INVESTING WITH CRITERIA

In financial markets, there are two ways to invest: by following stories… or by understanding realities. The former is often more entertaining. The latter, interestingly enough, more profitable.

The underlying asset is, in essence, the uncomfortable truth of any investment. Not the narrative, not the promise, not the collective enthusiasm. It is what sustains value when the market is no longer in a good mood—which, it is worth remembering, happens quite frequently.

We are talking about cash flows, assets, business models, competitive positioning… and, of course, the legal framework that surrounds them. Because yes, law also influences profitability, even if it does not trade on the stock market.

From a regulatory perspective, this approach is not optional. MiFID II (Directive 2014/65/EU) requires that any investment recommendation be based on an adequate analysis of the product and its risks. In other words: it is not enough for something to “look good.”

Fundamental analysis involves asking questions that are not always comfortable:

• Where does the return actually come from?

• Is it sustainable, or does it depend on everything going exceptionally well?

• Who controls the asset… and under what rules of the game?

This last point is often overlooked—until it can no longer be ignored.

Because investing in a good asset is not the same as having solid legal rights over it. And that is where structure comes in: an element rarely discussed in social settings, but often decisive in outcomes.

Markets may behave erratically in the short term, but in the long term they tend to follow a rather rational pattern: aligning price with value.

And when that happens, the underlying asset stops being an option… and becomes the only explanation.

Investing with criteria does not eliminate risk. But it makes it understandable.

And in this industry, understanding what you are doing is an often underestimated competitive advantage.