Jul 19, 2020
Mental Models discussed in this podcast:
- Scuttlebutt
- Circle of Competence
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Show Outline
The full show notes for this episode are available at https://www.diyinvesting.org/Episode84
Scuttlebutt Challenge: Your Employer's Stock
- If your company isn’t public, assess it qualitatively or do this work on your spouse's company or where a friend works.
- If you work for a non-profit or government, do the same.
- Email me your write-up during the month of July 2020 and I'll send you a response.
Questions to Ask / Areas to Assess
- Assess the industry
- Assess your company’s place in the industry
- What is the culture of your company like?
- What is the priority of management? Are they shareholder friendly? Are they employee-friendly? Other concerns?
- How are capital allocation decisions made?
- How are CapEx decisions made?
- Does your company earn high returns on capital?
- Does it use leverage?
- In summary: Is it a high-quality business?
- What are the risks?
- How would you value your employer’s stock? (Write down an explicit intrinsic value)
Summary:
The company you work for should be the first place you look to begin understanding how to perform scuttlebutt. Investors should analyze their employer's stock as a potential investment candidate. Culture, Quality, and Management are key areas.