Investment Checklist

My Ever-Evolving Investment Checklist

Photo by Aaron Burden on Unsplash

Valuation

• Is the share price trading below intrinsic value?

  • Can be measured using DCFs, NAV, Private Market Value, Liquidation Value

• Is the P/E ratio below 10x (or the inverse of the long term corporate bond rate, whichever is less)?

• Is the company profitable? Preferably it has increased earnings for the past 5 years.

• Is the company paying dividends? Preferably the dividend has been increasing and has been paid for some time.

• Long term debt and bank debt must be judiciously employed. There must be room to expand the debt position if required.

Business

• Is this a business I understand? Will the business be around for 50-100 years?

• Is the business drowning in cash?

• Is the business prone to change? Preferably not betting on change.

  • Sectors to Generally Avoid

    • Retail, technology, airlines

  • What sectors are left?

    • Consumer staples, healthcare, financials, energy, materials, industrials

• How resilient is the business?

• Is the business a royalty on the growth of others, requiring little capital itself?

• How much damage can competitors do to the business?

Miscellaneous

• How much of the stock do insiders own?

• Have insiders been buying or selling?

• How much are insiders paid relative to their stock holdings?