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October 15, 2003

10 Commandments of Research

From Big Picture

10 Commandments of Research

1) Be right on the fundamentals. Earnings growth drives stock price. There is essentially a 100% correlation with how a company does and how its stock performs over time.

2) Be Proactive -- Not Reactive. Reporting what happened is what a news reporter does. We get paid to look over the horizon and around corners.

3) When in Doubt -- Get it Out. The difference between value-added information and a commodity could be minutes.

4) When Wrong -- Admit it. The best investors and analysts are wrong a lot. The worst thing to do is rationalize a mistake. Be intellectually and morally honest.

5) The Cockroach Theory. You seldom find just one cockroach in a kitchen. Likewise, if you find a problem at a growth company, there are always more behind it. It's rarely a one-quarter issue -- the first loss is the best loss.

6) Research is About Information and Insight. Information is valuable if it is proprietary. Insight is valuable if we know what that information means.

7) The 4 Ps are Key for any Successful Growth Company. People, Product, Potential, Predictability. The first "P" (people) is the most important.

8) 5 Independent Sources for Each Initiation of Coverage. We will have regular dialogue with company management, but they will always see the glass as "half full."

9) 3 Main Reasons for a Stock to Move Up or Down. In addition, we will identify near term catalysts for price movements.

10) Make Clients Money -- and everything will take care of itself.

October 15, 2003 in Dismal science | Permalink


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