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This Stock Selection Checklist cuts through the clutter, showing you examples of how to recognize winning stocks by breaking down their attributes and processes. It will help you screen out many of the losers and focus your efforts on solid stocks with good business models. (Click on the text after the “💡” to expand the details)
How to use it: This Checklist is about “soft factors” like management decisions, moats, etc. It will help you filter companies that are worthy of further research. You won’t find many companies that fulfill ALL points, but the more apply, the better. Study the example companies to improve your judgment when researching.
Keep in mind that after the preselection you still need to apply valuation metrics to define if the share price is worth it.
Does the company have a competitive advantage (moat) and is it easy to identify? Companies are not bound to one moat, they can have multiple.
Does the company operate in a market that has room to grow or is it able to capture market share from competitors in a saturated market?
Does the company find its CEO from inside the firm?
Does the company have a management team that has been working together for many years?
When things are going well, does management engage openly with investors about its operations, but "clam up" when problems and disappointments arise?
How is the communication with investors? Are the reports in a thorough language that is easy to understand?
Does the management have a determination to develop new products or improve the existing products? No product can remain successful and yet remain the same.