Here at The Fifth Person, we use a 4-step formula to analyse all our stock investments
We call it The Investment Quadrant. As the name suggests, there are four quadrants to The Investment Quadrant – Business, Management, Financials and Valuation.
Before we invest a single dime in any stock, we always run it through The Investment Quadrant to make sure the company passes all our minimum criteria and benchmarks. This way you know that the companies that do pass the test are the some of the best stock investments around and have a high degree of certainty of being profitable in the long run.
Now you may or may not already know about the Quadrant as we’ve mentioned it before from time to time in some of the analyses we share on our site. And since we’re going to use it a lot more in our future analyses, we’re going to describe The Investment Quadrant in more detail in this article so you can always refer here again whenever it’s needed.
So let’s get started!
- Business Quadrant: you need to analyse the business model of a company and how it generates its revenues and profits
- Management Quadrant: A company’s top management team consists of the CEO, C-level executives, and the board of directors
- Financials Quadrant:This is the quadrant that most novice investors focus exclusively on, simply because it’s easy to analyse a company when you have hard data like numbers to examine
- Valuation Quadrant: Finally, even if a company passes the first three quadrants, you still need to accurately determine a stock’s intrinsic value to know if it’s currently undervalued or overpriced
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