A lot of time I take few weeks and even more to research one company. Sometime it get boring just reading on one company, but I think it is worth the effort to understand the risk and rewards of the business. Many have said that value investors sleep tight at night, well it is true as I know precisely the risks involved with any particular investment I hold. That knowledge is critical to relate and analyze the slew of news and information that zip through the media and analyst recommendations. Therefore I do not panic when the stock price drops on news that will not undermine the business fundamental of the company.
So below is the steps i do to research a business and it is generally broken into two sections:
- Understanding the business, and
- Valuing the business
| Objective | Task |
| Understand business | Read Annual Report current year |
| Understand business | Read Annual Report previous year |
| Understand business | Read Current quarter earning report |
| Understand business | Listen to current quarter earning call |
| Understand business | Industry analysis: read latest annual report and latest quarterly earning for chief competitors in the industry |
| Understand business | Read management presentations and competitions presentations plus any research on the industry. |
| Understand Management Ability | Research management resumes and review latest proxy statement |
| Understand Business | Determine and list industry and company economic drivers |
| Is the business a sound and have value potential? If yes then | |
| Understand Business Value | Gather financial data for analysis |
| Understand Business Value | Reclassify financial if necessary |
| Understand Business Value | Perform common financial and ratio analysis |
| Document Reason for Investment | Answer questionnaire |
| Understand Business Value | Create Revenue forecast model |
| Understand Business Value | Value business and determine if the price is favorable to buy? |
| Is the business trading at a price below determined value? By how much? | |
You value seeking investor,
Sami
2 comments:
"Document Reason for Investment
Answer questionnaire"
Is this a questionnaire that you've created?
yes. I put it together based on reading several books, experience and off course reading warren buffett letter to shareholders. you can find it here: http://myvalueidea.blogspot.com/2007/12/what-business-to-buy.html
Post a Comment