INVESTMENT CHECKLIST

 CHECKLIST FOR INVESTMENTS

Overall I want this to be short enough so that I will use it and long enough to be useful. not War and Peace. In deference to Charlie Munger who continually suggested using a checklist, well I am getting on! Can be built up and on over time.

Understandable business

Do you understand the positioning of the business versus its competitors, customers and suppliers? What are the critical products, services and relationships?

Is the size of the market(s) able to be estimated?

Are there existential risks to the business, structural decline, or obsolescence?

Operating History

EPS growth, consistency/volatility is it forecastable?

ROE/GM stability and level. Ability to manage margins. Total asset growth can the business profitably deploy assets. What has the reinvestment rate been? NPM level and stability.

Does the business generate FCF, does CF reconcile to earnings?

Given the above has the company favourable LT prospects?

Management

Conduct, stable, experience, and track record in deploying capital. Are the management forthright with info or do they blame outside influences, be overly promotional, highlight insignificant positives, not mention negatives?

Incentives too easy. Too large. Not aligned

Balance Sheet

Assess debt in absolute terms, relative to history, relative to similar companies.

Can use IC, FCC, ND/ebitda

Other

Amortisation charges? SBC? Historical share dilution

What range has the company PE traded in over the LT?

Check y1 consensus estimates -are they sensible

What is the market obsessed about (good or bad)-2-3 main points

 

 

 

 

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