(From The Jacket) – All too often, investors buy stocks based on either recommendations from other investors, hunches, or isolated facts about a business they’ve heard or read about. In doing this, your decision-making process becomes dangerous because you haven’t taken the time to thoroughly understand the businesses you are buying and you’re relying on the information, or misinformation, being provided to you about a particular stock. Instead, your investment purchases should be based on understanding the value of a business through in-depth research. If you truly understand the value of a business, then you will be in a position to recognize investment opportunities and can more easily make the right buy or sell decisions.
“The Investment Checklist” has been designed to help you develop an in-depth research process, through a series of checklists, that will allow you to effectively generate and research investment ideas, assess the quality of a business and its management team, and ultimately improve the performance of your portfolio. In it, author Michael Shearn — founder of Time Value of Money, LP, and the Compound Money Fund, LP — outlines the systematic process he has used over the past decade to carefully think through potential investments and avoid common investment mistakes. Along the way, he puts this approach in perspective by addressing:
- A search strategy that will improve your odds of finding investment ideas worth researching further
- The importance of evaluating a business’s strengths and weaknesses, measuring its operational and financial health, and understanding a business from the customers’ perspective rather than your own
- Why assessing the quality of management — from how they handle daily operations and long-term strategy to the type of managers they are and how they rose to lead the business — are essential to achieving better investment results
- How to gauge the potential future growth opportunities of a business by looking at whether it’s growing organically or through merger and acquisitions, and whether historical growth has been profitable
- And much more
Each chapter of “The Investment Checklist” also offers countless examples of companies the author has researched, considered investing in, and actually invested in or decided not to invest in. These examples show you exactly how his checklist helped him make investment decisions, and they’ll show you how to do the same. In addition, each chapter ends with “Key Points to Keep in Mind,” so you can zero in on the critical factors in each set of questions.
If you want to lower your investment risk you need to increase your knowledge of the businesses you buy stock in. “The Investment Checklist” will show you how to do this, and much more, by helping you follow a concise and easy-to-use framework that will guide your investment decisions.