Friday, June 24, 2011

My own rules of investing


  1. Will the business be around in 10 years or so ? What are the odds that something unforeseen can occur which may change the landscape completely ? Am I smart enough to see events that can break this business in long term ?
  2. Does the business have pricing power ? Can the business raise prices because of inflation or because it can ...and not loose customers ?
  3. Does the business have MOAT i.e. a sustainable competitive advantage ? 
  4. Is the management shareholder friendly ? Does it have the right incentives ?
  5. Is it selling for a reasonable price taking into account the free cash flow it generates or will generate ? 
  6. Is the business conservatively capitalized ? Is it highly leveraged ?
  7. Does the management allocate capital prudently ....be it dividends,share buyback or smart acquisitions ?
  8. If the business is cyclical I try to normalize the free cash flow it would generate over long term.