Investing Checklist: ABBA – Accident; Bird in Hand by CSInvesting
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Investing Checklist (Helpful)
ABBA – Accident (Our competitive advantage on the purchase)
- Purpose is to determine why the seller does not care about the price they receive hence giving us a competitive advantage on the purchase
|Is this an accident, if so, what went wrong (for example, a dividend cut, earnings miss)|
|Is this a region or industry that is currently unpopular? Why? Is there any reason to expect some type of reversion to the mean?|
|Is this a special situation such as a spinoff, rights issue, emergence from bankruptcy, index deletion, restructuring, tax loss selling|
|Is this an underfollowed stock? How many analysts cover it? Why do I think it is underfollowed?|
|Or do I simply think I understand the situation better than the market. Why?|
|Have we reach the point of maximum pessimism and if so, why? (include thoughts on why any negative market views are incorrect)|
ABBA - Bird in Hand (What do we think the company is worth)
- Purpose is to determine a value, preferably based on assets, of the company at this time.
|Which valuation approach is most applicable (Liquidation value/Replacement Value/Private Market value/Sum of the Parts) Why?|
|Do any of the other approaches suggest preferred approach is unrealistic|
|Have there been any m&a transactions in the last 3 years and if so, what are the details of the prices paid|
|What prices do similar companies trade at in the marketplace|
|Are there any extra assets such as vacant land, investments and if so, what is the approximate value (before and after tax)|
|Is the company divisible meaning parts (or a division) could be sold without hurting the core (for example, multiple radio stations vs single source mfg facility)|
|Are any segments/product lines/divisions losing moneyWhat are the net assets tied up in this segment/product line
Is there a plan to dispose of this segment or line in the next 3 years
What will be the proceeds and impact if this segment/line is disposed of
|Is there hidden value in their distribution channel (dealer organization), licenses, patents|
|Is there any hidden value or liability in the cost or structure of debt|
|Off balance sheet liabilities such as:Leases (incl any known closures)
Guarantees incl investment returns
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