Research Decision Cycle (Issue #76)
“After you buy a stock is when the real work starts”
Ian Cassel
Coffee Can Investing has been massively popularized by many of the greatest investors of our time. However, for most investors, it is a flawed method for analysis. Investments are made based on theses that are created through research before investing. These theses are essentially stories that need to be challenged, checked, and tested. After you buy a stock, research really matters not only because it can decide whether or not you lose money, but also because it can trigger you to buy. At a simple level, you should sell a stock when the thesis changes.
This makes investing an iterative process. First, there is research then a decision followed by continued research and another decision. The cycle repeats and a stock should only be held if the company can pass the regular “story validation checks” otherwise selling should be considered. That said, holding for the long term is important, and when I talk about the story changing I am only referring to fundamental parts of it. This does not include
Another name for a thesis is story and as we know valuation is a bridge between story and numbers. That’s why I created StoryBoard, the only valuation tool that is built to map out and visualize both the qualitative and quantitative sides of valuation. This comprehensive dashboard provides a framework of estimates to check your story.
For an example of how I’ve used it to map out the SkyHarbour Group, a stock I invest in, check out my post here.
Watchlist Update:
Portfolio Update:
To get access to the full spreadsheet and linked deep dives go here.
Until Thursday,
Soren