Synergy is the result when several components act synchronously to achieve greater effect than the simple addition of their individual efforts. In the midst of a plethora of contradictory information all around, it is a difficult task to maintain a sane direction. Therefore, we find it necessary to take small steps, shorten our focus to the smallest possible time span, and limit our exposure such that even after an adverse change of direction in the market or the stock, we can recover fast and return to high profitability. In terms of Systems Theory, we are taking advantage of the linearity of a non linear system, by breaking it into manageable smaller linear systems. A few examples will clarify our statements a little better.

On January 7, 2002 in a press release, U.S. Bancorp Piper Jaffray upgraded Applied Materials (AMAT) to Strong Buy from Outperform, in the face of every one talking about shrinkage in capital investment in chip manufacturing equipment industry. The stock reached a high of $48 on January 9 in two days and reached a low of $39 by January 22. Until February 2 - the date of writing this part, the stock had not touched $45.22. The stock moved $14 considering both legs of the movement in about 15 days. An investment of $4800 (100 shares) went through a variation of $1400 in 15 days. It amounts to about 500% variation in a year's time. Some stocks will show a variation of 40 times in a year. If by some means, we are able to capture a reasonable percentage of this movement, we can get a high return. Our efforts have been to take advantage of this phenomenon.

“A good business generates high cash flow. Peter Lynch, the renowned Stock Market Guru with spectacular performance of Magellan Fund under his watch, said in his book “One Up on Wall Street” – “And if you find $20 stock with a sustainable $10 per share cash flow, mortgage your house and buy all the shares you can.” We are not asking you to take such a drastic step. However, we are trying to generate a high cash flow, while maintaining minimum slippage in the invested capital value consistent with NAV growth.”

Our business model allows a very high cash flow while limiting slippage in invested capital to allow a consistent growth in the Net Asset Value (NAV).

The following table shows how a buy of a stock was brought to profitabilty, even though the stock never reached a profitable zone. It took some time, but it became profitable by creating pseudo short sells.

A gross profit of 80 cents per share was generated, even though the stock never reached a price higher than 14.7. No additional capital was invested.