About Investing and the Kenbun Capital Philosophy

Kenbun Capital targets fundamentally sound businesses whose risk the market overprices, reduces the controllable risk it carries over the holding period, and so makes excess return foreseeable.

Many schools of thought exist in today’s market, including value, momentum, quantitative and qualitative approaches. For Kenbun Capital, these are analogous to 道 (the way), and 術 (method).

道 (The way) is the inner discipline, a mode of thought, an abstract conception.

術 (Method) is the outward form it takes: a set of means for applying that way to an actual problem.

The same way, held by different people, can therefore give rise to different methods. None of these methods is good or bad in itself. Each carries its own assumptions, constraints and blind spots, and, above all, its own timing.

Take an example. A rumor circulates that a certain cup breaks easily.

The market becomes aware of the risk in sequence, but at that moment no one knows how fragile the cup is or why. Setting aside the questions of who spread the rumor and of conscience, the result is as follows.

• Existing holders of the cup move to offload it.
• Those whose demand for it is unmet become unwilling, or afraid to buy.
  

Consensus about the risk builds rapidly. The survival instinct of an animal carries over into human behavior, and is amplified in the process.

Supply rises steeply and demand falls within a short period, and the price retreats to USD 10 per cup. At that point we would examine the underlying cause in detail.