Investment Checklist for Stock Selection


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Following on from the discussion of my first investing checklist, it’s time to reveal my new investment checklist.

Rather than a checklist of yes/no answers, the new checklist focuses on sets of core to do tasks with the real checklist being only a handful of questions in the “Final Evaluation” section.

I’ve also made it visual so that it makes it quicker and easier to follow. Rather than having a checklist of 100 items thrown at you, having a flow chart will make it easier to manage and keep track of what stage of the investing process you are on.

Investment Checklist Flowchart

Edit: Link has been deleted.

Core Investment Checklist

Here is the text version.

But before that, maybe you want a printable version of the checklist? Just click on the image below to get the best investment checklist to help you organize your thoughts and make it easier for you.

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Do the Pre Work

Preliminary Background Reading

  • Read previous thesis on Blogs / Investing Sites / Forums / Alerts
  • Read news headlines

Valuation

Financial Statement Analysis

Dirty Work

  • 2 annual reports
  • 3 quarterly reports
    • specific attention to footnotes at the end of the report
    • managers discussion – consistency, candidness
  • 2 letter to shareholders
    • compare words, numbers to annual report numbers
  • Latest proxy
    • CEO compensation (% of sales)
    • Greed factor (bonuses, reimbursements, planes, boats, family donations)
    • Insider ownership
  • Search CEO history, track record, personality

Emotional Check

  • Write down how you are feeling
  • Beware of
    • wanting to just buy and study later
    • hindsight bias
    • overconfidence
    • obligation to buy due to amount of research
    • reluctance to accept differing opinions
    • social proof bias
  • If required, take a break and clear your mind. Get away from the excitement and  noise.

Final Evaluation (the only checklist you need at this point)

  • What can go wrong?
  • What are the risks? How likely are the risks?
  • How can you lose money?
  • How would you categorise this investment?
  • How attractive is this idea compared to the other holdings? (There can only be ONE best idea. Not 2 or 3.)
  • What is the expected holding time frame?
  • What should be the portfolio sizing?
  • What price will you sell?

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