four forms of knowledge is missing or misunderstood: data, information, understanding and creative intelligence. Connecting data gives information – patterns and regularities in the data; testing these patterns in the light of hypotheses and theories constitute understanding; the leap from analysis using established facts and theories to new, original insights provides creative intelligence, which successful investors ultimately use to form investment decisions.