My Public Market Investing Checklist

In this article, I outline the exact checklist I run through for all potential public market investments (updated in February 2025). Feedback welcome!

Understanding of Business Model

1. Can I explain what the business does and how it makes money to a 5-year-old?

2. Do I have a unique perspective on the business model that is misunderstood by other investors?

Business Predictability

1. Do I have high visibility into how the company will perform over the next 5 years?

2. Has the company shown resilience during past macroeconomic downturns?

3. Is the company exposed to any external risks that could make the business obsolete overnight?

   1. Regulatory risk

   2. Legal risk

   3. Geopolitical risk

   4. Reliance on access to credit or low interest rates

Product

1. Do customers love the product or service?

   1. Strong reviews on 3P websites (e.g., Trustpilot, App Store)

   2. Very low gross churn

   3. High customer acquisition from word of mouth or customer referrals

   4. Expanding customer usage over time

2. Is the product or service market leading and materially better than competitors?

3. Is the product or service quality improving over time?

Industry Structure

1. Is the company a monopoly or does it operate in a favourable oligopoly structure?

2. Is the company a clear market leader (overall or for a specific segment) based on scale?

3. Is there a long growth runway from ‘white space’ or does the company need to win customers from competitors to grow?

4. Does the industry have high barriers to entry and/or is it difficult for new entrants to gain share and compete with this company?

   1. Could a new upstart raise $500m from Softbank or Tiger Global and disrupt this company overnight?

Moat (7 Powers Framework)

1. Does the company have sustainable competitive advantages (i.e., a moat)?

   1. Scale economies

   2. Network effects

   3. Switching costs

   4. Branding

   5. Counter-positioning

   6. Cornered resource

   7. Process power

2. Does the company have latent pricing power (particularly if misunderstood by the market)?

Total Addressable Market (TAM)

1. Does the company operate in a very large market?

2. Has the company shown an ability to expand its TAM over time, either by launching new products or expanding into new geographies?

3. Are there exciting new products and/or geographies on the horizon in the short-to-medium term?

Premium Revenue Growth

1. Has the company demonstrated sustained premium revenue growth for at least 5-6 quarters (ideally at least 20% YoY growth)?

2. Is the company growing faster than competitors and improving its competitive position?

Profitability & Unit Economics

1. Has the company shown an ability to acquire new customers cheaply?

   1. High word of mouth / customer referrals

   2. Excellent brand recognition (i.e., best if the product or service becomes a verb)

   3. World class viral marketing engine

2. Does the company have attractive unit economics and CaC payback?

3. Can the company materially expand its margins and show operating leverage over the next 5 years?

4. Is the company ‘default alive’ (i.e., positive free cash flow or fast approaching break-even)?

Balance Sheet

1. Does the company have a strong balance sheet that sets them up to take advantage of macroeconomic downturns?

   1. Strong net cash position

   2. Manageable debt loads

Management

1. Is the company founder-led?

2. Is the company run by exceptional and trustworthy management?

   1. Past track record of success

   2. Gut feel on the CEO

3. Does management have a long-term orientation?

4. Does management have a history of underpromising and overdelivering?

5. Does management have a history of product innovation?

6. Is management maniacally focused on customer satisfaction?

7. Do insiders hold a significant number of shares?

8. Have insiders purchased (or sold) shares in the last 12 months?

9. Have management been efficient allocators of capital in the past?

Valuation

1. Does the business trade on a reasonable growth-adjusted valuation multiple for the quality of the business?

2. Can I generate a 20%+ IRR over the next 5 years based on reasonable base case assumptions?

Other Potential Signals

1. Do any high-quality investors I follow also own this company? Is their thesis similar to mine?

2. Am I naturally curious to learn more about the company? Can I see myself listening to their quarterly conference calls?

3. Am I displaying any cognitive biases in my assessment of this company?

4. Does this company improve the quality of my existing portfolio?

5. Am I proud to tell people I am a shareholder in this company?