Saturday, December 19, 2015

The investment check list

Checklist, 2016, construction

As I wrote in a comment somewhere I have become more and more interested in making an investment check list. I heard about it from Mr Mohnish Pabrai and I find it to be a very correct thing to use.

Thinking back on my own investments and starting to considering this investment check list I must admit that I get a big embarrassed because I have bought cheap companies that I have found but I have very rarely taken a look at their competitors. So in situations where the entire sector crashed I have only bought more or less randomly the company that I looked at that then appeared to be cheap. This is not ok. There were for sure many other companies / competitors in the sector that were equally cheap but maybe with a significant advantage that I have completely missed to analyse.

This investment check list will not in any way make me better at analysing the companies but it will hopefully force me to take a look at the competitors before I make any investment. As an example... maybe I would not have ended up owning every darn energy producer in Europe but instead I would have had one and plenty of that one company.

I do however need help with this list to try to build a better one quicker then it would be built by me alone. Who knows maybe it will be useful also for you guys!

Would I feel embarrassed to publish on the blog that I bought this company?

Is the P/E at an acceptable level?
What is the P/E?
What is the P/E of its peers?

Is the P/B at an acceptable level?
What is the P/B?
What is the P/B of its peers?

Is the company paying an acceptable dividend?
How much is it paying?
Which %-age is that compared to its earnings?
How much does its peers pay?

Can this business be decimated by low cost producers?
Is their underlying business in structural decline?
Am I able to see an ending to this product/service?

How much of their “assets” are as Intangibles?
How much of their “assets” are as Goodwill?

Does the company keep issuing new shares and live on the shareholders?
Does the company have retained earnings?

Is this company involved in large litigation processes?

Is this a family owned company?
How many %-age of the shares do they have?
How many %-age of the company is held by passive institutions?

What is the name of the CEO?
How is the CEO compensated?
How long has the CEO been sitting there?
Where did he or she come from?
What does that company look like today?
Is the CEO telling stories to bring up the share price?

What is the name of the Chairman of the Board?
What is the overall board composition in terms of skills/education?

Are they having a normalized or boom year earnings?

Are they making aggressive accounting?
Who is the auditing company?

What is their business model?
What are they producing/selling?
Is their business model morally acceptable?

Is this an IPO?

Has the company at least been forced to file 5 years of quarter and annual reports based on stock market rules and regulations in a trustworthy country?

Is the company planning to conduct a large acquisition or merger?

This was all that I have for now but I look forward to your replies which I hope will not only be additions to the list but maybe also things that you find completely stupid to have on the list. Thanks!


Fredrik von Oberhausen said...

I thought of one addition that I want to make...

I want to look at book to debt compared to peers also? Simply to avoid the most leveraged company.

Fredrik von Oberhausen said...

Another additions:

What do they produce/sell?
Do I like their products?
Do their customers like their products and look forward to new ones?