A checklist saves lives.
Before a planes takes off, the pilot must always go through a checklist to ensure that everything is rigorously checked.
And you certainly don’t want a nightmare crash in your portfolio.
I’ve had my checklist for about 2 years now and I felt it was time to go through it and improve upon it.
For long time readers and intrinsic value calculator users, you would have seen my initial checklist.
It went a little something like this.
1. Quantitative
2. Qualitative
By the end of these questions, I will have an idea of what number to give to categories in the spider graph such as below.
On the qualitative side, there isn’t much to explain. The criteria and cutoff points look pretty good. That’s only if you’re looking for the same type of company for every investment.
E.g. The cases couldn’t identify that a company with low margins with high inventory turnover could be even more effective than a high margin, low turnover company.
2. Too Narrow/Focused
By having setting specific standards, it was easy to forget other aspects like looking up CEO compensation, shares outstanding history etc.
3. Wording
The wording of the case also made it difficult because it just requires a yes or no. It made it far to easy to just answer based on my own guesses without performing the due research.
4. Not Universal
I found that the checklist was pretty lame against a company like KO or JNJ. I ended up skipping the entire checklist.
I’ll get to that next time along with the updated checklist.
Jae Jun
http://www.oldschoolvalue.com/
Before a planes takes off, the pilot must always go through a checklist to ensure that everything is rigorously checked.
And you certainly don’t want a nightmare crash in your portfolio.
I’ve had my checklist for about 2 years now and I felt it was time to go through it and improve upon it.
For long time readers and intrinsic value calculator users, you would have seen my initial checklist.
It went a little something like this.
Initial OSV Investing Checklist
There were two sections to the checklist. Qualitative and Quantitative.1. Quantitative
2. Qualitative
By the end of these questions, I will have an idea of what number to give to categories in the spider graph such as below.
Problems with the Above Investing Checklist
1. Limited set of numbers and metricsOn the qualitative side, there isn’t much to explain. The criteria and cutoff points look pretty good. That’s only if you’re looking for the same type of company for every investment.
E.g. The cases couldn’t identify that a company with low margins with high inventory turnover could be even more effective than a high margin, low turnover company.
2. Too Narrow/Focused
By having setting specific standards, it was easy to forget other aspects like looking up CEO compensation, shares outstanding history etc.
3. Wording
The wording of the case also made it difficult because it just requires a yes or no. It made it far to easy to just answer based on my own guesses without performing the due research.
4. Not Universal
I found that the checklist was pretty lame against a company like KO or JNJ. I ended up skipping the entire checklist.
Checklist Improvement
So the question is, how do I improve on this?I’ll get to that next time along with the updated checklist.
Jae Jun
http://www.oldschoolvalue.com/
