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Article on Mohnish, Atul Gawande and Checklists


Parsad

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Thanks for all of the great posts on this topic. The Charlie Rose interview was very interesting.

 

I have a copy of a presentation Mr. Parbrai made  regarding checklists to the Columbia Business school. It is in a pdf so if anyone is interested I can email it (or is there a way to attach on the forum??).

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I have a copy of a presentation Mr. Parbrai made  regarding checklists to the Columbia Business school. It is in a pdf so if anyone is interested I can email it (or is there a way to attach on the forum??).

 

If you click on the "Additional Options" below the post you type, you will be able to attach.  I'd be very interested in this presentation.  Thx much!

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I've had a checklist for a while and I tough it might be good if we could make it a collective work. I'd be happy to have you insight on what's missing. There is still a lot to add!

 

For me, the most important part of the checklist that I think is not present in Pabrai's checklist is the mental state. It is so easy to go out of range and lie to yourself. The checklist might not avoid it but makes you wonder if you are being irrational.

 

Another part I think is important is to review your checklist at each quarter. Again, your mental state probably influenced your decision back then... are you still reaching the same conclusion 3 months later?

 

BeerBaron

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This is a great list. I would add a few more.

 

1. Is the debt to equity ratio comfortable

2. Is the ROE or P/B acceptable

3. How much can the ROE; P/B fall?

4. Can this company withstand negative to low earnings for a few years because of special situations

5. Can the free cash flow increase over time

6. Is the management handling reinvestment of invested capital prudently

7. Is the business facing tailwinds or headwinds right now

8. What is the prospect of facing tailwinds or headwinds two-five years from now

9. What is the impact of further competition - will it erode margins and competitive position

10. What is the margin of safety in the current investment, is it quantitative or is it qualitative

11. Who are the major holders of stock in the company; do you know them.

12. After putting everything together, is it possible to assign a probability of failure.

13. How much of the portfolio would you put on this stock

14. Would you buy this if the stock went down in price by half in six months

15. What is the probability of the stock going to zero.

 

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The only problem with checklists is that you have to be very careful that you use them and don't think things out.  In the accounting profession you need a checklist to make sure you haven't missed a checklist. It's amazing what gets missed simply because some of the new folks don;t step back and simply read through the statements they are drafting.

I am not against checklists, but do believe they can be overdone.

jmho

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