Investment Checklist

Looking over the investment decisions I made in the past half year, I become aware that I’ve made a few bad decisions. Overall the result is still profitable because those failures are small positions, but I knew that I have to be honest to myself so that I could learn from that. Those successful decisions are mainly the idea I learned from SeekingAlpha, Xueqiu, or ideas from subscriptions. However, the investment idea that I build from scratch are mostly not successful. I am still far from the skill level I would like to reach. I know I need to put down a checklist into my system so that I could stop myself from tripping on the same mistakes again. Noting them down would also help me to review my thinking at the time.


  • What does the company do?
  • What products does the company have?
  • Who’s the biggest customer/supplier?
  • Recent events?
  • Where do they operate geographically?

Investment Thesis

  • Is the product durable? Would it exist ten-year later? How much percentage of the R&D cost spent by the sale to make the company competent?
  • What’s the competitors? and what’s the competitive advantage of the company? Where does the moat come from? Location of the real-estate, high-switching cost? patents? contracts? network-effects? shelve-space? brand? economy of scale? regulatory? high barrier of entry? technical skill? reputation? intangible like database, credit records, or sports right?
  • Is it a growth company with good runway, what’s the CAGR? Is it grow by acquisition? If organic growth, break down the source of growth. Is it grow by market share? International expansion? Calculate the upper bound by comparing to other items. Also notes the factor that put the structural upper bound: demographic, population, inflation, nominal GDP.
  • Is it cyclical? What makes you confident that you are on the right trend?
  • Are you betting a turn- around? Or is it a spin-off arbitrage? Or it is a cigar-butt opportunity, be mindful that it might suffer from reflection theory like financial institution.
  • List at least three reasons where you would like to buy the stock. And write the thesis down, so that you could review them afterwards. Whether it turns out to be a good or bad decision later.
  • What’s the short interest ratio? Read short thesis.
  • What does the analysts say on TipRanks? What are the rankings for those analysts?
  • On what conditions you would sell it when you open an position.

Circle of Competence

  • Is the business model complicated and hard to predict?
  • how long have I been watching/working-in the industry? How would I evaluate myself on the familiarity.
  • How confident am I to predict the future 10-year avg EPS?


  • What kind of scenario would disrupt the business that you are looking at?
  • Is the Reward/Risk ratio large enough?
  • What makes Mr.Market wrong? Is it too early to dive-in right now?
  • What’s its maturity distribution on senior debt if any?
  • Where are we in the economy cycle? What’s the trend of the interest rate? When’s the last bear market? What’s the median PE ratio of the market?
  • Would it suffer from systematic risk or black swan? How much liquidity would it lose in a catastrophic situation?
  • Is its suppliers/buyers too concentrated?


  • What’s ROE, ROA, ROC, OCF?
  • What’s the dividend payout record?
  • CAGR in the number of the outstanding stocks?
  • Debt repayment. Debt/EBITDA, Z-Score (for manufacturing industry)?
  • Quality. F-Score, S&P, Moody, Fitch on bonds rating.
  • What’s the acquirer’s multiple? What’s EV/EBITDA, EV/Sales, P/OCF?
  • Is the margin of safety enough when the scenarios you listed happen?


  • Any institutional investors?
  • Is it part of any stock index?
  • Any chance to uplist to a bigger exchange?
  • What’s the history record of stock buyback?
  • Have they ever paid special dividends?
  • Any guru buying?

Management Team

  • Are they aligned with the investors? How much ownership do they own?
  • How does the management team compensated? Look at the proxy statement, is it options, restricted stocks, bonus? what’s the strike price for stock options? How much do they own the stocks, and is that a big part of their compensation?
  • What’s their guidance on the usage of the FCF? And historical record?
  • Any outstanding people on the board?
  • Any insiders buying?
  • What’s their record on acquisition? Are they good investment?
  • What’s the age of the management’s team? (FCAU’s CEO passed away due to disease)
  • If it is a Chinese company. What’s their record before? Have they ever diluted the shares with low issuance? Have they manipulated the account book?
  • If it is listed in HKE, check against if it is in the black list


  • Glassdoor Review of the management’s team
  • Product’s review on the forums. Yelp,, Car forum, TripAdvisor
  • Check on BBB
  • Look for info about the industry group. Timber, Core processors, Oil.
  • Get Satellite image of their HQ on Google Map

Discipline on Trading

  • Don’t check the stock price actively, set up price notification so that it would force you to plan ahead.
  • Limit the max of one position to be 30%
  • Don’t open a new position easily, stay on the sideline most of the time.
  • Does it make sense to use options strategy? If not, does it make sense to use Grid-Trading technique? What would be the opening size? Do I have enough of fund to support that? What would be the selling price?