E.g., customer habit of using my product or the undivided laser sharp focus of my promoters. Is your fear is based on some well thought through analysis for the concerned sector or only based on fear? Have you analysed the strength of the invested business and the strategy of the new entrant?ĭoes my business (the stock that you own) have a strong moat? If yes, piercing that would not be easy. Is it really true that whenever a company with deep pockets enters a business, others shut or become laggards? How many cases do you actually remember? Don’t generalize, get specific. If it can be done in one sector, why not in others? This chatter was so common after Jio disrupted the telecom sector. Impulsive Action: As competition will be tough going forward, let me sell and book profits before it’s too late.Situation: A big corporate with deep pockets is entering into this sector.Find out what is working and what is not.Īnd even if the company turns profitable, would that be sustainable? If yes, would it be able to quickly achieve respectable margins? Which are the comparable companies in the industry that are already making profits? Do a comparison. Is the management’s prediction already discounted in the current price? Why has it not happened? What is different now? The management spoke about turning profitable few years back.

If the latter, there is a greater risk of you getting punted. Do you have any exclusive insight here or are you getting away by the management’s spiel? If the former, you are taking a calculated punt. You may be led to buy into the narrative that the new company can generate higher stock returns over a specified period. Why are you not considering businesses with track records of delivering profits? Why are you considering an investment in a loss-making entity? The company is predicting, not making actual profits (margins is a separate discussion). Situation: Management has announced a clear path towards profitability over the next two years.Investor Nitin Jain details some commonsense checklists and questions that can act help you avoid losses. But investing is complex when emotions come into play. Buy a well-managed company, look at the growth prospects, check for valuation and adequate margin of safety, and you should be on the road to riches.

My stock checklist