Thought process when evaluating a company

[anypirate]

when trying to go indepth analysis of the companies, what is the thought process or the questions you guys will look into?

I tend to look at the major customers, major competitors and strategy or product innovation in the coming years. From the questions, I try to see if there is a moat or an advantage for the company I'm evaluating.

But i always have problems finding information on the three questions above. Can't think of any other ways to get the information without calling IR of the company.

Anyone can share their thought process when evaluating a stock?

[bardsmanship]

when trying to go indepth analysis of the companies, what is the thought process or the questions you guys will look into?

I tend to look at the major customers, major competitors and strategy or product innovation in the coming years. From the questions, I try to see if there is a moat or an advantage for the company I'm evaluating.

But i always have problems finding information on the three questions above. Can't think of any other ways to get the information without calling IR of the company.

Anyone can share their thought process when evaluating a stock?

I find this post on an analyst's investment research process quite useful: https://www.wallstreetoasis.com/forums/o...ch-process

Broadly, the key points I took away are:
1. What drives the company's revenue and profit?
2. How do the market, the company's customers and the company's competitors view the company?
3. How is management structured and incentivised?
4. Is management a good allocator of capital / do they make good decisions?
5. How are the company's financials - quality of earnings, leverage, cash flow, return on invested capital, any accounting red flags
6. What are the company's prospects, and what are the risks that might affect these prospects?
7. Is there a catalyst is sight?
8. Why is the market wrong about the company's valuation / What do I know that the market doesn't?

I also think talking to IR or attending AGMs and asking management questions in person can be useful. If IR doesn't respond to me or management is unwilling to answer my questions, I'm usually less inclined to invest in the company, or will invest a smaller amount.

[Wildreamz]

Philip Fisher's 15 point checklist:

POINT 1. DOES THE COMPANY HAVE PRODUCTS OR SERVICES WITH SUFFICIENT MARKET POTENTIAL TO MAKE POSSIBLE A SIZABLE INCREASE IN SALES FOR AT LEAST SEVERAL YEARS? 

POINT 2. DOES THE MANAGEMENT HAVE A DETERMINATION TO CONTINUE TO DEVELOP PRODUCTS OR PROCESSES THAT WILL STILL FURTHER INCREASE TOTAL SALES POTENTIALS WHEN THE GROWTH POTENTIALS OF CURRENTLY ATTRACTIVE PRODUCT LINES HAVE LARGELY BEEN EXPLOITED? 

POINT 3. HOW EFFECTIVE ARE THE COMPANY’S RESEARCH AND DEVELOPMENT EFFORTS IN RELATION TO ITS SIZE? 

POINT 4. DOES THE COMPANY HAVE AN ABOVE-AVERAGE SALES ORGANIZATION? 

POINT 5. DOES THE COMPANY HAVE A WORTHWHILE PROFIT MARGIN? 

POINT 6. WHAT IS THE COMPANY DOING TO MAINTAIN OR IMPROVE PROFIT MARGINS? 

POINT 7. DOES THE COMPANY HAVE OUTSTANDING LABOR AND PERSONNEL RELATIONS? 

POINT 8. DOES THE COMPANY HAVE OUTSTANDING EXECUTIVE RELATIONS? 

POINT 9. DOES THE COMPANY HAVE DEPTH TO ITS MANAGEMENT? 

POINT 10. HOW GOOD ARE THE COMPANY’S COST ANALYSIS AND ACCOUNTING CONTROLS? 

POINT 11. ARE THERE OTHER ASPECTS OF THE BUSINESS, SOMEWHAT PECULIAR TO THE INDUSTRY INVOLVED, WHICH WILL GIVE THE INVESTOR IMPORTANT CLUES AS TO HOW OUTSTANDING THE COMPANY MAY BE IN RELATION TO ITS COMPETITION? 

POINT 12. DOES THE COMPANY HAVE A SHORT-RANGE OR LONG-RANGE OUTLOOK IN REGARD TO PROFITS? 

POINT 13. IN THE FORESEEABLE FUTURE WILL THE GROWTH OF THE COMPANY REQUIRE SUFFICIENT EQUITY FINANCING SO THAT THE LARGER NUMBER OF SHARES THEN OUTSTANDING WILL LARGELY CANCEL THE EXISITNG STOCKHOLDERS’ BENEFIT FROM THIS ANTICIPATED GROWTH? 

POINT 14. DOES THE MANAGEMENT TALK FREELY TO INVESTORS ABOUT ITS AFFAIRS WHEN THINGS ARE GOING WELL BUT “CLAM UP” WHEN TROUBLES AND DISAPPOINTMENTS OCCUR? 

POINT 15. DOES THE COMPANY HAVE A MANAGEMENT OF UNQUESTIONABLE INTEGRITY? 


Source: http://www.stevensfirstprinciples.com/ne...points.pdf

[ksir]

Philip Fisher's 15 point checklist:

POINT 1. DOES THE COMPANY HAVE PRODUCTS OR SERVICES WITH SUFFICIENT MARKET POTENTIAL TO MAKE POSSIBLE A SIZABLE INCREASE IN SALES FOR AT LEAST SEVERAL YEARS? 

POINT 2. DOES THE MANAGEMENT HAVE A DETERMINATION TO CONTINUE TO DEVELOP PRODUCTS OR PROCESSES THAT WILL STILL FURTHER INCREASE TOTAL SALES POTENTIALS WHEN THE GROWTH POTENTIALS OF CURRENTLY ATTRACTIVE PRODUCT LINES HAVE LARGELY BEEN EXPLOITED? 

POINT 3. HOW EFFECTIVE ARE THE COMPANY’S RESEARCH AND DEVELOPMENT EFFORTS IN RELATION TO ITS SIZE? 

POINT 4. DOES THE COMPANY HAVE AN ABOVE-AVERAGE SALES ORGANIZATION? 

POINT 5. DOES THE COMPANY HAVE A WORTHWHILE PROFIT MARGIN? 

POINT 6. WHAT IS THE COMPANY DOING TO MAINTAIN OR IMPROVE PROFIT MARGINS? 

POINT 7. DOES THE COMPANY HAVE OUTSTANDING LABOR AND PERSONNEL RELATIONS? 

POINT 8. DOES THE COMPANY HAVE OUTSTANDING EXECUTIVE RELATIONS? 

POINT 9. DOES THE COMPANY HAVE DEPTH TO ITS MANAGEMENT? 

POINT 10. HOW GOOD ARE THE COMPANY’S COST ANALYSIS AND ACCOUNTING CONTROLS? 

POINT 11. ARE THERE OTHER ASPECTS OF THE BUSINESS, SOMEWHAT PECULIAR TO THE INDUSTRY INVOLVED, WHICH WILL GIVE THE INVESTOR IMPORTANT CLUES AS TO HOW OUTSTANDING THE COMPANY MAY BE IN RELATION TO ITS COMPETITION? 

POINT 12. DOES THE COMPANY HAVE A SHORT-RANGE OR LONG-RANGE OUTLOOK IN REGARD TO PROFITS? 

POINT 13. IN THE FORESEEABLE FUTURE WILL THE GROWTH OF THE COMPANY REQUIRE SUFFICIENT EQUITY FINANCING SO THAT THE LARGER NUMBER OF SHARES THEN OUTSTANDING WILL LARGELY CANCEL THE EXISITNG STOCKHOLDERS’ BENEFIT FROM THIS ANTICIPATED GROWTH? 

POINT 14. DOES THE MANAGEMENT TALK FREELY TO INVESTORS ABOUT ITS AFFAIRS WHEN THINGS ARE GOING WELL BUT “CLAM UP” WHEN TROUBLES AND DISAPPOINTMENTS OCCUR? 

POINT 15. DOES THE COMPANY HAVE A MANAGEMENT OF UNQUESTIONABLE INTEGRITY? 


Source: http://www.stevensfirstprinciples.com/ne...points.pdf

Whenever in doubt of Management (actions or behaviors), I find myself keep going back to point 15.
Point 15 is mandatory and essential.

Most of the times, it helped to avoid bad companies and the decisions usually turned out to be the right calls.

[chialc88]

Good morning valuebuddies,
Each day, 
do something to make you FEEL HAPPY,
until this becomes a habit.
- Remez Sasson

I'm still learning and this is my thinking.

If you're already learn all the basic stuffs
and looking for the holy grail, 
then please skip to the next post.

For those beginner (just like me),
this is what I think.

1. Back to basic.
There are simply too many great way to make $$$ in stocks.
Some methods required buying stocks with a good MOS (most of our valuebuddies practising).
Some methods required extreme patients (c.f. WB buying of KO).
Some methods required you to walk around and gotten first hand experience with the stocks.
Some methods required you to be an insider, I mean ... your circle of competence.

The more important is not the method that you choose but rather 
your temperament.

Know yourself, know how much risks you can take, 
that to me is simply the first step to investing.

2. Having fun while learning.
I'm not sure about you.
I'm having so much fun learning to invest.
You probably can sense my passion by reading my posts.
I can tell you this.
If I don't enjoy investing, 
I would had stash my $$$ in ETF.
Bye bye.

Everyday I learn,
I acquired more knowledge.
Everyday I do,
I hope to gain more wisdom.

3. Do the easy stuffs.
My dear friend.
If you start by asking questions,
I think you'll waste a lot of your time.

I think you should do less analysis and start investing soonest.
If you do not know what to buy?
Just look at the vb.com and buy some favourite stocks.


If you really don't know, why not just buy $10K of MM?
we need more love.

[anypirate]

Good morning valuebuddies,
Each day, 
do something to make you FEEL HAPPY,
until this becomes a habit.
- Remez Sasson

I'm still learning and this is my thinking.

If you're already learn all the basic stuffs
and looking for the holy grail, 
then please skip to the next post.

For those beginner (just like me),
this is what I think.

1. Back to basic.
There are simply too many great way to make $$$ in stocks.
Some methods required buying stocks with a good MOS (most of our valuebuddies practising).
Some methods required extreme patients (c.f. WB buying of KO).
Some methods required you to walk around and gotten first hand experience with the stocks.
Some methods required you to be an insider, I mean ... your circle of competence.

The more important is not the method that you choose but rather 
your temperament.

Know yourself, know how much risks you can take, 
that to me is simply the first step to investing.

2. Having fun while learning.
I'm not sure about you.
I'm having so much fun learning to invest.
You probably can sense my passion by reading my posts.
I can tell you this.
If I don't enjoy investing, 
I would had stash my $$$ in ETF.
Bye bye.

Everyday I learn,
I acquired more knowledge.
Everyday I do,
I hope to gain more wisdom.

3. Do the easy stuffs.
My dear friend.
If you start by asking questions,
I think you'll waste a lot of your time.

I think you should do less analysis and start investing soonest.
If you do not know what to buy?
Just look at the vb.com and buy some favourite stocks.


If you really don't know, why not just buy $10K of MM?
we need more love.

Thanks for the reply 

I'm trying to set up a system for myself from searching to the end evaluation of the stock.

In terms of searching for stocks, i'm using screeners now. But based on screeners, the issue I faced is I find myself not understanding the industry or the company well enough to make my investment. Maybe that is because I haven't done enough prospecting on stocks in the same segment. 
Finding the market share, major customers etc is always an issue for me.
I am trying to learn the more qualitative of business valuation instead of just using numbers from financial reports. 

Is there sites that list down SGX listed companies with more specific breakdown of segments? I'm trying to find comparison stocks but I cannot seem to find another company that does similar things based on the classification on SGX 

I certainly find it interesting to learn about the different businesses but I cannot find enough information to know enough about the company.

[chialc88]

don't know about others.
I am very happy with sgx stockfacts.
Just click on the INDUSTRY and the sorting looks ok to me.



Good luck in studying...
I had more than 10,000 hrs plunging thru SGX's company.

It's a very hard way.
Looking back, I will not regrets spending the 10,000 hrs.

However, to you, my dear friend.
There is another easy way.

S$10K is just an arbitrary number.
Depends on your current financial state.

Just do me a favour, tomorrow, just buy any amount of Micro Mechanics that you can afford.
Just buy.

Next Monday, 30 Oct 2017, pop into National Library (nearest MRT: Bugis).
2pm at Level 5 Possibility Room.

That, my friend, will be the first day of your exciting and fun journey learning on SGX companies.


I have a need for speed - Tom Cruise
why waste your 10,000 hrs when you can speed up with Micro Mechanics?
ask yourself....

[yeokiwi]

Is there sites that list down SGX listed companies with more specific breakdown of segments? I'm trying to find comparison stocks but I cannot seem to find another company that does similar things based on the classification on SGX

I certainly find it interesting to learn about the different businesses but I cannot find enough information to know enough about the company.

In short, there is probably no shortcut except to go through the annual reports of companies that you are interested.
http://www.sgx.com/wps/portal/sgxweb/hom..._financial
Pick up the interesting information and analysis it further.

It was much much more difficult in the past with no or limited information in the internet. Unless you are the shareholder, I think the annual reports were only found in libraries??

And even then, if the information is that easily available, in abundance or can be understood by anyone, it probably means that there is probably no significant advantage in doing your own research.

[anypirate]

Is there sites that list down SGX listed companies with more specific breakdown of segments? I'm trying to find comparison stocks but I cannot seem to find another company that does similar things based on the classification on SGX

I certainly find it interesting to learn about the different businesses but I cannot find enough information to know enough about the company.

In short, there is probably no shortcut except to go through the annual reports of companies that you are interested.
http://www.sgx.com/wps/portal/sgxweb/hom..._financial
Pick up the interesting information and analysis it further.

It was much much more difficult in the past with no or limited information in the internet. Unless you are the shareholder, I think the annual reports were only found in libraries??

And even then, if the information is that easily available, in abundance or can be understood by anyone, it probably means that there is probably no significant advantage in doing your own research.

I see. Thank you for the advice, I'll do more legwork and look for more companies then.

[karlmarx]

when trying to go indepth analysis of the companies, what is the thought process or the questions you guys will look into?

I tend to look at the major customers, major competitors and strategy or product innovation in the coming years. From the questions, I try to see if there is a moat or an advantage for the company I'm evaluating.

But i always have problems finding information on the three questions above. Can't think of any other ways to get the information without calling IR of the company.

Anyone can share their thought process when evaluating a stock?

Have you tried reading the company's IPO prospectus? It is the best public source of information for any company.