What needs to change, or must not change, that others, i.e. the market, do not expect in order for your investment to be successful?

Is the timing right?

Is it the right price and the right time to make the investment? Make a timeline with milestones to plan your optimal decision points for purchases and sales

Does today’s valuation, interest rate, inflation, leverage or narrative deviate a lot from the norm? Why would the extreme situation persist? You should have very good reasons for assuming an extreme situation will continue (or arise).

Can you afford bad luck?

Is the macro tailwind or headwind likely to change much (or not) over the lifetime of the investment? What variables are likely to change? (e.g. inflation, interest rates, overall stock market valuation, financing availability, business cycle)

How wrong can you be, i.e. regarding your forecasts (market shares, growth, costs, profits) and valuation assumptions, without losing money on the investment? Can you afford bad luck?

Are you paying the right price, with enough margin of safety, considering the possibility of being wrong in your assessment of the company’s value generation (“earnings”) or the market’s willingness to pay (“valuation”) for this?

Is the company reasonably safe?

Is it a “good” company? Is it desirable and reasonable that the authorities will allow the business to continue unchecked? Are there risks of restrictions on operations, bans or penalty taxes? Alcohol, tobacco, snuff, oil, nuclear power, weapons, gambling, lottery, crypto and fintech are examples of potentially threatened industries.

Does the company cater to (timeless) human needs such as nutrition, shelter, transportation, entertainment, energy, socializing, and care?

Do you understand how the company can provide its products at a competitive price?

Does your thesis entail the necessity for the company to achieve a special/unique position in the world? How and why should that happen?

You May Also Want to Read These Articles:

• How to Think about Investment Risk
• Portfolio Management Basics
• Do You Have a Sufficient Margin of Safety?