How Stock Operations Forces Move - Reading Patterns through Executive Networks

PER, PBR, ROE.

These are commonly used indicators.

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But these indicators see results.

It does not show how management is using capital, or the process.

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RaymondsIndex asks a different question.

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What is RaymondsIndex?

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Capital Allocation Efficiency Index.

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Simply put: “Is this company’s management spending shareholders’ money well?”

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Measurements:

Return on Investment vs Cost of Capital Differences

- Whether dividend/reinvestment ratio of profits is optimized

- Timing and efficiency of share buybacks

- Tracking changes in performance after M&A and facility investment

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Why is capital allocation efficient?

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Even if the ROE is the same at 15%, the two companies are different.

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Company A: Achieved 15% ROE by increasing assets with debt → Low real profitability

Company B: Achieving 15% ROE through reinvestment in core business → Sustainable growth possible

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Financial ratios cannot distinguish this difference.

RaymondsIndex quantifies this difference.

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Link between relational risk and capital allocation

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Why do companies have low capital allocation efficiency?

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Answer from a relational risk perspective:

Controlling shareholders’ interests take priority → Minority shareholders’ capital is damaged

- CB issuance/tunneling → external transfer of capital

- Executive network decision-making → Investment based on relationships, not efficiency

In other words, companies with low capital allocation efficiency scores

At the same time, relational risks tend to be high.

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Looking at these two indices together provides a stronger signal.

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How to find a company that resolves discounts in Korea

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Companies benefiting from the value increase = Companies with improved capital allocation efficiency + low relational risk

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Features of RaymondsIndex Top Companies:

Positive correlation between CEO tenure and investment return

- Share buybacks are concentrated near the bottom

- High synergy realization rate after M&A

- There is no history of CB issuance or stock price recovery after conversion

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key message

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PBR 1x is not the goal.

The discount will disappear only when capital allocation changes.

RaymondsIndex is the measure of that change.

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■ Reference materials

Schwetzler (2024): Capital allocation and minority shareholder exploitation.

-Carroll et al. (2024): Governance and capital power.

- RaymondsRisk White Paper: https://www.konnect-ai.net/whitepaper

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