100-Point Investing Checklist — Systematic Screening

Learning Objectives

After reading this chapter, you will be able to:

• Explain how checklist converts emotion to professional process
• Connect: 100 points across 10 domains: Competence → Portfolio decision
• Identify: Scoring guides conviction; red flags override scores
• Apply: Journal + inversion + 5-year test = final gates

Introduction

Aviation disasters often from simple mistakes, not lack of knowledge — solution: Checklist.Pilots, surgeons, engineers use them — great investors too.This chapter = your Operating Manual for every investment decision.

Core Concepts

Financial Terms

Investment Decision

Score < 70: More research or pass.Fatal red flag: Never invest.

"In investing, avoiding mistakes is as important as being right." — Charlie Munger

Part A: Circle of Competence (1–10)

Business model, revenue, risks, industry, competition, product, customer, 10-year view, explain to child

Part B: Industry & Sector (11–20)

Growth, TAM, cyclical/secular, regulation, barriers, competition, pricing power, share trend, leaders, outlook

Part C: Business Quality (21–30)

Revenue/profit growth, margins, cash flow, ROE, ROCE, debt, working capital, FCF, earnings quality

Part D: Moat Analysis (31–40)

Brand, distribution, cost, switching, network, regulatory, share stability, copyability, pricing power, 10-year moat

Part E: Management Quality (41–50)

Integrity, capital allocation, promoter holding, pledge, auditor, RPTs, communication, dilution, minority respect, crisis mgmt

Part F: Financial Analysis (51–60)

Sales/Profit CAGR >10%, ROCE >15%, D/E, interest coverage, margins, FCF, working capital, cash conversion, Altman Z

Part G: Valuation (61–70)

P/E, P/B, EV/EBITDA, PEG, DCF, Graham Number, margin of safety, peer comparison, historical valuation, downside risk

Part H: Growth Analysis (71–80)

Runway, TAM, scalability, operating leverage, innovation, share gain, new products, expansion, export, 10-year potential

Part I: Risk Analysis (81–90)

Key risks, customer/supplier concentration, commodity/currency/regulatory/tech/governance risk, recession impact, worst case

Part J: Portfolio Decision (91–100)

Allocation, position size, buy price, intrinsic value, sell conditions, thesis written, horizon, rebalancing, exit strategy, tolerate 30% drop?

Formula & Explanation

Scoring System

Red Flag Override

Visual Guide

Worked Example — Indian Market

Example 1 - Scalability

Revenue doubles in 3 years with stable gross margin -> operating leverage at work.

Example 2 - Moat

Brand + distribution = pricing power through inflation cycles.

Real World Example

Brain under FOMO, confirmation bias, emotion — checklist converts Emotion → Process.One big mistake (fraud, governance) destroys years of compounding — Red Flag Override ignores score when fatal flaw exists.

Case Study

Apply to Asian Paints: Wide moat (brand+distribution), high ROCE, clean governance — likely 80+ score.Value trap with governance issue — override rule triggers Avoid regardless of cheap P/E.

Atul Gawande (Checklist Manifesto): Knowledge volume exceeds delivery ability — Process required.

CFA Exam Tip

Professional asks: "Does this pass my checklist?" — not just "Good stock?"

5-Minute Test: Market closed 5 years — still want to hold? Yes = buying business, not ticker.

Inversion Test (Munger): How lose money? Avoid those paths.

Buffett: Rule #1: Don't lose money. Rule #2: Don't forget Rule #1.

Common Mistakes

• Fraud
• Governance Issue
• Auditor Resignation
• Excessive Debt
• Continuous Dilution

Investment Journal Template

Company, Date, Buy Price, Intrinsic Value, Thesis, Risks, Allocation, Sell Conditions, Holding Period

Key Takeaways

• Checklist converts emotion to professional process.
• 100 points across 10 domains: Competence → Portfolio decision.
• Scoring guides conviction; red flags override scores.
• Journal + inversion + 5-year test = final gates.
• Investing = managing probabilities, not predicting future.

Disclaimer: Checklist is framework, not guarantee; adapt weights to your strategy.

Practice Questions

Chapter: 100 Point Investing Checklist | Part 05 | Try before reading answers.

Q1 (Conceptual): 100 Point Investing Checklist — What is the core message of this chapter in one sentence?

Q2 (Calculate): Apply formula: Each Question: Yes = 1, No = 0 quad → quad Total = 100 — use numbers from this chapter.

Q3 (Application): How do Investment Checklist and Red Flag Override interact in 100 Point Investing Checklist decisions?

Q4 (Red Flag): Red flag: Governance Issue — why avoid relying on 100 Point Investing Checklist alone?

Q5 (CFA Style): CFA-style trap when interpreting 100 Point Investing Checklist?

Q6 (Decision): 100 Point Investing Checklist looks strong but valuation stretched — invest, wait, or avoid?

Q7 (Lab): Complete one 100 Point Investing Checklist exercise in Part 05 Practice Lab.

Answer Key

Go deeper: Part 05 Practice Lab

FAQ {#faq}

Q: 100 Point Investing Checklist — What is the second check when evaluating this topic?

A: Governance Issue

Q: How do I connect theory to Indian market practice for 100 Point Investing Checklist?

A: Use Screener/Trendlyne + company annual reports — plot the same metrics over 3 years; paper formulas alone are insufficient.

Q: 100-point-investing-checklist — why avoid this mistake?

A: Fraud

Q: 100-point-investing-checklist — Auditor Resignation — why avoid this red flag?

A: Auditor Resignation

Q: How do I drill this chapter's concepts in the Practice Lab?

A: Open Part 05 Practice Lab → use the FAQ Drill row for 100-point-investing-checklist to practice on real stocks, then verify answers against the Chapter FAQ Quick Index.

Practice Lab FAQ: Full part FAQ index — Part 05 Practice Lab

Related Topics

• Previous Chapter: 50-Behavioral Finance Growth
• Next Chapter: 52-Portfolio Construction
• Part Overview: Part 05 Growth Investing
• Book Index: Full Table of Contents

Disclaimer: Educational content only. Not investment advice. Consult a qualified financial advisor before investing.