It is a great question, Rob.
Sometimes I worry that I am an under-thinker and that I do not do nearly enough diligence before making a buy decision. When I am considering a purchase, I check all the usual important DG metrics (as I explained at length in a very old series of posts). I read all the recent articles about the company that I can find, which usually includes both pro and con opinions. I check where the current yield and p/e are relative to the company's historical range. And I consider the economy generally, whether I am ready to buy, and what role the new shares will play in the portfolio. If after all of that I am comfortable, I pull the trigger.
I do not bury myself in the last few annual and quarterly SEC reports. I do not scrutinize balance sheets and income statements. I do not pore over analyst reports. I do not calculate my own estimates of book value, and I do not perform detailed calculations to come up with my own estimate of fair value.
For me, this balance works. Am I adding risk by not doing all of those extra steps? It is hard to know. For the most part, though, I am buying the largest and most heavily scrutinized companies on the planet. Companies that have established and proven business models, competent management, wide moats, and that sell goods and services that will be in demand decades from now.
And importantly, I plan to hold for decades, which removes a lot of pressure to buy at *exactly* the right moment. This is one area where I feel the individual investor has a huge advantage over the "professionals." I can patiently wait years for my purchases to excel. I do not need to see results next quarter or next year. Even fairly valued companies will appreciate over the long term if they are able to grow earnings. And even better, I can calmly accumulate shares in great businesses that are going through rough periods, only to enjoy the ride when then eventually (inevitably?) recover.
So to answer your question more directly -- what am I most concerned about? I am most concerned about getting an excellent business at a fair price. In seeking that out, I'd say I do an average, but not thorough, amount of diligence. And I am pretty comfortable with it!
Sometimes I worry that I am an under-thinker and that I do not do nearly enough diligence before making a buy decision. When I am considering a purchase, I check all the usual important DG metrics (as I explained at length in a very old series of posts). I read all the recent articles about the company that I can find, which usually includes both pro and con opinions. I check where the current yield and p/e are relative to the company's historical range. And I consider the economy generally, whether I am ready to buy, and what role the new shares will play in the portfolio. If after all of that I am comfortable, I pull the trigger.
I do not bury myself in the last few annual and quarterly SEC reports. I do not scrutinize balance sheets and income statements. I do not pore over analyst reports. I do not calculate my own estimates of book value, and I do not perform detailed calculations to come up with my own estimate of fair value.
For me, this balance works. Am I adding risk by not doing all of those extra steps? It is hard to know. For the most part, though, I am buying the largest and most heavily scrutinized companies on the planet. Companies that have established and proven business models, competent management, wide moats, and that sell goods and services that will be in demand decades from now.
And importantly, I plan to hold for decades, which removes a lot of pressure to buy at *exactly* the right moment. This is one area where I feel the individual investor has a huge advantage over the "professionals." I can patiently wait years for my purchases to excel. I do not need to see results next quarter or next year. Even fairly valued companies will appreciate over the long term if they are able to grow earnings. And even better, I can calmly accumulate shares in great businesses that are going through rough periods, only to enjoy the ride when then eventually (inevitably?) recover.
So to answer your question more directly -- what am I most concerned about? I am most concerned about getting an excellent business at a fair price. In seeking that out, I'd say I do an average, but not thorough, amount of diligence. And I am pretty comfortable with it!