A research checklist
- Thesis. Write one paragraph on why the company should earn more than the market expects. Make it specific enough to be wrong.
- Filings and results. Read the latest annual and interim reports, or the ASX, UK, Canadian or German equivalents. Check whether results match the thesis.
- Valuation. Compare the price with the company's own history and with peers. Use more than one measure, because a single ratio can mislead.
- Insider and ownership activity. Check recent insider transactions and major holders. See what insider buying signals.
- News and catalysts. Look at what has changed in the last few weeks, and what is scheduled next, such as results or a shareholder vote.
- Market regime and liquidity. Check the broad conditions you are buying into, and whether you can exit the position at a reasonable price.
- Position size and exit rules. Decide how much you will hold and what would make you sell, before you buy.
What to write down
Your thesis, the three facts that support it, the one fact that would break it, the position size and your exit conditions. Keep it short and dated so you can review it later.
Common shortcuts to avoid
- Buying on one headline without reading the filing behind it.
- Using a single valuation ratio as proof of value.
- Ignoring position size because the thesis feels strong.
For ongoing checks after you buy, see portfolio monitoring.