THE CHECKLIST INVESTOR

THE CHECKLIST INVESTOR

for FUNdamental Investors

PORTLAND CHAPTER 2016 EDUCATION DAY

Portland Chapter 2016 Education DayMarcia Couey

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IDENTIFYING THE PROBLEM


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INTRODUCTION

Marcia Couey, MBA in Marketing & Finance

Technical & MarCom Writer 30 years (contract)

Director GoldenWest Chapter 12 years

Director Portland Chapter 9 months

Taught Toolkit 5 & 6

Portfolio Management using Toolkit 6 (Defense/Offense)

My First Investment October 1999

My First Investment Club Stock Presentation 2000

Lions and Tigers and Bears, oh my….



THIS IS HOW MUCH I KNOW…

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DISCLAIMER

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The information in this presentation is for educational purposes only and is not intended to be a

recommendation to purchase or sell any of the stocks, mutual funds, or other securities that may be

referenced. The securities of companies referenced or featured in the seminar materials are for

illustrative purposes only and are not to be considered endorsed or recommended for purchase or

sale by BetterInvesting™ National Association of Investors Corporation (“BI”) or the National

Investors Association, its volunteer advisory board (“BIVA”). The views expressed are those of the

instructors, commentators, guests and participants, as the case may be, and do not necessarily

represent those of BetterInvesting™ or BIVA. Investors should conduct their own review and

analysis of any company of interest before making an investment decision.

Securities discussed may be held by the instructors in their own personal or club portfolios.

BI presenters and volunteers are held to a strict code of conduct that precludes benefiting financially

from educational presentations or public activities via any BetterInvesting programs, events and/or

educational sessions in which they participate. Any violation is strictly prohibited and should be

reported to the President of BetterInvesting or the Manager of Volunteer Relations.

Sites and resources used may not be endorsed by Betterinvesting.


WHAT WE WILL COVER

Understand

why do a checklist

use checklists to build new habits

when checklists save lives

when checklist bloopers occur & what to do about it

how checklists build successful doctors, pilots,

investors and investment clubs

the golden rule of habit change

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WHY I GOT EXCITED ABOUT THIS TOPIC

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WHY USE CHECKLISTS

Early checklists: short but easy to understand

See the lion, run.

Test pilot checklist: Fly the plane.

Systems have become more complex, the

amount of information is overwhelming

When there is a crisis, it takes more than a pilot

to land the plane safely: Hudson River Landing

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SINGLE ENGINE AIRPLANE: PAUSE POINT

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WHY USE CHECKLISTS

The brain gets overwhelmed by thinking too

much and can shut down.

Avoiding failures is becoming more difficult to do.

The first checklist skill is to correctly identify the

problem you are trying to solve.

Modern checklist structure for complex systems

has “pause points”. i.e., Surgical Safety Checklist

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THREE PAUSE POINTS

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IDENTIFYING THE PROBLEM



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A LITTLE HISTORY: BETTERINVESTING GUIDELINES


Invest regularly, regardless of market conditions

Re-invest all earnings

Invest in growth companies (and growth mutual

funds); and

Diversify to reduce risk

Sector/Industry

Size


GEORGE A. NICHOLSON: WHAT THE SSG DOES

Displays information meant to answer:

Is this a well-managed company?

Is the stock selling at a reasonable price?

Problem: how do you remember all the

judgments that get you to the buy/no buy

decision?

Problem: when the current price is too high, what

do you do?

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FIRST CUTS & OTHER WORKSHEETS

This BI checklist documents your SSG judgments

First cut form

Member home page

new investment ideas

Sample First Cut

Worksheets can also help make judgments

Member home page

From Tools & Resources menu, select Worksheets

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https://drive.google.com/open?id=0B6T8jWM5lBi6a1Y2cWh1VHF5TWc

http://betterinvesting.org/Members/Tools/First+Cut/default.htm

http://www.betterinvesting.org/NR/rdonlyres/37C8FA0E-B468-49CD-AFB0-BC1B42D85622/0/FC20160529AL.pdf

http://betterinvesting.org/Members/Tools/WorkSheets/default.htm


THE ONLINE TOOLS WE USE: MY STUDIES

Stock Selection Guide (SSG) = 80%

Online CoreSSG

SSGplus

Stock Comparison Guide

Additional Research = 20%

Stock Ideas (SSG Plus screener)

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http://ssg.betterinvesting.org/manage/Default.aspx#Tab=screener


CoreSSG

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CoreSSG STEPS and PAUSE POINTS*

Analyze Growth*

Evaluate Management*

Forecast Sales & Earnings*

Assess Risk & Reward*

Determine 5-year Potential*

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SSGplus

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SSGplus STEPS and PAUSE POINTS*

Analyze Growth*

Forecast Sales & Earnings

Evaluate Management (Quality)*

Assess Risk & Reward

Determine 5-year Potential*

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THE OTHER 20% - START HERE

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THE OTHER 20% CONTINUED

Growth and Quality Parameters

Sales greater than 10%

PTP on Sales greater than 12%

Quality & Value: Nicholson Triple Play

Operating margins are consistent or increasing

Current P/E ratio is lower than the forecasted P/E

Current stock price has room for capital appreciation

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VALUE INVESTING CHECKLISTS

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OTHER CHECKLISTS



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OTHER CHECKLISTS: Club vs. Personal

Portfolio Management

Pounce List Management

Annual Report Analysis – Bob Adams spreadsheet:

http://bob-adams.net/

High Level Buy/Sell Checklists

Club Checklist: BIONIC


https://drive.google.com/file/d/0B6T8jWM5lBi6QjNkdklsM1A0UUk/view?usp=sharing

http://bob-adams.net/

https://drive.google.com/open?id=0B6T8jWM5lBi6WTZBTWs4eldXS29mbV82aC1JM2laZ21ZTEVB


BIONIC Investment Club (per Kim Butcher)

SSG in the Buy zone

Discounted Cash Flow has a Margin of Safety

Current P/E less than the average P/E

Net profit margin > 15%, better than the industry

Return on Invested Capital (ROIC) > 10%

Efficiency Ratios: cash conversion cycle, receivables and

inventory trends. Compare in relation to it’s industry.

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The Index Card Checklist

1. Strive to save 10 to 20 % of your income

2. Pay your credit card balance in full every month (and

how to deal with other forms of debt)

3. Max out your 401(k) and other tax-advantaged

savings accounts

4. Never buy or sell individual stocks

5. Buy Inexpensive, well-diversified indexed mutual

funds and exchange-traded funds

6. Make your Financial Advisor commit to the Fiduciary

Standard

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The Index Card Checklist continued

7. Buy a home when you are financially ready.

8. Insurance – make sure you are protected

9. Do what you can to support the Social Safety Net

10.Remember the Index Card

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DO YOUR OWN RESEARCH

“You need a different checklist and different mental model

for different companies. I can never make it easy by

saying, ‘Here are three things.’ You have to derive it

yourself to ingrain it in your head for the rest of your life.”

– Charlie Munger

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IMPLEMENTATION



BUILDING A HABIT

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BUILDING AN INVESTMENT HABIT

(BI) Invest regularly, regardless of market conditions.

The Habit Loop (how habits work)

The Craving Brain (how to create new habits)

The Golden Rule of Habit Change (why transformation

occurs)

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THE HABIT LOOP

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THE CRAVING BRAIN

Be more beautiful, richer, smarter.

First, find a simple and obvious cue.

Second, clearly define the reward.

Review the routine.

How to create New habits.

Determine what needs to change: Is it the routine? The

cue? Or the reward?

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DETERMINE YOUR FAVORITE INVESTORS

Warren Buffett

Charlie Munger http://www.valuewalk.com/2015/12/charlie-

mungers-investment-principles-and-checklists/

Pat Dorsey

Monish Pabrai

Guy Spears

Tom Gaynor (new)


http://www.valuewalk.com/2015/12/charlie-mungers-investment-principles-and-checklists/

http://www.valuewalk.com/2015/12/charlie-mungers-investment-principles-and-checklists/


BUILD YOUR OWN CHECKLISTS

Determine what problem(s) you need to solve

Quantify or qualify the problem defined

Start with one problem (easiest) to solve

Clearly identify the cue and reward

Determine what the pause points are, if any. 7-8 items

are better than 29 items per pause point. Chunk or

categorize.

Review checklists with others (your Club Partners?)

Implement. Test. Refine.

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THE GOLDEN RULE OF HABIT CHANGE

Why Transformation Occurs

You can never extinguish a bad habit, you can only

change it.

How it works:

Use the same cue

Provide the same reward

Change the routine

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PIT CREW vs. LONE WOLF

Most Clubs have a buy checklist. What else do you need?

New member training

Industry/stock presentation

Pounce/Watch list

Sell checklist

Document your judgments in the Online SSG Notes, on a

First Cut, or both

If the price is too high, add the stock to the Watch

List/Pounce List

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PIT CREW: CONSIDER VISITING A CLUB or CHAPTER

Share your checklist and ask them to review

They may want you to join/you may want to join

Consider club member benefits (sharing the workload,

filter and share ideas, education, building skills)

Consider volunteering with your chapter

They may want you to join/you may want to join

Consider volunteer benefits (sharing the workload,

filter and share ideas, education, building skills)

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SUMMARY

Contact:

Marcia Couey

Phone: 949.661.8861

Email: [email protected]

www.betterinvesting.net/portland

Reference page

Chapter meetings: the first Wednesday of the month

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mailto:[email protected]

http://www.betterinvesting.net/portland

https://drive.google.com/open?id=0B6T8jWM5lBi6N2U3aWdIS3N1dTg

Documents

THE CHECKLIST INVESTOR