Permanent Cap's Valuation Checklist

Identifying Market Inefficiencies

  • Are investors overextrapolating from recent results, leading to unrealistic expectations?
  • Is there evidence of performance chasing in a security, sector, or asset class?
  • Do sentiment indicators suggest extreme fear or greed?
  • Do investors have correlated views that create fragility in the market?
  • Do you have a different time horizon, allowing you to take advantage of time arbitrage?
  • Are you more analytically skillful than the other investors you're competing with?
  • Are you placing different, and more precise, weights on information?
  • Are you accurately updating your views based on new information?
  • Do you have reason to believe that the story about a security will change?
  • Do you understand a complex investment opportunity better than others?
  • Have you legally acquired information that other investors don't have?
  • Are you paying attention to all relevant information?
  • Are you trading with forced buyers or sellers?
  • Can you take the other side of fund flows?
  • Can you step in when arbitraguers are tapped out?