REAL vs FAKE Due Dillgence: How to Properly Research a Company

TL;DR

Due diligence in investing goes beyond reading news articles or relying on analyst ratings and advice from friends and family. Investors should focus on fundamental analysis and develop a systematic process for evaluating companies.

Transcript

paul show our viewer at home the difference between real and fake due diligence in research hey guys first what is fake due diligence we encounter this all the time when people tell us you didn't do due diligence or we hear it about they're out there first off due diligence is not going to google and typing in the company's ticker symbol and seeing... Read More

Key Insights

• 👀 Due diligence in investing involves looking beyond surface-level research methods.
• 🧑‍🏭 Analyst ratings should be approached with caution, as they may be influenced by external factors.
• 🖤 Advice from friends and family should not be relied upon, as they may lack financial expertise.
• 👋 Liking a company's products does not equate to a good investment.
• 👨‍🔬 A systematic research process, such as the eight-pillar approach, can help investors make informed decisions.
• 🧑‍⚕️ Debt can be a significant factor in a company's financial health and should be considered in due diligence.
• 🥶 Free cash flow growth and valuation metrics should also be analyzed.

Questions & Answers

Q: What is the difference between real and fake due diligence in investment research?

Real due diligence involves analyzing a company's fundamentals, while fake due diligence relies on easy research methods like reading news articles or relying on analyst ratings.

Q: Why should advice from friends and family be avoided in investing?

Friends and family may not have the expertise or knowledge to provide sound financial advice. Relying on their recommendations can lead to poor investment decisions.

Q: How does liking a company's products differ from investing in their stock?

Liking a company's products does not guarantee that their stock is a good investment. Fundamental analysis, such as evaluating financial metrics, is necessary to determine the stock's true value.

Q: How can investors develop a systematic research process?

Investors should focus on the eight-pillar process, which includes analyzing metrics such as PE ratios, return on invested capital, revenue growth, net income growth, shares outstanding, long-term liabilities, free cash flow, and price to free cash flow.

Summary & Key Takeaways

• The video discusses the difference between real and fake due diligence in investment research.

• Real due diligence involves looking beyond news articles and analyst ratings to evaluate a company's fundamentals.

• Advice from friends and family should be avoided, as they are not financial experts.

• Liking a company's products is not sufficient reason to invest in their stock, as fundamentals should be the primary consideration.