Methodology
Our research framework
A consistent, candid and auditable process for understanding businesses rather than predicting short-term prices.
- 1
Understand the business
Who pays, why they pay and how revenue turns into cash.
- 2
Judge the moat
Identify network effects, cost advantages, brands, switching costs and organizational strengths.
- 3
Examine free cash flow
Separate accounting earnings from cash that can be distributed or reinvested.
- 4
Measure returns on capital
Study ROIC and incremental returns to see whether growth creates value.
- 5
Study management and culture
Look for rationality, candor, aligned incentives and organizational resilience.
- 6
Review capital allocation
Understand the trade-offs among reinvestment, acquisitions, dividends and buybacks.
- 7
Estimate intrinsic value
Use conservative assumptions and scenarios instead of false precision.
- 8
Demand a margin of safety
Leave room for uncertain outcomes, analytical mistakes and change.
- 9
Stay within the circle
Name what we do not yet understand and keep updating the evidence.
- 10
Keep a stop-doing list
Exclude opportunities that are unverifiable, unsustainable or poorly governed.