At Valuepoint we focus on minimising the downside of an investment by sticking to these investment rules

1. The investment thesis must have a positive thematic
   Companies in industries that have strong tailwinds will be more capable of delivering strong operational results.

1. The company must be profitable
   The value of a shareholder’s investment is equal to their share of the company’s profits over time. A company must be able to generate a profit to be a going concern.

1. The momentum of revenue drivers must be positive
   That is the company’s price and volume should be growing over time. This will be the case for a desirable company who’s product in in demand. Recurring revenue also results in fewer surprises given its nature.

1. Must pay a dividend or intend to pay a dividend in current period
   A solid company should intend to provide returns to its shareholders.

1. Must not be a speculative trade - even if very cheap and tempting
   The temptation to buy because something is cheap should be resisted. There should always be a defined investment thesis to back up any investment.

1. The investment thesis must stand up
   We should not rely on a catalyst to deliver your return, there is always a risk that it doesn't eventuate. Therefore, the investment proposition must stand up under the current market conditions.

1. Must have a valuation you understand
   If a business can not be understood, it should be avoided. Understanding the valuation is critical as this will be the ultimate driver of your returns.

1. Must understand the drivers of the business
   Identify a step-by-step flow of the company’s revenue model. Then understand what drives these factors.

1. Must have a sustainable industry
   Having a sustainable industry enables us to capitalise the earnings of the company. Never rely on an industry or conditions having to change to justify an investment case.

1. Earnings must be independent of single sources
   A company’s earnings should be diversified. That is not singularly funded by one customer or derived by a single event.
   1. Single source of revenue test – no one customer / source greater than 20%
   2. No 3 customers greater than 50%

1. Avoid businesses with large seasonal skews
   Large seasonal skews can cause confusion on the current operating environment and lead to incorrect assumptions.

1. Factor in opportunity cost of cash
   All investments must be weighed up versus a risk-free investment. If an opportunity is not superior to cash it should be avoided.

1. Only buy on discount to 1 year forward valuation
   Time can eat away at an investor’s returns. Be prudent and only pay for 1 years upside.