The Ultimate Investing Checklist - This is All You Need

Author

Ayrat Murtazin
August 19, 2024

🗣️ Stock Market Today: US stocks steady as countdown to Jackson Hole begins

U.S. stocks remained largely stable on Monday after a strong performance last week, as investors focused on the upcoming speech by Fed Chair Jerome Powell at the Jackson Hole symposium, which could influence expectations for future rate cuts. The S&P 500 and Nasdaq Composite both edged up slightly, hovering near record highs, while the Dow Jones Industrial Average was also steady. Last week’s rally, which recouped losses from earlier in August, was driven by positive inflation and consumer spending data, easing concerns about a potential recession.

Attention is now shifting to Powell's speech on Friday, with investors speculating on the possibility of a rate cut in September. Current market expectations suggest a 72% chance of a 0.25% rate cut and a 28% chance of a 0.50% cut. Additionally, Wall Street is awaiting retail earnings reports from major companies like Lowes, Target, and Macy's, which will provide further insights into the health of the consumer. The Democratic National Convention, starting Monday, could also offer clues on the economic policies of presidential nominee Kamala Harris.

Stay informed with today's rundown:

Today, we delve into the “The Ultimate Investing Checklist I compiled”👇

You may remember this post from last week: Warren Buffett Value Investing Cheat Sheet.

Below is the complete version of the well-received value investing cheat sheet. As mentioned before, it is nearly impossible for a company to tick all of these boxes in the current market, but they are useful guidelines.

This took me a long time to compile... I hope you derive value from it.

QUANTITATIVE METRICS:

Value:

  • Price / Earnings < 15.0

  • Price / Book Value < 1.5

  • Price / Sales < 2.0

  • Price / FCF < 15.0

  • PEG < 1.0

  • Price / TBV < 0.7

  • Price / NCAV < 0.7

  • EV / EBITDA < 8.0

  • Current P/E to P/E 5yr High < 0.4

  • Current P/E to P/E 5yr Low < 0.8

  • Margin of safety below Intrinsic value > 30%

Efficiency:

  • ROE > 30%

  • ROA > 15%

  • ROTA > 20%

  • ROIC > 20%

  • ROCE > 20%

  • ROIC-WACC > 0.2

  • Inventory Turnover > 4.0

  • Accounts Payable Turnover > 3.0

  • Accounts Receivable Turnover > 5.0

  • Pre-tax Margin > 20%

Health:

  • Current Ratio > 0.3

  • Quick Ratio > 1.5

  • Flow Ratio < 1.25

  • Liabilities / Equity < 0.8

  • Debt / Equity < 0.5

  • Debt / EBITDA < 4.0

  • Debt / NCAV < 2.0

  • Long-term Debt / Working Capital < 2.0

  • Interest Coverage Ratio > 8.0

  • FCF / Sales > 8%

Growth:

  • Earnings Yield > 12%

  • EBIT Yield > 12%

  • # Of Years Where Earnings Growth < 2X Federal Bond Yield < 2

  • FCF Yield > 10%

  • Forward P/E to Trailing P/E > 1.1

  • Operating Cash Flow / EPS > 1.2

  • # Of Years With Declining EPS <= 2.0

  • Current EPS / EPS 10yrs ago > 3.0

  • Earnings Misses in the Last 24 Months = 0

Dividends:

  • Dividend Yield > 2%

  • Number Of Consecutive Years Increasing Dividends > 9

  • FCF / Dividends Paid > 2.5

  • EPS / Dividends Paid > 2.5

  • Payout Ratio < 40%

  • Number Of Dividend Cuts In Last 10yrs = 0.0

Ratings:

  • Altman Z-score >= 3.5

  • Piotroski F-score >= 7.0

  • Beneish M-score < -3.0

HISTORICAL PERFORMANCE:

Look at the last 10 years of data, year over year and make sure there is low volatility and high growth (except for net margin and debt/equity) for:

  • Sales

  • Earnings

  • Book value

  • Free cash flow

  • Dividends

  • Return on equity

  • Current ratio

  • Debt / equity

  • Net margin

  • Inventory turnover

QUALITATIVE METRICS:

  1. What does the company do (in one sentence)?

  2. What is the company's competitive advantage / moat?

  3. Who are the primary competitors?

  4. Is the company within my circle of competence?

  5. Have I read at least the most recent earnings report?

  6. Do I trust / like the management?

  7. What should I be wary of with this company?

  8. Does the company have a credit rating of at least BB?

  9. What do I like about this company?

  10. Does this company give me international exposure?

  11. Will this company be around in 20 years?

  12. If the stock market closed tomorrow for the next five years, would I still buy this company?

  13. Do I already own companies in this sector?

  14. Does the company treat its employees well?

  15. Are insiders buying or selling shares?

  16. Is the industry and company sustainable?

  17. Is the company's growth slowing?

  18. Are analysts optimistic about the company?

  19. Is the company a value trap?

  20. Is the stock "screaming" cheap?

  21. What is my exit strategy?

You can save up to 100% on a Tradingview subscription with my refer-a-friend link. When you get there, click on the Tradingview icon on the top-left of the page to get to the free plan if that’s what you want.

Reply

or to participate.