INVESTMENT CHECKLIST-I
INVESTMENT CHECKLIST-IUnderstanding the Business The
basicsUnderstanding the Business From the customers
perspectiveEvaluating the strengths and weaknesses of a Business
and IndustryMeasuring the Operating and Financial health of the
BusinessEvaluating the Distribution of Earnings (CF)
3/7/20151INVESTMENT CHECKLIST-II6.Assessing the Quality of
Management Background and classifications: Who are they?7.Assessing
the Quality of Management Competence: How management operates the
Business8.Assessing the Quality of Management- Positive and
negative traitsEvaluating growth opportunities10.Evaluating Mergers
& Acquisitions
3/7/20152UNDERSTANDING THE BUSINES Do I want to spend a lot of
time learning about the businessHow would you evaluate the business
if you were to become its CEOCan you describe how the business
operates, in your own wordsHow does the business makes moneyHow has
the business evolved over the timeIn what foreign markets does the
business operates, and what are the risks of operating in these
countries3/7/20153
UNDERSTANDING THE BUSINESS FROM THE CUSTOMERS PERSPECTIVE
Who is the core customer of the businessIs the customer base
concentrated or diversifiedIs it easy or difficult to convince
customers to buy the products or servicesWhat is the customer
retention rate for the businessWhat are the signs a business is
customer orientedWhat pain does the business alleviate for the
customersTo what degree is the customer dependent on the products
or servicesIf the business disappeared tomorrow what impact this
have on the customer base 3/7/20154
EVALUATING THE STRENGTHS AND WEAKNESSES OF A BUSINESS AND
INDUSTRY
Does the business have sustainable competitive advantage and
what is its sourceDoes the business possess the ability to raise
prices without losing customersDoes the business operates in a good
or bad industryHow has the industry evolved over timeWhat is the
competitive landscape and how intense is the competitionWhat type
of relationship does the business have with its suppliers
3/7/20155
MEASURING THE OPERATING AND FINANCIAL HEALTH OF THE BUSINESS
What are the fundamentals of the businessWhat are the operating
metrics of the business that you need to monitorWhat are the key
risks the business facesHow does inflation affect the businessIs
the businesses balance sheet strong or weakWhat is the return on
invested capital for the business
3/7/20156
EVALUATING THE DISTRIBUTION OF EARNINGS (CF)
Are the accounting standards used are conservative or
liberalDoes the business generate revenues that are recurring or
from one-off transactionTo what degree is the business cyclical,
countercyclical, or recession resistantTo what degree does
operating leverage impact the earnings of the businessHow does
working capital impact the cash flow of the businessDoes the
business have high or low capital expenditure requirements
3/7/20157ASSESSING THE QUALITY OF MANAGEMENT BACKGROUND AND
CLASSIFICATIONS: WHO ARE THEY?What type of manager is leading the
companyWhat are the effects on the business of bringing in outside
management Is the manager a lion or a hyenaHow did the manager rise
to lead the businessHow are senior managers compensated and how did
they gain their ownership interestHave the managers been buying or
selling the stock
3/7/20158ASSESSING THE QUALITY OF MANAGEMENT COMPETENCE: HOW
MANAGEMENT OPERATES THE BUSINESSDoes the CEO manage the business to
benefit all stakeholdersDoes the management team improve its
operational day to day or does it used a strategic plan to conduct
its businessDo the CEO and CFO issue guidance regarding earningsIs
the business managed in a centralized or decentralized wayDoes
management value its employeesDoes the management team know how to
hireDoes the management team focus on cutting unnecessary costsAre
the CEO & CFO are disciplined in making capital allocation
decisionsDoes the CEO & CFO buyback stock opportunistically
3/7/20159ASSESSING THE QUALITY OF MANAGEMENT- POSITIVE AND NEGATIVE
TRAITSDoes the CEO loves the money or the business ?Can you
identify a moment of integrity for the managersAre managers clear
and consistent in their communications and actions with
stakeholdersDoes management think independently and remain unswayed
by what others in their industry are doingIs the CEO self promoting
?
3/7/201510EVALUATING GROWTH OPPORTUNITIESDoes the business grow
through M&A or does it grow organicallyWhat is the management
teams motivation to grow the businessHas historical growth been
profitable and will it continueWhat are the future growth prospects
for the businessIs the management team growing the business too
quickly or at a steady pace 3/7/201511EVALUATING MERGERS &
ACQUISITIONSHow does management make M&A decisionsHave past
acquisitions been profitable3/7/201512
