Saturday, April 21, 2012

How do you quantify qualitative data? part deux

What are some qualitative question you can ask about company?

In a earlier piece I was trying to come up with a way to  quantify the qualitative data?
I have tried to compile a list of questions and make each line a binary YES/NO or TRUE/FALSE answer format. These can be put in an excel spreadsheet and counted in a column.

Frankly, I have partially answered all these question on a valuation but never in a systematic and controlled  methodology. This is an on-going exercise. It is not a comprehensive survey.

Does the Company sell a destructive innovation?
Industry increasing/stable in growth?
Industry increasing/stable in margin?
Management compensation excessive?
Management and shareholders interest align?
How does the company make money?
What percentage of company makes money?
What is the market share rank/place?(1st=5,2=4,3=3,4=2,5=1,6+=0)
Do they have market share in more than one area?
Is the innovation pipeline full?
Who are the top competitor and their profile?
Who is the rogue competitor and their profile?
Value Line sector rank position in top 20? Below the mean (enter the number)?
Financial competitive advantage?
Strategic/business/branding model competitive advantage?
Technology competitive advantage?
Do you know the industry metric and how they rank?

3rd party synergies?
R&D in growth sector?
R&D% compared to rivals?
Did you like it before it went out of favor?
Company culture, ethics, financials transparency?
Future catalysts?
Political / social problems?
Unfavorable legal problems?
Regulation catalysts or problems?

Can others not compete directly with this company {how big is the moat}?
Customer based on large small accounts? { 0/1 }
Am I emotionally attached (both negative or positive)
Company part of an index/ETF?
What Morningstar style?
Not followed by analysts? { more than 20 and less than 5 good? }
Not followed by institutions?

Have read letter from CEO
Have read annual report
Have visited company website
Is the company engineer based?
Is the company marketing based?
Is it an excellent company or an excellent investment?
Is original entrepreneur still CEO?
CEO changed in last 3 years?
Top-tier financial auditors?
Reverse Merger?
Recent IPO?
History of disappointments on earnings or revenue?
Any undervalued fixed assets?
Chairman is also CEO or handpicked CEO
Expense recognition valid?
Revenue recognition valid?
Intangible assets look valid?
Abnormal change in employee count drop=0, inc=1
Pension liability large?
Valuation allowances?

Deferred revenue?
What is replacement cost for a customer?
What is the Total Applicable (or Available) Market?
What is the Served Available Market?
What is the geographic reach?
What are the primary channels of distribution within that reach
Who are the key partners for sales and marketing within those channels(scalability)
What will it cost for the company to capture 10 to 20 percent of that market?
Divestiture?
Dupont ROE weakness?
Late or adjusted filings?
Restructuring?
Is accounting  ranked very aggressive=0, aggressive=1,average=2,conservative=3,very conservative=4

Demand feed
Supply feed
Innovation feed
CEO background and interests
Patents content or non-disclosure agreements
Trademarks and copyrights
Don't make up your mind until you've read the last 2-3 conference calls

Have you written a SWOT or exit plan?

Capital intensive, fixed assets or inventory?
Life cycle stage of product?
Social media feed-back
Analyst upgrades/downgrades Insider's SEC forms 3, 4, 5
Read SEC 10K, 10Q
Get Google news feed
Stock splits/ reverse splits adjusted price in historical context

Study a person who agrees with you and say why they are wrong
Study a person who disagrees with you
Go through list of analyst buy/sell comments
Standard industry/fanboy magazine i.e. Crackberry, Techcrunch
Management style fit company situation? {RIMM}

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