The Market Attractiveness Scorecard

The Market Attractiveness Scorecard is a nine-factor framework for judging whether a small market is worth an independent allocator's time. Seven factors are scored and added. Two are vetoes: they can end the analysis regardless of how well the other seven score, because they describe ways of losing that no amount of opportunity elsewhere compensates for.

The whole framework is published here. There is nothing withheld, and nothing to sign up for to see the rest of it — a scoring method that cannot be checked is not worth using.

What this page covers: how to score the seven additive factors, how the two vetoes work, how to read a total, worked examples at both ends, and where the method breaks down.

How to use it

Pick one specific market — an industry in a region, or a class of security — and score each factor 0, 1 or 2. Score what you can currently demonstrate, not what you expect to find. An honest 0 on a factor you have not investigated is more useful than a hopeful 1.

The point is not the number. It is that the nine questions are answered explicitly, so that a decision rests on stated reasoning rather than on general enthusiasm.

The seven additive factors

1. Fragmentation

Are there many small participants with no dominant consolidator?

0 — Consolidated. A handful of participants set prices and terms.
1 — Mixed. Regional consolidators exist; independents remain.
2 — Genuinely fragmented. Largest participant holds low single-digit share.

Fragmentation is necessary but weak on its own — see How to Identify an Attractive Fragmented Market for why most fragmented industries stay that way for sound reasons.

2. Institutional absence

Is the market too small or operationally awkward for large funds?

0 — Institutional capital is active and has professionalized the process.
1 — Institutions are arriving. Brokers specialize; multiples are quoted.
2 — No institutional participation, and a structural reason why not.

Score this on the reason, not the observation. Absence with no explanation is usually a gap in your research rather than a feature of the market.

3. Information quality

Is useful information difficult, local, unstructured, or relationship-based?

0 — Standardized data is available to anyone who pays for it.
1 — Public but unaggregated; assembling it is work.
2 — Local, relational, or obtainable only by being present.

4. Capacity

Can you deploy enough capital here to make the work worthwhile?

0 — Positions too small to matter after the effort of finding them.
1 — Meaningful for a personal account, with limited room to add.
2 — Enough capacity to justify the learning curve, repeatedly.

The most commonly skipped factor. A genuine inefficiency you can only exploit for a trivial amount is a hobby.

5. Repeatability

Is this a recurring hunting ground or a one-off curiosity?

0 — One situation. Nothing learned transfers.
1 — Occasional recurrence, unpredictably timed.
2 — A standing category where expertise compounds across situations.

6. Value creation

Can returns come from more than multiple expansion?

0 — The entire thesis is paying less than someone else will later.
1 — Modest operational or structural improvement available.
2 — Real improvement available: consolidation of a badly-run function, professionalization, or a closing discount with a stated mechanism.

A thesis resting only on multiple expansion is a bet on the next buyer's mood.

7. Durability

How quickly will capital, technology or consolidation eliminate the edge?

0 — Closing now. Capital has been raised against it.
1 — Several years, with visible pressure.
2 — Structural and slow-moving, protected by something that will not change soon.

The two vetoes

These are not scored on the same scale, because they do not trade off against the others. A market can score 14 out of 14 above and still be uninvestable.

Adverse selection — why is this available, and who knows more than you?

Every opportunity is available because someone chose to make it available. If the counterparty knows materially more than you do about what happens next, the apparent discount is a transfer of information risk, not a bargain.

Veto condition: you cannot articulate a reason the seller is transacting that is independent of the asset's future prospects. Retirement, mandate constraints, forced index selling, redemption pressure and estate settlement are independent reasons. "They wanted to diversify" usually is not.

Liquidity risk — can you survive being unable to exit?

Illiquidity is only an advantage when it deters competition for something worth owning. On its own it is simply risk, and it interacts badly with everything else: the moment you need to exit for reasons unrelated to the asset, the structural feature that protected your returns becomes the thing destroying them.

Veto condition: any plausible personal circumstance over the expected holding period would force a sale. Not "would be inconvenient" — would force.

How to read the total

Out of 14, with both vetoes passed:

Score	Reading
11–14	Structurally inefficient. Rare. Verify the vetoes again — a score this high more often indicates an analytical error than a discovery.
8–10	Genuinely interesting. Usually temporarily inefficient; durability is the factor to press hardest.
5–7	Mixed. Frequently a market that was attractive and is closing, or one where the edge exists but capacity does not.
0–4	Small, not inefficient. The correct response is to move on.

Either veto failing sends the total to zero regardless.

The most common real-world result is 8–10 with durability scored 1 — a market that is genuinely inefficient and visibly closing. That is a legitimate place to operate, provided the closing window is priced into the plan rather than discovered later.

Worked examples

A fragmented trade services industry, pre-consolidation. Fragmentation 2, institutional absence 2, information 2, capacity 2, repeatability 2, value creation 2, durability 1 — total 13. Adverse selection: passes, if the specific seller is retiring with no successor. Liquidity: this is the veto that decides it. A business bought with personal guarantees, requiring the buyer's own labour, where a health event forces a sale — that fails, and the 13 does not matter.

Graded collectibles. Fragmentation 2, institutional absence 2, information 1, capacity 1, repeatability 2, value creation 0, durability 1 — total 9. Looks interesting. Adverse selection fails: in a market of specialists trading with newcomers, the counterparty is systematically better informed about condition, authenticity and the marginal buyer. The score is irrelevant.

A closed-end fund at a discount with a stated catalyst. Fragmentation 0, institutional absence 1, information 1, capacity 1, repeatability 2, value creation 2, durability 1 — total 8. Both vetoes pass: the selling is mechanical and the security is exchange-traded. A lower total than either example above and a better risk structure, which is the point of separating the vetoes out.

Where this method breaks down

Stated plainly, because a framework that cannot be criticized cannot be used.

The factors are not independent. Institutional absence and information quality tend to move together, so a market can score twice for one underlying cause.
Equal weighting is a simplification. Capacity and durability arguably deserve more weight than repeatability. Equal weights are used because defensible weights would require data this site does not have.
Scoring is judgment, not measurement. Two careful people will score the same market differently. The framework's value is in forcing the questions, not in producing a comparable number.
It says nothing about price. A market can be structurally attractive and the specific asset still too expensive. The scorecard evaluates the hunting ground, not the shot.
It cannot detect fraud. Adverse selection covers information asymmetry between honest parties. It does not cover a counterparty who is lying.

Key conclusions

Seven factors add; two override. Vetoes are not tradeable against score.
Score what you can demonstrate, not what you expect to find.
Most attractive real markets score 8–10 with durability as the weak factor — genuinely inefficient and visibly closing.
Adverse selection is the factor that most often turns a high score into a loss.
The number is a by-product. The answered questions are the output.

Methodology and limitations

The nine factors are this site's own framework, assembled from market-structure reasoning set out in The Small-Market Edge. They are not derived from a dataset and have not been validated against outcomes; the weighting is deliberately naive, and the limitations above are not a disclaimer but a description of what the tool is.

General education, not financial advice. A high score is not a recommendation and a low score is not a warning about any specific asset. This site holds and discloses no positions.

An expanded worksheet edition of this scorecard is planned. It will contain the same framework published here — this page is not an abridgement of anything.

The Small-Market Edge — the reasoning the factors come from.
The Small-Market Opportunity Map — markets already described against these dimensions.
How to Identify an Attractive Fragmented Market — factor 1 in depth.
Market Anatomy — worked examples of market structure.

Next: see how these factors play out across markets on the Opportunity Map.