You should always have a checklist before you buy a stock
Do I want to spend a long time learning about this business
How do you evaluate this business if you were to become the CEO. You should research this business as if you will be the next CEO which will be taking over the business
Can you describe how the business operates in your own words
Each of the business segments
Distribution channels
Marketing strategies
Manufacturing activities
Regulatory requirements
Industry size and terns
Insight into the competitive environment
How does the business make money
How has the business evolved over time
Is success of business due to management brillance or is it
being at the right place at right time
In what foreign markets does the business operate and what are the risks in operating in these countries
Need to understand how committed the management is to invest in foreign countries
To build brand awareness, a business must invest long term in a foreign country
How long has the business being operating in the foreign country.
Is the business investing in R&D to adapt to specific tastes of the customers in foreign country
Has the company assigned a specific Regional manager to emerging markets
Is Revenue Growth translating into Profit growth
If a company does not provide adequate information ie: profits from certain regions
What are the risks to the companies foreign earnings Country risks Brazil complicated tax code China’s protectionism in wind turbine industry
Currency risks Mexico has a highly volatile currency Companies tend to reduce this risk by
investing the money back in the same country
Who is the core customer of the business
Is the customer base concentrated or diversified. Need to have a diversified customer base rather than one with a concentrated customer base. The loss of one customer should not affect the business. Check if the % a business have for one customer
Is the customer base concentrated or diversified. Need to have a diversified customer base rather than one with a concentrated customer base. The loss of one customer should not affect the business.Check if the % a business have for one customer
What is the customer retention rate for the business. Loyal customer base generates more predictable sales. Customer also serve as advocates for a business. Watch for declining loyalty program numbers as this is an indicator that the customer retention is declining. It is useful to interview sales staff to see if there is an incentive to retain existing customers.
What are the signs that the business is customer oriented. The more frequently the business interacts with its customers, the more the customers are happy. You can quickly return a defective t.v to Cotsco without asking any questions
Customers are not loyal to businesses with poor customer service
Find out if a business solves customer problems quickly and easily
Costco cuts its prices when commodity price falls
Southwest airlines doesn’t charge its customers for 2 bags
How does the management stay close to its customers
CEO personally reads all the customers emails
What pain does the business alleviate for the customer
A medical disposal company avoid potential liabilities that come from disposal of medical syringes
To what degree is the customer dependent on the product or services from the business
Need to have
Company which manufactureres heart pacemakers
Need to have but not immediately
Example：Car Maintenance
Need to have but not critical
Travel, New car, New house
If the business dissapeared tomorro, what impact would it have on the customer base
Ask what a custonmer will do if the busines dissapeared tomorrow
Excellent post friend.
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Buenos dias Amigo!
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A fundamental investing strategy.
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