Our 4 Node Investment Process (Mini-Primer)

NODE #1: Monumental Societal Shifts

Identify what we believe is a “truth” about how the world works today and how it will work in the future. Example: We’re Addicted to Video & Images. We’ve identified 23 “NODE #1” shifts… a few of which pip touched on earlier.

NODE #2: Markets

Identify products, services, markets that will be affected positively or negatively based on a change at NODE #1. Example: The Flat Panel TV market is booming thanks to the NODE #1 shift around society’s Addiction to Video…

NODE #3: Companies

Identify companies that will be positively or negatively affected based on a change at NODE #2. We look for companies that will generate an unfair sustainable competitive advantage or will be in the process of losing one. Example: Corning as a glass provider to the flat panel TV makers.

NODE #4: Stocks

Identify the degree of leverage in the business models and valuation “leverage” for those companies experiencing dramatic change at NODE #3. Do earnings estimates fully account for the monumental change happening in NODES #1 thru 3? Will there be valuation expansion as the change takes place? Example: Corning had NODE #4 leverage until they ran into the same ASP pressure that was affecting the rest of the supply chain.