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| Preface | |
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| Acknowledgments | |
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| How to Generate Investment Ideas | |
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| How Investment Opportunities Are Created | |
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| How to Filter Your Investment Ideas | |
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| Using a Spreadsheet to Track Potential and Existing Holdings | |
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| Understanding the Business-The Basics | |
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| Do I want to spend a lot of time learning about this business? | |
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| How would you evaluate this business if you were to become its CEO? | |
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| Can you describe how the business operates, in your own words? | |
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| How does the business make money? | |
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| How has the business evolved overtime? | |
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| In what foreign markets does the business operate, and what are the risks of operating in these countries? | |
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| Understanding the Business-from the Customer Perspective | |
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| Who is the core customer of the business? | |
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| Is the customer base concentrated or diversified? | |
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| Is it easy or difficult to convince customers to buy the products or services? | |
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| What is the customer retention rate for the business? | |
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| What are the signs a business is customer oriented? | |
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| What pain does the business alleviate for the customer? | |
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| To What degree is the customer dependent on the products or services from the business? | |
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| If the business disappeared tomorrow, what impact would this have on the customer base? | |
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| Evaluating the Strengths and Weaknesses of a Business and Industry | |
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| Does the business have a sustainable competitive advantage and what is its source? | |
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| Does the business possess the ability to raise prices without losing customers? | |
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| Does the business operate in a good or bad industry? | |
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| How has the industry evolved over time? | |
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| What is the competitive landscape, and how intense is the competition? | |
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| What type of relationship does the business have with its suppliers? | |
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| Measuring the Operating and Financial Health of the Business | |
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| What are the fundamentals of the business? | |
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| What are the operating metrics of the business that you need to monitor? | |
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| What are the key risks the business faces? | |
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| How does inflation affect the business? | |
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| Is the business's balance sheet strong or weak? | |
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| What is the return on invested capital for the business? | |
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| Evaluating the Distribution of Earnings (Cash Flows) | |
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| Are the accounting standards that management uses conservative or liberal? | |
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| Does the business generate revenues that are recurring or from one-off transactions? | |
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| To what degree is the business cyclical, countercyclical, or recession-resistant? | |
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| To what degree does operating leverage impact the earnings of the business? | |
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| How does working capital impact the cash flows of the business? | |
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| Does the business have high or low capital-expenditure requirements? | |
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| Assessing the Quality of Management-Background and Classification: Who Are They? | |
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| What type of manager is leading the company? | |
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| What are the effects on the business of bringing in outside management? | |
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| Is the manager a lion or a hyena? | |
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| How did the manager rise to lead the business? | |
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| How are senior managers compensated, and how did they gain their ownership interest? | |
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| Have the managers been buying or selling the stock? | |
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| Assessing the Quality of Management-Competence: How Management Operates the Business | |
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| Does the CEO manage the business to benefit all stakeholders? | |
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| Does the management team improve its operations day-to-day or does it use a strategic plan to conduct its business? | |
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| Do the CEO and CFO issue guidance regarding earnings? | |
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| Is the business managed in a centralized or decentralized way? | |
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| Does management value its employees? | |
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| Does the management team know how to hire well? | |
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| Does the management team focus on cutting unnecessary costs? | |
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| Are the CEO and CFO disciplined in making capita! allocation decisions? | |
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| Do the CEO and CFO buy back stock opportunistically? | |
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| Assessing the Quality of Management-Positive and Negative Traits | |
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| Does the CEO love the money or the business? | |
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| Can you identify a moment of integrity for the manager? | |
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| Are managers clear and consistent in their communications and actions with stakeholders? | |
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| Does management think independently and remain unswayed by what others in their industry are doing? | |
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| Is the CEO self-promoting? | |
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| Evaluating Growth Opportunities | |
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| Does the business grow through mergers and acquisitions, or does it grow organically? | |
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| What is the management team's motivation to grow the business? | |
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| Has historical growth been profitable and will it continue? | |
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| What are the future growth prospects for the business? | |
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| Is the management team growing the business too quickly or at a steady pace? | |
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| Evaluating Mergers & Acquisitions | |
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| How does management make M&A decisions? | |
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| Have past acquisitions been successful? | |
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| Building a Human Intelligence Network | |
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| Evaluating Information Sources | |
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| How to Locate Human Sources | |
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| How to Contact Human Sources-and Get the Information You Want | |
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| Create a Database of Your Interviews for Future Reference | |
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| How to Interview the Management Team | |
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| Ask Open-Ended Questions | |
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| Be Aware of the Danger of Face-to-Face Assessments of Managers | |
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| Your Investment Checklist | |
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| Notes | |
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| About the Author | |
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| Index | |