Foolish Thesis
Interpreted from fool.com
Problem
Understand the company and the problem it solves
- What does the company sell or do?
- What problem is the company solving?
- Who are the company's customers?
- How does the company make money?
Revenue
Identify the main revenue sources
- List all revenue streams
- Determine the proportion of total revenue from each source
- Assess the stability and growth potential of each revenue stream
Health and Sustainability
Assess the financial health and sustainability of the business
- Analyze financial statements (income statement, balance sheet, cash flow statement)
- Evaluate profitability, liquidity, and solvency ratios
- Consider any financial risks or red flags
Performance Signals
Focus on signals rather than market volatility noise
- Identify key performance indicators (KPIs) relevant to the business
- Monitor long-term trends and fundamental metrics
- Avoid making decisions based on short-term market fluctuations
Advantages
Evaluate competitive advantages
- Analyze the competition within the industry
- Assess the stickiness of the product or service
- Determine if the business has network effects
- Identify any unique selling propositions or barriers to entry
Culture
Examine management and company culture
- Research the founders and current leadership team
- Assess their long-term vision for the company
- Investigate the company culture and employee satisfaction
- Check management's track record and alignment with shareholders
Potential
Analyze future growth potential
- Estimate the total addressable market
- Identify potential avenues for growth (e.g., new products, markets, or acquisitions)
- Consider broader industry trends that may impact the company
- Evaluate the company's expansion plans
Risks
Identify and assess risks
- List potential threats to the business model
- Consider regulatory, technological, or competitive risks
- Assess the company's ability to adapt to changing market conditions
- Evaluate any potential weaknesses in the business
Future Value
Determine valuation and potential returns
- Compare current valuation metrics to industry peers and historical averages
- Estimate future earnings and cash flows
- Consider potential catalysts that could drive the stock price higher
- Assess the risk-reward ratio of the investment
Meme
Summarize the investment thesis into a meme
- Concisely state the main reasons for considering the investment
- Highlight the most compelling aspects of the business
- Address any major concerns or risks
- Decide whether to invest, add to a watch list, or pass on the opportunity