OUR RESEARCH METHODOLOGY
Non-consensus inputs generate non-consensus results.

At Fusion Wealth Management Limited ("Fusion"), our mission is to better understand the present and to peer into the future from a basis of knowledge. We deliver research reports to advisory clients and as bespoke service. Our experience has enabled us to look at investing differently than others. Fusion's research places an emphasis on data and valuation metrics that are different from others¹. We focus on people, structure, and value.

People – Business is about people. This is especially true in Asian and emerging markets where the controlling shareholder many times owns the majority of a company's equity. Understanding a company from the controlling owner's perspective is something that is overlooked and typically not included in research reports.

At Fusion, we look objectively and evaluate a company's controlling shareholders. We look at the owner's track record of capital allocation for both their listed and unlisted investments.


Structure – Investors depend on structure. A good structure aligns interests between controlling and minority shareholders. A bad structure transfers assets from the listed entities to the controlling shareholder's entities.

At Fusion, we go beyond the listed company and spend as much time looking at a controlling shareholder's unlisted investments. In mapping out the structure we uncover the potential for adverse transfer pricing and the potential for long-term pump-and-dump schemes.


Value – Paying too much for an asset is an easy way to lose money. An expensive asset will likely revert to a lower price. An inexpensive asset will likely increase to a higher price.

At Fusion, we minimize clients' loss by investing and recommending quality assets only at inexpensive valuations. We emphasize long-term valuation metrics that are rarely used by sell-side analysts. We emphasize absolute rather than relative metrics. We back test these to minimize the shortcomings.

While most of our valuation work has been looking for inexpensive 'long' ideas, we generate a substantial number of expensive 'short' ones, and market neutral/pair trade ones.


People

  • Deep-dive into controlling shareholders
  • Stick with quality
    • How do they allocate capital?
    • What are their past actions?
    • 'Do the right thing' vs 'Do what's required'
    • Leading or following?

Structure

  • Deep dive into corporate structure
    • How does controlling shareholders look at group?
  • Scope for leakages
    • Adverse transfer pricing?
    • Funding pump-and-dump?
  • Aligned interests?

Value

  • Minimize risk/loss by buying assets cheaply
  • Emphasis on long-term and non-consensus valuation metrics
    • Absolute rather than relative
  • Backtest for past market lows, highs
    • Market over/under reaction
Our Head of Research, Michael R. McGaughy maintains a personal blog in which he shares his insights on the market and his trivia at work. Titled Minority Report, it can be assessed here: http://michaelmcgaughy.blogspot.hk.

Mr. McGaughy has recently launched a Chinese blog under the same title in which he posts some of his translated blog entries. For more information, please visit:
http://minorityreportmm.blog.sohu.com/.
1 Fusion's research methodology was originally developed by award-winning analyst Michael R. McGaughy under his own companies, Kaiko Limited and Kairo Limited.
NEWS
Fusion and its key people have been featured in the following new items:
  • 23 May, 2013
    Michael R. McGaughy speaks about his research strategy on Asian business ...MORE
  • 15 May, 2012
    Author of Inside China's Corporations, Michael R. McGaughy presents his ...MORE