rules & checklist

from the education of a value investor

rules

• check stock prices as infrequently as possible

• if the seller has a self-interest in me buying, I ain’t buying

• beware of CEOs and other top management, no matter how charismatic, persuasive, and amiable they seem

• pay attention to the order in which you consume information and don’t eat your dessert until you’ve finished your meat and vegetables

• pool your knowledge with other investors, but stick with people who can keep their ego in check

• keep the market at a safe distance and don’t let it invade your office or your brain

• before buying any stock, make sure you like it enough to hold on for at least two years, even if the price halves right after you buy it

• don’t say anything publicly about your investments that you may live to regret

checklist

• are any of the key members of the company’s management team going through a difficult personal experience that might radically affect their ability to act for the benefit of their shareholders? also, has this management team previously done anything self-serving that appears dumb?

• is this company providing a win-win for its entire ecosystem?

• how could this business be affected by changes in other parts of the value chain that lie beyond the company’s control? for example, are its revenues perilously dependent on the credit markets or the price of a particular commodity?

• is this stock cheap enough (not just in relative terms)? am I sure that I’m paying for the business as it is today—not for an excessively rosy expectation of where it might be in the future? does this investment satisfy me psychologically by meeting some unmet personal need? for example, am I keen to buy it because it makes me feel smart?