How to pick & pitch a stock
A seemingly infinite amount of research can be done when analyzing a stock. We can forecast thousands of factors to predict how they would impact a company, we can try to understand how hundreds of competitors interact in the industry, we think endlessly about the psychology of other investors in the marketplace and construct sensitivity analyses to quantify our level of certainty on any specific valuation. The reason I’m writing this post is to share a commonly used framework to evaluate a stock and build a stock pitch that can be used as a foundation for many further analyses.
I personally use a top-down approach when analyzing stocks, beginning with industry research, continuing with company research, and concluding with a valuation. Understanding the industry that a company operates in is fundamental to projecting its future success - some questions to ask are:
What does the...
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