Companies checklist before you buy

1) This is my big number 1! Will the company be around in 20 years? (Crox maybe, JNJ hell yes)

2) Will (will, not should) earnings and sales and the dividend grow over 5 years?

3) Have sales historically increased annually, with maybe a few one year hickups?

4) Has the dividend been increased annually 10+ years?

5) Does the company have a moat or durable competitive advantage?

6) Is the company rated A or better in Value Line? (I used to use B++ or better, but upped it to A or better)

• Am I giving more weight to recent data and events?
• Did I think a fact was obvious beforehand?
• Have I looked at the situation from different scenarios? (Company loses money, no growth, growth etc)
• Am I influenced by the way the data is presented preventing me to perform the required work?
• Am I overconfident in the analysis because I work in the industry or otherwise?
• Have I reviewed the negative factors?
• Am I over-weighing the negative factors creating too much loss aversion?
• Am I buying just to average down?
• Am I slow in changing my opinion?
• Am I ignoring potential risks because of the reward?
• Am I willing to purchase because I spent the time researching? Obligated to buy?
• Is there a bias because everyone else is recommending to buy?
• Am I refusing to sell for any reason? Attached?
• Is the information I am using a consensus that can be false?
• Do I have an exit plan

While Studying about a company

• See how the company can make its profits and see if it can make the same profits in future too.
• Compare the Sales growth in the past 5 or 10 years and their annual Growth rate.
• Compare the Net Profit growth in the past 5 or 10 years and their annual Growth rate.
• Compare the EPS growth in the past 5 or 10 years. and its annual Growth rate.
• How the Debt is reduced in the 5 years

Chandrakanth Sampath
1. One is least capital expenditures.
2. Two is since there is least capital expenditure,  there are no borrowings.
     That means there are no future costs that are not provided for.
3. Three is the return on capital employed should not be less than 25%.
4. Then it adds to the fourth that these companies give a big chunk of their earnings as a dividend.

That's a start I guess. The number 1 above is the key point.
---------------------------------------------------------------


1) Where is the company at in its growth cycle? I like to pick young companies with a lot of growth ahead, under 1 billion market cap. (just my personal investment thesis)

2) What is the economic outlook for the companies industry? I like to try to find industries with a bright future instead of ones muddied or with crumbling foundations.

3) PE under 15, little to no debt, no more than 2x book (preferably 1x book or less), ROE greater than PE, greater than industry average ROE. Crude I know, but it weeds out a lot of junk.

4) Who are the founders/BOD, what other companies have they been involved in, what are their credentials/biographies? I only invest in experts with a proven record of success.

5) Why is this company undervalued? Is this reason likely to get worse before it gets better? Does this reason undermine my valuation, or does it gravely affect the future of the company? If so, then I stay away.

6) If the share price went down by 50% the day after I bought, would I immediately worry about having made a mistake, or would I anxiously await the next paycheck to gobble up more shares? This is more key than anything else. Your sub-concious knows more than you think you do, after reading all the financials, etc.

That's my general checklist.