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Investment Checklist

This page was inspired by the fact that Monosh Pabrai uses to checklists to help him improve his investment decision-making. I present here my checklist, which I expect to update periodically as I identify more and more investment mistakes that I make:

positive news
EPS isn't abnormally high - so as to prevent using an abnormal PER
several years listing on the stock market - I suggest 7 - to prevent being caught up in favourable temporary business environment of the company
not reliant on one supplier or one customer - for fairly obvious reason
0.5 total liabilities to total assets
debtors days
net cash flows against net profits
John Chew suggested:
1. Is this a good business by ROIC, ROE, ROA?
2. What is it? Sales, profits, cash flows growing, slowing, declining, volatile?
3. Debt? How much and what terms?
4. How is management compensated and do they have skin in the game?
5. Do I have a hope of understanding this business?

A few more I thought of:

Trend of Operating margins, num of shares

Checklist derived 19-Mar-2012 DB02/47:

PER

ROE

Debt

Revenue growth (look for 20% over 2 years, which is about 10% pa)

num share - check that number of shares is not ballooning, preferrably reducing

length listed - 10 years listing preferrable

ROA - available from Google, although the numbers may be fishy

OPM≥15% - suggested by Geoff Gannon on How to screen for hidden champions

ROIC - should probably be above 15%, more like 17.5%, but preferrably above 20%. I give my ROIC formula on DB02/50.

Links to other sites

40 point checklist - a checklist over at Old School Value

Best and worst buys - simple checklist of what generally leads to good and bad buys.

Author:  Mark Carter
Created: 03-Nov-2010
Updated: 12-May-2012