My holding period is 1-5 years. I like the part about researching great companies and prefer not holding shares for decades. In the end, I need to know when to hold’em and when to fold’em. As most companies in the stock market will not go on decade long bullruns like Apple and Microsoft. I want to find great companies today, not hoping my stocks becomes great in the next five years. Makes sense?
Much of this formula below stems from the principles pioneered by Philip Fisher, the legendary stock market investor whose focus on long-term growth and qualitative analysis deeply influenced modern investing.
My Evaluation Formula:
1. Market Size
Is the addressable market large enough (in dollars) to allow for major growth? A company operating in a billion-dollar industry has more room to scale than one in a niche market.
2. Who’s Behind the Business?
Look at the backgrounds of founders and top executives. Have they studied at top institutions like Stanford or MIT? What does their work history say about their capabilities?
3. Intelligence & Track Record
Rather than guessing IQ, assess their intellectual credibility: Have they built successful ventures before? Published research? Solved complex challenges?
4. Key Clients
Are the company’s clients legitimate, known entities? If not, beware of shell companies as a common red flag in pump-and-dump schemes.
5. Innovation & Product Value
Is the business offering truly new, valuable solutions, or just recycling existing ideas with new branding? Look for uniqueness that can scale.
6. Competitive Landscape
Who are their competitors, and what are they doing better or worse?
7. Employee Satisfaction
Glassdoor.com reviews can reveal toxic cultures or inspiring leadership. Pay attention to how employees describe the CEO.
8. Industry Focus
I focus solely on scalable tech. Retail chains are harder to predict; tech has the potential to scale explosively.
9. CEO Temperament
Look for thoughtful, humble, creative leaders instead of flashy salespeople. Warmth and long-term thinking go further than polish.
10. Vision & Metrics
Do they have clear, measurable goals (e.g., 15% annual growth)? Watch for overly ambitious or vague claims.
Top Takeaways
The two most critical factors:
1. Leadership quality
2. Product innovation
Test the product yourself if possible, as that alone can tell you a lot.
This formula is tailored to micro, small, and midcap IPOs, where smart analysis can help you find the next big success story.