- Do I Like the business?
- Does it have a moat?
- Does it have a business which will be in demand for coming future?
- Do I understand the business (even partly)?
- Doest it have branding/pricing power?
- Any risk I can think of like:
- Any Law/Regulation which can make the business go down?
- What about raw material can their be any problem with that?
- Does it have a single client which make large chunk of its profit what if the client pulls up. I have some bad investment in this respect.
- Is management capable?
- Their credentials degree B.tech, Masters, MBA etc
- Their profile
- Their thinking are they their for long term?
- How are their thinking with respect to future?
- Can they keep up with the changing future?
- How is their marketing/advertising?
- Am I in sink with Management investment philosophy?
- Am I okay with the growth (with some margin of safety)?
- Does the growth/pricing/risk make sense for my money I am investing
- I have buckets and different expectation of money for each bucket.
- Is the company passing my hurdle rate? I Keep inflation in mind while deciding growth I want.
- Cash crunch?
- Does company have enough for bad days?
- Can it invest into research long term things?
- Can it bear bad market for sometime and emerge a winner when other loose? Antifragile
- Make sure I understand the flow of money a little bit.
- Balance sheet
- Clean balance sheet
- I am sure I can not make out small discrepancies with balance sheet but anything huge I can flag like huge salary?
- Without any reason accumulating interest on debt?
- Huge debt
- Margin of safety
- Clean balance sheet
- Current Price
- How much I am paying for business growth?
- Net income and growth are deciding factors here
Sometime even if management is great they can be in false impression about the market and I being an outsider can sense it. My philosophy is from Mohnish Pabrai copy paste. Take a list of companies from great investors I like then filter out based on my checklist. Like business I understand etc. Based on these aspects I filter out the bad one and then select whatever is left and have passed everything. Try to buy cheap most of the time there always is some Diwali/Christmas sale for the company share. May be set an alert for price or check whenever you here market is down.
Always keep cash: Investment mistake I have done in past. Whenever I get surplus money to invest I just put it in the market within a month don’t do this. Cash in Portfolio is very important.
Checklist helps you in filtering fast if you know what you are looking for you can get it fast even in the fat Annual report. Simple google search will give you other details.
Once you have done your homework for a company and you have faith in it if nothing drastic changes from your checklist you can remain invested. If price goes down for whatever reasons(market crash or the bad sales for your company or the area company is operating in has some issue). If the problem is not from your checklist do not worry you should actually put extra cash you have now. You have believe in the business now let the company do their job.
I have given you my money I trust you and I also know that you have a good business. Now I am okay, If something major is not changing I am with you.