Equity investment checklist

Having a checklist is always good to handle complex stuff. For me, when it comes to equity investment, having a checklist is a necessity more than an option. Here, standing on the shoulders of giants, I’m sharing with you a checklist that I have created for my investment. More than picking the right business, having a checklist helps me to filter out the bad one.

As Charlie Munger famously said,

All I want to know is where I’m going to die So I’ll never go there.

Learning is a non-stop journey and it is especially true in the case of equity Investment. I have been trying to develop this checklist for a long time and I’m sure that I will be able to update this as I move forward in my learning curve.

Each investor will have their own style of investment and it is not necessary that all should accept or agree with my investment style or philosophy. But still, for a starter, I guess, this checklist is a good starting point. But keep in mind, knowing a list of parameters is not enough to find the right business. You should be able to understand in deep, the purpose of each parameter and how they are connected to one another. For the same reason, in near future, I will be writing in detail on each parameter I have mentioned below.

So here it goes.


Stage 1 – Stock shortlisting

  1. A proven tracker record of at least 10 years


Stage 2 – Fundamental analysis

  1. Having better ROIC & ROIIC – High efficiency

  2. Stability in profit generation

  3. Good in cash flow generation proportional to profit generation

  4. Good in Free Cash Flow (FCF) generation

  5. Financial resilience – Fund growth with internally generated profit/low debt/High cash/Good working capital ratio. (Can the businesses I own continue to grow through a recession? How will they be affected?)

  6. Need for less working capital/Preferably negative working capital due to excess cash flow – Short creditors days/Short inventory days/Short Debtors days or accounts receivable.

  7. Low competition intensive industry

  8. Enormous pricing power (Tapped or untapped)/ High-profit margin

  9. Less capital-intensive (Less need of CAPEX/ Less need of OPEX)

  10. Not a serial acquisitor

  11. Stable/Increasing dividend/High dividend to cash flow ratio

Stage 3 – Digging annual reports, presentations and interviews

  1. Understandable business model (Circle of competence)

  2. Repeat purchase business model

  3. Product/Service that is unavoidable even during a financial crisis

  4. Long runway/Untapped market /size of the market (Not prone to disruption) ***

  5. High/stable market share

  6. Large & expanding market opportunity (Can expand into related business)

  7. Minimum Government / Regulatory interference

  8. Skin in the game – High promoter holdings/Management with proven track record/Management integrity/Honesty/Transparency/Corporate governance ***


Stage 4 – Decider

By this stage you should be in a stage to say the competitive advantage of the business.

  1. Durable competitive advantage/ Moat


Stage 5 – Valuation (Before buying)

  1. Low valuation (Can pay up for quality stocks)


Stage 6 – Holding period (After buying)

This the most toughest and most important stage.

  1. Write down the reason for buying one particular stock, take a print out and file it

  2. Reinvest the dividend into your portfolio

  3. Hold it forever and keep reviewing the business performance every year using the printed document prepared while purchasing the stock

  4. When facts changes, change your mind (Document the reasons to sell a stock and refer it later on to validate your decision)


Stage 7 – Preparation part

  1. Keep allocating budget to tap the opportunity market gives in between

(At least 25% of total capital in cash)

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