The judge asked, “What do you plead?” I said, “Insanity, your honour, who in their right mind would park in the passing lane?” — Steven Wright
A Valuable FREE Investing Newsletter: Checklist Investor Quarterly
Hewitt, a reader, kindly sent me an issue. Informative! Just email and ask to be on his mailing list for the Checklist Investor: Hewitt.Heiserman@EarningsPower.com
Below is my old Cessna Pre-Flight Checklist
You use a check-list so as not to overlook critical information (full gas tanks, alternative airport, correct altimeter) and to be able to have mental capacity free to handle emergencies such as this: http://www.youtube.com/watch?v=IbirtASpgEk&feature=related.
As you learn, build YOUR own checklist. When I first look at a company I quickly like to view the Value-Line to check the company’s historical financial history. Is this a good business with relatively stable, high returns on capital, growing sales, low debt, or–if it has debt–then the terms of that debt, and what is the quality of the balance sheet? What is management doing with excess cash? Then, when looking deeper, I immediately check the proxy to see if management is incentivized properly or has conflicts of interest. Can I understand this business moving forward, etc. Soon the checklist will automatically become part of your process.
From the Checklist Investor:
The stock market in the last dozen years has been colder than the summit of Mt. Everest.
But we are not curling up in the fetal position.
Instead, we are improving our skills, so we can compete smarter. To this end, we are also publishing a new e-letter for our friends, Checklist Investor Quarterly.
Our e-letter is inspired by Dr. Atul Gawande’s excellent book, The Checklist Manifesto. Gawande’s thesis is that airplane pilots, engineers, and other professionals can improve their desired outcomes just by following a repeatable process; i.e., a checklist. Gawande also profiles a few money managers who became checklist investors and saw their performance get better fast.
In addition to anecdotal evidence, Gawande also cites academic research by Geoff Smart, a Ph.D. psychologist, who examined how 51 venture capitalists decided whether to give an entrepreneur money. Among the group, Smart identified a top-tier he called Airline Captains for their sky-high 80% median return versus 35% for other personality types. Airline Captains, Smart says, “…took a methodical, checklist-driven approach to their task. Studying past mistakes and lessons from others in the field, they built formal checks into their process. They forced themselves to be disciplined and not to skip steps, even when they found someone they “knew” intuitively was a real prospect.” Smart says the other thinker-types—Art Critics, Sponges, Prosecutors, Suitors, and Terminators—were not failures. “But those who added checklists to their experiences proved substantially more successful.”
Our goal with Checklist Investor Quarterly is to share with you the latest thinking from the Internet—a checklist of great ideas, if you will—on how to help you become a better stock-picker. Our motto is: Checklist Investor Quarterly is free, but the information is valuable. If you like what you see, let us know and also pass this issue along to your friends. Anyone who opts in via an email to Hewitt.Heiserman@EarningsPower.com is welcome on our mailing list.
The Spring 2012 issue comes out in April. In the meantime, if you want to share an interesting article with the rest of us, drop us a line.
Important note: We welcome feedback. But as a courtesy to everyone else, please use “Reply”—not “Reply All.” Otherwise, our In-boxes fill up fast, which none of us want.
Best wishes for a healthy and prosperous 2012.
Co-editors, Checklist Investor Quarterly