Your Due Diligence Process

robertbanking · 13 September 2023

Hello you very intelligent and amazing individuals that make up this forum, i sincerely hope things are going well for you.

I kindly wondered when analysing a stock after you have read an Annual Report or a few, what does your process look like after this please? Do you then read maybe competitors Annual Reports please? Do you then for instance read Company Presentations, i am kindly refining my own due diligence process and would be very interested to hear what yours is made up of please? If anyone kindly had any thoughts on this i would be forever grateful and thankful for your support, it would mean the world to me.

Sending you lots of good wishes and i truly hope you continue to do amazing with your investing and have a fabulous life. All the very best.

divs4ever · 13 September 2023

well one thing i do that may be different to most is keep a 'little black book ' of dud directors ( and other top level management , when they are known )

another thing i do is mostly take reports with 'a grain of salt ' ESPECIALLY shareholder/investor presentations/roadshows , sure there are a few blistering accurate , but it normally takes me a few years to build that sort of trust

other than that thinning out potential targets by a series of scans ( and yes in hindsight some gems have been overlooked )

ALSO with ETFs in particular i read any attached white papers intently , considering why that strategy is better ( for me ) than the rivals

cheers

galumay · 13 September 2023

Great strategy @divs4ever, I do a similar thing in my investing forum. Its hard to tell how good management are, but once you spot rotten eggs its imperative to avoid wherever they go!

I try to avoid narrative in reports & presentations, it's too easy to be seduced into buying the story instead of the business. My focus is on the financial reports and understanding how the business works, capital allocation, strength of balance sheet, ROIIC, FCF, unit economics/margins etc.

I also have developed a process to look thru a business at a fairly high level that allows me to decide within a few minutes whether a business is worthy of a deeper dive. This not only saves time but also allows me to look at more businesses overall.

I suspect the most important thing is to develop a process that you are happy with and suits your personality, this helps you develop conviction in positions and makes it easier to weather the inevitable ups and downs of the market.

divs4ever · 13 September 2023

galumay said:
Great strategy @divs4ever, I do a similar thing in my investing forum. Its hard to tell how good management are, but once you spot rotten eggs its imperative to avoid wherever they go!

I try to avoid narrative in reports & presentations, it's too easy to be seduced into buying the story instead of the business. My focus is on the financial reports and understanding how the business works, capital allocation, strength of balance sheet, ROIIC, FCF, unit economics/margins etc.

I also have developed a process to look thru a business at a fairly high level that allows me to decide within a few minutes whether a business is worthy of a deeper dive. This not only saves time but also allows me to look at more businesses overall.

I suspect the most important thing is to develop a process that you are happy with and suits your personality, this helps you develop conviction in positions and makes it easier to weather the inevitable ups and downs of the market.

have worked for a few companies where incompetence is rewarded , so maybe low-level work gossip ( if you can get it might be helpful as well )

i remember one place ( not an ASX listed company ) where a serial slacker was promoted and was told directly that the promotion was because he knew all the crevices and cubby-holes to sneak off for a nap or smoke , therefore he could find any other slackers

tech/a · 13 September 2023

An alternate method I developed back in 2001 and refined in 2013. For longer term trading.

Fundamentally I use the BT margin list. My thinking is that if BT are happy to have it on their list they have done the due diligence.
I just do not have the time and I'm not convinced that all that is made available to the public is as it looks.

So this is my universe of stocks.

Im a technical trader as I like to be able to see things visually and like to be able to measure Trader/Investor participation.
This forms the foundation for a systematic trading methodology with the 20/20 trading methodology and a refined version of Tech Trader
Both of which can be found in Nick Radges book.
"ÜnHoly Grails"

Easy to maintain and better than What I see as an industry average (> 10%) over 10 years.
I have a blueprint that I can reference.

galumay · 13 September 2023

No doubt, if you are a speculator/trader, then you would have a very different process. Even for someone like the OP it may be better to 'outsource' the due diligence (research/analysis) and simply invest in a couple of ETF's. I suspect that unless you are passionate about understanding and owning businesses, it may be better to take this path.

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