Valuation Checklist Bias
What is your bias regarding the company and industry?
How do you feel about the company? (i.e., what are the first thoughts that cross your mind?)
Before starting the valuation, do you think this company is undervalued? If so, why?
How are you managing your bias? (which typically is optimistic)
Why are you considering buying this stock?
Is someone you admire buying the stock? What are the biases that could impair their rational thinking?
Is there any non-rational reason that is embedded in your thinking?
How are you adequately managing through your biases?
Are you open to considering an opposite view about the company?
Valuation Checklist Circle of competence
Valuation Checklist: The Industry/moat
Do you understand the industry? Why?
What is the consensus view of the industry?
What is the size of the industry?
Is the industry necessary for society?
Is the industry good for society?
What is the growth rate of the industry?
What is the cycle of product change?
Do competitors behave rationally in this industry?
What is the distribution of market share in the industry? Has market share been stable for companies in the industry? What is the market share of the company in the sector?
What is the nature of the industry?
What is the current and prospective regulatory climate?
What is the supply/demand dynamic of the industry?
Is the industry capital intensive? If so, do industry participants have differentiated goods?
Do industry prices reflect direct operating costs rather than capital employed? (excess production capacity?)
Is there excess production capacity in the industry? If so, is this a temporary condition? If so, why?
Can companies replicate their model as they go from geography to geography? Do the companies need local economy of scale?
Do you have a cultural/business understanding of the market the company is in?
Why will the industry sector face tailwinds in the future?
Over the next 10 years, will this market likely materially expand or shrink?
Could the industry be impacted by major technological change?
What unique insight do you have about the industry?
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