Earlier when evaluating opportunities I would look at adjacencies to the business or some business seeding that the promoter has done or doing and some of these adjacencies/seeds could someday become another tree (division) at the same time one was not paying anything for these seeds/adjacencies.
Chinese bamboo: A Chinese bamboo tree grows around 90ft in 6 weeks after 4 years of no visible growth.
The Chinese bamboo investing metaphor: There are companies which invest years and years in R&D and product development at the cost of their balance sheet, P&L, cash flows and market caps. The market treats the business with disdain and the promoter with doubts. Just like a Chinese bamboo these businesses are test in patience and perseverance. If one can establish the depth of R&D, promoter focus and the right environment investing in these business can create significant wealth along with the satisfaction of being part of an amazing journey of a promoter. The most interesting aspect is that most of the market participants refuse to accept and believe in the story until it is too late.
Wockhardt: When I first spotted Wockhardt (thanks to a friend) everyone hated it and no one believed in what the promoters were saying and they were not wrong since Wockhardt has destroyed massive wealth and had all kinds of regulatory and financial concerns and no one believed that an Indian company can ever succeed in NCE development. Wockhardt kept on publishing the evidence generated by compassionate use of WCK5222 and the lives that it had saved but that did not change market’s disbelief. Wockhardt’s drug discovery was a classic case of Chinese bamboo where at some point you were getting the entire drug discovery portfolio for free.
Similar examples can be seen in HBL and a lot of other Indian defence companies lke Astra micro, Zen etc.
My current investment thinking has changed and moved away from betting on optionalities to finding out these Chinese bamboos preferably just before they are about to shoot. One has to be cautious though as not all drug discovery companies will be Wockhardt and the best thing to do is to keep collecting evidence until it becomes irrefutable.