The 7 Red Questions
We operate a checklist which we call the seven ‘Red’ questions.What are the 7 Red Questions?
The First & Second Question
- Is the screen missing any liabilities (or assets)?
- Are the profits misleading?
The Third Question
- Is the business likely to suffer from structural change?
The Fourth Question
- Do the profits turn into cash?
The Fifth Question
- How would the business stand up to a financial stress-test?
The Sixth Question
- How can we assess the quality of the business?
The Seventh Question
- What are the ESG considerations?
The 4 Edges
Investing is a highly competitive marketplace and, if you want to outperform there, you will need an ‘edge’ over the competition. Fortunately, value investing offers the prospect of edges across four different areas.