My Investing Checklist
I’m a big fan of checklists because they create a systematic way to make sure a decision is based on logical, pre-determined factors. It helps articulate a view I have on a certain company before I want to invest in it.
Having a checklist and behavioral check is important because it’s easy to jump on the investing ‘hype train’ that values a stock extremely high due to promising growth rather than leaping through the hurdles of actually doing the research. One example that comes to mind (July 2020), is Tesla, which due to its stock price surge this week has become the world’s most valuable carmaker (even though its CEO, Elon Musk, famously tweeted that its stock price was too high). Tesla stock (ticker: TSLA) has gained about 55% over the past month and has surpassed Toyota, which has been profitable for years and sells 30X more cars than Tesla with 10X more revenue (BBC). The hype may well be warranted, or investors following the crowd may soon find that it was a bubble waiting to burst.
As John Gratham writes in ‘Investment Advice from Your Uncle Polonius’, Resist the crowd: Cherish numbers only.
After reading Charlie Munger’s book, Poor Charlie’s Almanack, one of the ideas that stuck with me was his ‘Two-Track Analysis’ method to screening stocks. The Two-Track Analysis: In any decision, your first step is thinking about the rational and economic factors that go into some decision. Then, you consider the psychological factors that distort those factors. The checklist is there to help ensure that both these tracks are covered.
The steps: 1. Go through the checklist. 2. Write notes on the company in question and store it in its own file under the company name to have a dated thesis to return to. 3. After the investment has been made, in time, assess areas the checklist was lacking and amend.
Michael Shearn, author of The Investment Checklist has a sample visual criteria checklist format I quite like. This is a very high-level overview but I like the conciseness of it.
Generating Investment Ideas
Broader Preliminary Research
- S&P Industry Surveys, Bond Reports, Stock Reports
- Analyst Reports (from stockbrokers) — these may be biased at times, but help collate a bunch of information in one place
- News Sources: WSJ, FT, etc. Finding expert opinions is time-consuming but helpful
- Search ‘Industry X’ ETF and see the companies invested in within the ETF
- Use a screener to narrow down the search to sort for sector, industry, or other metrics like the market cap
Specific Companies
- Company Website, Press Releases, Presentations
- S-1 Filing
- 10K, 10Q (Annual, Quarterly Reports)
- Investor Presentations
- Earnings Calls Transcripts
- Q&A (what questions do they ask?)
- Financial Statements + Footnotes
- Stock Prices — you can just google, or use a tool like Koyfin which I’m testing out right now (an online Bloomberg)
This blog post is a work-in-progress investing checklist. I have linked the checklist as a google doc rather than posting here on Medium as I will be periodically updating it.
Click here for the Checklist
