Investment checklist v 0.1 (beta)

One of my “secondary” goals for 2013 is trying to develop a more “formal” checklist especially for my “boring stock” strategy. As the “Boss Score” is only ment to be a starting point, I usually try to “quick check” certain points in order to find out if a deeper analysis makes sense.

One of the first thing one has to decide is: “what kind of stocks am I looking for” ? I don’t believe that a single check list for all kind of different stocks exists. So please keep in mind, the purpose of this checklist wil be to find stocks that:

– perform consistently well over time but not spectacularily so (no “wide moat” companies)
– have little fundamental downside (low debt, “hard” assets, stable sector)
– can be “left alone” if necessary for a long time because management is trustworthy (“low maintenance”)
– are nevertheless “mispriced” by the market

So far I have come up with the following list and the first 27 items (beta version):

1 . Market cap between 25-250 mn
“sweet spot”, large enough to invest, small enough to deter “large professional” investors

2. Less than 3 analysts following on Bloomberg or very bad sentiment
Unfollowed or “hated” stocks have larger potential to be mispriced

3. “low key” IR. E.g. no English annual reports, short quarterly updates etc., no share price on company homepage
Many investors skip such stocks

4. Potential special circumstances like Euro crisis, very diverse business activities, complex structure, Spin off etc.
increases chance of mispricing

5. Low historical beta /volatility
Good for my nerves, bad for any index oriented investors

6. Dividend yield > 3%
subjective criteria based on experience

7. P/E < 10
For some reasons I prefer “single digits” P/E

8. P/B < 1.2
Maybe anchoring effect, but in my opinion limtis downside risk

9. EV/EBITDA <= 6
in order to detect “special effects”

10. 10 Year mean reversion potential > 50%
Mean reversion potential based on P/E- net margin & EV/EBITDA, EBITDA margin

11. Positive 10 year FCF yield
no FCF generation normally indicates issues with capital allocation efficiency

12. Large acquisitions in the past or serial “acquirer” ?
might severly impact quality of reported numbers

13. Large share of intangible assets ?
again, quality of reported numbers

14. Significant pension liabilities, operating leases ?
Adjust for them accordingly to see if total leverage still acceptable

15. Low financial debt (net debt/equity <0.5)
again to minimize downside risk

16. Family owned / run
better chance for long term strategic management, best with founder still in charge and not too old

17. Treatment of shareholders in the past ?
Any indications of screwing shareholders in the past ?

18. Sharecount stable or decreasing ?
Does company dilute shareholders e.g. via options to management ?

19. Alignment of management and shareholders ?
Does management earn comparably much more than their shareholdings ? Outsized & unwarranted bonuses ?

20. Subjective impression of company management (pictures, speeches, comments)
Might sound stupid, but sometimes a picture says more than 500 pages …. Avoid jet set, sleazy looking guys

21. 10 Years of comparable history available ?
preferably companies with a long term track record as listed companies without major restructurings etc.

22. Industry in general decline
avoid value traps or make sure to understand whats going on

23. Positive/neutral short term (6m-1 year) price momentum ?
only catch the falling knife if you are very very sure

24. high quality investors as share holders ?
Preferable less known but good investors

25. Do I understand the business model ?
Why is the company succesful over the long run ?

26. Potential short/medium catalyst ?
i.e. sale of loss making division, change in shareholder structure etc.

27. 10 year sales growth above inflation
Don’t pay for growth, but if you get it cheap…also trade off with FCF

For each item I will give a score which is either:

+1 for a very positive answer
0 for a neutral position
-1 for a negative aspect

I will then add all the scores, the maximum is then logically the total number of checklist items. Anything which scores above 50% or more will be analysed deeper. In order to “callibrate” the list, I will also calculate scores for all my current holdings.

For a first test I calculated the “sores” for the following positions:

Installux: 18
Total Produce: 16
Hornbach: 16
Tonnelerie: 22
AS Creation: 20
Vetropack: 18
Buzzi: 10

As with any checklist or other “Model”, I don’t think one should follow this like a slave. Rather it should help to look more structured at a stock and also being able to review such a stock periodically on a structured basis.

I would be highly interested if any of the readers has comparable checklists and suggestions for the list.


  • Hi mme,

    are the above mentioned Investment criteria identical with your Boss score or are these additional criteria. If so, what’s actually the Boss score ? What does Boss stand for and how does it work ? Maybe, it is already on your Website, but I have not found it.

    Many thanks

  • Have you looked at the “Levermann – Punktesystem” this is not exactly for value investors but filters stocks based on fundamental and technical criteria

  • oli,

    there are already some good tools avaiable for retail investors, like Tim Du Toits Sharelab.

    maybe it makes sense for you to look at their stuff and compare ?


    I have acces to the bloombert terminal btw,

  • bloomberg website, bloomberg terminal or something else?
    I am using the stock screener from ( but the screening options cover only a small amount of value investing metrics. Therefore I am writing a financial data crawler to compute my own metrics and a “value investing process” website to combine qualitative information form annual reports (from / EDGAR) to record my investment process and results. At the moment my development stoped because I do not know if the value investing community would use my software and the software is exposed to legal issues if the software would be a public website (bc it builds on top of non-free financial data from An installable application would have no legal issues, but has higher adoption barriers for its potential users and less user created content (eg. industry specific screener, different valuation methods – Grahams Net-Net, Ottes Königsanalyse, …). Develop it or not!?

  • Do you compute your checklist automatical or semi-automatical?
    Where do you get the data for screening?

  • I have well over a hundred points in my investment guide’s checklist and, even at the “quick check”, I prefer a less schematic thinking.
    For reasons of clarity, I distinguish between a figures checklist (“Zahlenwerk-Checkliste”) and a checklist beyond the figures (“Jenseits des Zahlenwerks”). There are also specific points for the various industries.
    My first question is always: ‘Where are the biggest risks?’ I think that a certain amount of experience helps to discover possible weaknesses relatively quickly. But surely it needs a checklist in the background.

  • Hi,
    2 points from me:
    1) Low financial debt (net debt/equity <0.5): it doesn't make sense to compare NET debt to equity. Net debt means you subtracted cash on hand (and equivalents) from ST + LT debt. Since you deduced cash from gross debt you can't compare it to equity as cash is a component of equity. Or not?

    2) Read a section on litigation. Sometimes there might be patent disputes etc. See Marvel.

    • Stefan,

      good points. I have to think about the debt definition again. However as it is only part of a “first step” check, it might still work. I want to avoid gross debt because this is not really a relevant number.

      Off balance sheet liabilities are important as well. You are absolutely right.


    • Cash is not a component of equity, but of the total liabilities (=balance sheet total). I think it does make perfectly sense to compute that ratio.

      • Cash is in total liabilities, true. But when you have undistributed profits from previous years(cash) than it goes into equity.

  • Great checklist.

    I have a similar though less detailed and stuctured one

    Few additional items :
    I always check off-balance sheet liabilities.

    For French stocks, the “Boursorama” indicator ; the boursorama online broker hosts investments forums ; a mostly deserted forum is a good sign for a stock.

    Cash and equivalents ; is it real cash/ low risk investments or otherwise.

    If the company operates in a traditional “brick and mortar” industry, it’s a positive.

    Insider buying is a positive (for small caps).

  • Some suggestions: Is the business cyclical? How did it react to the financial crisis? How large are average return on assets of the Industry? What drives the price of the products?

    • martin, thanks. Traded volume is also a good indicator, however sometimes it is quite volatile. “free float” would also be an alternative.

      • Market cap is volatile, too. If you don’t like turnover I would rather go with free float market cap than market cap.

    • robert,

      i think your pointsare quite important but rather for the second stage of the analysis. The “checklist” is more a quick first filter.


    • There is no such thing as a different constant return on assets in different industries. It does not make any sense, why the return should depend on the industry. Maybe temporarily, but not sustainable.

      • Of cause it makes sense. First of all many industry have barrier which prevent free market entry. Often on a local level even in the long run. Second different industries bear different levels of risk. I don’t believe in a linear return-risk relation, but industries with particular low or particular high risk should earn below average returns.

  • I like your approach. In addition I look at the average traded daily value in order to see if I can aquire a position without moving the price too much. E.g. conduril’s turnover was too low for me.

    Instead of market cap I rather look at average traded value to be smaller than a certain threshold, because this is in my opinion what really matters to deter large investors. Sometims market cap may be larger than e.g. 250mm but due to long-term shareholders turnover is not.

    Somehow I like ev/ebit, too.

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