The Investment Checklist

A practical guide to making more informed investment
decisions

Investors often buy or sell stocks too quickly. When you base
your purchase decisions on isolated facts and don't take the time
to thoroughly understand the businesses you are buying, stock-price
swings and third-party opinion can lead to costly investment
mistakes. Your decision making at this point becomes dangerous
because it is dominated by emotions. The Investment
Checklist has been designed to help you develop an in-depth
research process, from generating and researching investment ideas
to assessing the quality of a business and its management team.

The purpose of The Investment Checklist is to help you
implement a principled investing strategy through a series of
checklists. In it, a thorough and comprehensive research process is
made simpler through the use of straightforward checklists that
will allow you to identify quality investment opportunities. Each
chapter contains detailed demonstrations of how and where to find
the information necessary to answer fundamental questions about
investment opportunities. Real-world examples of how investment
managers and CEOs apply these universal principles are also
included and help bring the concepts to life. These checklists will
help you consider a fuller range of possibilities in your
investment strategy, enhance your ability to value your investments
by giving you a holistic view of the business and each of its
moving parts, identify the risks you are taking, and much more.

• Offers valuable insights into one of the most important aspects
  of successful investing, in-depth research

• Written in an accessible style that allows aspiring investors
  to easily understand and apply the concepts covered

• Discusses how to think through your investment decisions more
  carefully

With The Investment Checklist, you'll quickly be able to
ascertain how well you understand your investments by the questions
you are able to answer, or not answer, without making the costly
mistakes that usually hinder other investors.

Auteur

Michael Shearn founded Time Value of Money, LP, a private investment firm, in 1996, to devote his attention to selecting and researching stocks and private investments. He launched the Compound Money Fund, LP, a concentrated value fund, in 2007. Shearn serves on the Investment Committee of Southwestern University, which oversees the school's $250 million endowment. He is also a member of the Advisory Board for the University of Texas MBA Investment Fund. Shearn graduated magna cum laude from Southwestern University, a small liberal arts college in Georgetown, Texas, with a BA in business, with an emphasis in accounting and finance. He lives with his wife and two daughters in Austin, Texas.

Résumé
A practical guide to making more informed investment decisions Investors often buy or sell stocks too quickly. When you base your purchase decisions on isolated facts and don't take the time to thoroughly understand the businesses you are buying, stock-price swings and third-party opinion can lead to costly investment mistakes. Your decision making at this point becomes dangerous because it is dominated by emotions. The Investment Checklist has been designed to help you develop an in-depth research process, from generating and researching investment ideas to assessing the quality of a business and its management team.

The purpose of The Investment Checklist is to help you implement a principled investing strategy through a series of checklists. In it, a thorough and comprehensive research process is made simpler through the use of straightforward checklists that will allow you to identify quality investment opportunities. Each chapter contains detailed demonstrations of how and where to find the information necessary to answer fundamental questions about investment opportunities. Real-world examples of how investment managers and CEOs apply these universal principles are also included and help bring the concepts to life. These checklists will help you consider a fuller range of possibilities in your investment strategy, enhance your ability to value your investments by giving you a holistic view of the business and each of its moving parts, identify the risks you are taking, and much more.

• Offers valuable insights into one of the most important aspects of successful investing, in-depth research
• Written in an accessible style that allows aspiring investors to easily understand and apply the concepts covered
• Discusses how to think through your investment decisions more carefully
  With The Investment Checklist, you'll quickly be able to ascertain how well you understand your investments by the questions you are able to answer, or not answer, without making the costly mistakes that usually hinder other investors.

Contenu

Preface xi

Acknowledgments xix

Chapter 1 How to Generate Investment Ideas 1

How Investment Opportunities Are Created 1

How to Filter Your Investment Ideas 14

Using a Spreadsheet to Track Potential and Existing Holdings 19

Chapter 2 Understanding the BusinessThe Basics 21

1. Do I want to spend a lot of time learning about this business? 22

2. How would you evaluate this business if you were to become its CEO? 23

3. Can you describe how the business operates, in your own words? 26

4. How does the business make money? 28

5. How has the business evolved over time? 29

6. In what foreign markets does the business operate, and what are the risks of operating in these countries? 30

Chapter 3 Understanding the Businessfrom the Customer Perspective 39

7. Who is the core customer of the business? 41

8. Is the customer base concentrated or diversified? 42

9. Is it easy or difficult to convince customers to buy the products or services? 43

10. What is the customer retention rate for the business? 44

11. What are the signs a business is customer oriented? 46

12. What pain does the business alleviate for the customer? 49

13. To What degree is the customer dependent on the products or services from the business? 49

14. If the business disappeared tomorrow, what impact would this have on the customer base? 50

Chapter 4 Evaluating the Strengths and Weaknesses of a Business and Industry 53

15. Does the business have a sustainable competitive advantage and what is its source? 54

16. Does the business possess the ability to raise prices without losing customers? 68

17. Does the business operate in a good or bad industry? 73

18. How has the industry evolved over time? 77

19. What is the competitive landscape, and how intense is the competition? 79

20. What type of relationship does the business have with its suppliers? 89

Chapter 5 Measuring the Operating and Financial Health of the Business 97

21. What are the fundamentals of the business? 98

22. What are the operating metrics of the business that you need to monitor? 100

23. What are the key risks the business faces? 105

24. How does inflation affect the business? 111

25. Is the business's balance sheet strong or weak? 113

26. What is the return on invested capital for the business? 123

Chapter 6 Evaluating the Distribution of Earnings (Cash Flows) 137

27. Are the accounting standards that management uses conservative or liberal? 138

28. Does the business generate revenues that are recurring or from one-off transactions? 146

29. To what degree is the business cyclical, countercyclical, or recession-resistant? 148

30. To what degree does operating leverage impact the earnings of the business? 152

31. How does working capital impact the cash flows of the business? 162

32. Does the business have high or low capital-expenditure requirements? 167

**Chapter 7 Assessing t…