The Stock Analysis Template I Use Before Owning Any Stock

TITLE: The Stock Analysis Template I Use Before Owning Any Stock CHANNEL: Vishal Khandelwal DATE: 2026-04-26 ---TRANSCRIPT--- So a few months ago, a young man at one of my workshops asked me a question I still think about a lot. He said, “Vishal, I read the annual reports. I listen to the conference calls. I follow the smart investors on Twitter and LinkedIn. I’ve done everything I’m supposed to do. But when I actually have to decide whether to buy a stock or not, I freeze. I do not know what I’m supposed to be looking for. And I could see in his eyes that this was not just a casual question. He was actually genuinely stuck in this entire process. So I told him something I wish someone had told me 20 years ago when I was first trying to figure all this out. I said, “The problem is not that you do not have enough information. You actually have too much in today’s world. The problem is that you do not have a small enough set of questions, a very important questions. you’re in fact trying to see everything at once and when you try to see everything you end up seeing nothing at all or nothing clearly. So after all I think good investing is not about knowing more. It is about knowing what really matters and what does not matter. In today’s episode I attempt to give you that small set of questions uh 15 questions in total uh which I have organized into three columns business management and price. If you can answer all 15 questions honestly for a company you are thinking about buying uh you will know whether you should own it and just as importantly you will also know what you do not know yet. I think that’s such an important idea but I believe uh that the 15 questions are the easy part. What’s not easy is the honesty and independent thinking with which you answer these questions. But I think we will get to that very soon. I am going to walk you through this template first which I have created. I will explain what each of the 15 questions is really asking why it matters. Then we will apply to a real company which is demmart together. Now I want to be very clear about one thing. This is not a stock recommendation. I am not telling you to buy demart or any stock or to avoid any stock or any or or even demand. I am showing you how this template or this way of thinking uh works on real businesses and real investing. So let’s get started. So the first thing I want to talk about is the template. What this template is all about. Uh I will also share a PDF version of this template in the show notes of this episode which you can check out. U in this template if you as you see you you you see three columns. The first is business, the second is management, the third is price. Now each column has five questions inside it and at at the bottom of each column there is one single question I call if the check question which is like a gut check that you answer only after you have answered all the five above questions on each of the parameters of business management and price. Uh now I have made I have tried to make this template very simple on purpose. Uh you can print it for any company you are analyzing and fold it into your investing journal, investing notebook. Also, I keep my investing simple and use this template, the same template to analyze stocks on my own. I’ve been doing that for the past many years. So, this is the kind of template which I have used for my own investing purposes. Now, you might ask why three columns? Why not five or 10 or just one? Well, that’s because I believe most investing frameworks fail in two ways. They ask too few questions so you miss something important or they ask too many questions so you drown in detail and never actually make a decision. I have seen both happen to myself included. Three columns I think is small enough that you can hold it in your hand in your head but large enough to catch the things that usually hurt investors over a longer period of time. and applying the rule of three from writing uh which I practiced for many years now. I think three is a good number for thinking as well. So the first column that you see on this template is about business. Um uh what does this company do and do I understand it well enough to own it for a decade. The second column is about the management about the people running the business. uh it’s simply because you can buy into a wonderful company and still lose money if the people at the top are not trustworthy or not competent or not aligned with you as as a shareholder. The third column that you see on the sheet is price of valuations and I think that’s such an important column such an important thinking point and I think this is where this is the most this is where most most investors uh I think slip or this is the part which most investors skip uh because even a wonderful business run by wonderful people can be a terrible investment if you pay too much for it and we’ve seen a lot of cases like this in the past in fact I would say that price is where good stories go to die and a lot of people investors go to die. Now, here’s the thing most people get wrong about a template like this. They want to treat the three columns as a score, right? So, they want to add it all up. Two out of three, I will buy. Three out of three, I will buy more aggressively. One out of three, I will pass. But I think that is not how this works. This template is not a score. It is not a checklist. It is how you apply your thinking about an investment on paper and with yourself without getting biased by someone else’s views. And often I think the most useful thing uh it does or this template does or a template like this does is show you clearly where you are certain and where you are pretending to be certain. Also the point of this template is not to give you an answer. It is to show you very clearly what you are agreeing to when you buy a stock and what you are uncertain about. The decision I think is still yours. It will always be yours. The template just makes sure you are making it with your eyes and ears and mind open and not with your eyes and ears and mind closed. That I think is the whole idea of a template like this. Anyways, now let us go through the 15 questions one by one. I will tell you what each question is really asking and why it matters before we apply any of them to a real company. So the first uh uh segment or the first set of questions that we talk about or we think about when we are analyzing a stock is the business itself and do I really understand the business? Uh I think it’s about one thing as I mentioned the very important questions. Do you actually understand what this company does? And do you understand it well enough to own a piece of it through good years and bad? I think such an important thought process for an investor. In good times, you all understand that I can own a business which I own as a stock. But it’s the bad years where your real understanding shines or it really leads you to sell the stock because you don’t really understand. So real understanding or actually understanding a business is much different than just understanding on like the over-the-top kind of things right a lot of people only uh understand the most surface level thing and not really go deeper inside understanding a business which is what this part of the template does. Now it sounds simple right? Uh anyone can say oh I understand the business and this is what it does. But I think in my experience this is where most investment mistakes actually begin not at the price stage not at the management stage at the business stage at the very first column people I think skip a lot of investors skip the basics because the basics feel beneath them right they they generally believe that oh I know the name of the company I know what product sells which means I understand the business which is not the case. So we will start here slowly and take it seriously. So the first question that you see on this on this sheet under business is what does this company actually do? Right now this sounds like the easiest question on the entire template but I promise you it is the hardest. The test is simple. Can you explain the business in one plain sentence or maybe 100 words the way you would explain it to a 10 or 15 year old child without any jargon, no buzzwords, no quarterly guidance language, no phrases that you lifted from the annual report and a broker report. Now, if you cannot do this, you do not understand the business yet. And if you do not understand it, you have absolutely no business owning it. Full stop. A lot of investors I see skip this question because it feels too basic. They think of course I know what this company does. Let me get to the clever questions. Now that is exactly why this question catches so many people. I think simplicity in investing is where the work is not in complicated stuff but in the simple stuff um that you refuse to take seriously. A lot of investors take refuse to take it simplicity seriously and I think that is where what the real work of investing is all about. The second question is on this business template business side of template is how do they make money and from whom? Now questions like who are the customers? What exactly do they pay for and at what margin? Now you now you see that a company that sells to governments is a different animal from a company that sells to families or individuals. A company that earns a 50% gross margin lives in a different world from a company that earns 8%. The pressures are different, the risks are different, the way they have to behave to survive is completely different. If you cannot describe who pays this company and why they pay, then you do not actually know what you own. You may own a stock ticker like most people in the stock market do, but you do not own a business. And I think there’s a big difference between these two, owning a stock ticker and owning a business. A ticker is just a string of letters that moves on the screen. A business is a group of real people doing real work for real customers. When you buy a stock, you are becoming a small partner, small part owner in that business. So you should at least know what the business does for a living. The third question, am I pretending to understand this business or do I really understand it? Now I think this is the hardest question on the template because it is a question you have to ask yourself honestly and nobody else can check your answer. We all want to feel smart. We want to feel like we have done our homework. So we quietly fool ourselves into believing we understand businesses we do not actually understand. I have done this many times in my career. I’m not above it. Nobody is. The test I use now is that if I had to sit across the table from the CEO of the company and ask them three sharp questions about their business, would my questions sound smart or would they sound like something a beginner podcast host would ask? If the answer is the second one, I do not own the stock. I put the template down and I go back to reading. I wait until my questions get sharper and sometimes they never do which is also useful information for investors. The fourth question is would I be happy owning this for 10 years if the market shut tomorrow? Now this is like a Warren Buffett test and it is so much more powerful than it sounds on the surface. Imagine the market closed for 10 full years. You could not see the stock prices. You could not check your portfolio. you could not sell. The only thing that would matter for the 10 years is the business itself and what it is doing. So it’s very important to ask yourself honestly what without without a ticker on on a screen without a chart without a business channel telling you what happened today would I still want to own this company? If the answer is yes you are investing you are treating this as part ownership of a business. If the answer is no you are just trading a stock. You are not owning a business. You are just betting on where the prize will go in the future and that is okay if that is what you want to do. But be honest with yourself about which game you are actually playing. The fifth question that you see on this template is what could kill this business. Now every business has its weak points. Every single one. Technology can change as it’s happening now. Regulations can change for a lot of companies. Consumer habits can move or a new competitor can appear with deeper pockets and a hungrier team. Now the question is not whether threats exist. They always do. The question is whether you have thought about them honestly or whether you have quietly told yourself that this one business is special and nothing can hurt it. I believe that a good investor holds two thoughts in their head at the same time. The first is that this may be a wonderful business and the second thought is that that it could still fail. Now I know that holding both these thoughts is very uncomfortable which is why most people only hold the first one that this is a wonderful business and that is exactly why most people get hurt when the second one comes to which is that the business fails. So the check question at the bottom that you see of this entire column is simple. Do I truly understand this business? If you cannot say yes with a clear conscience, the template is telling you to wait and not act. Before we move on, one quick thought. Everything we have done so far, this slow and structured way of thinking about business and stocks is the foundation of how I teach investing in my mastermind membership. I will say more about it at the end of the video. If what you have heard till now is useful, I think the closing might be useful too. For now, let us keep going with the video. We now move on to the second column of this template which is about the management or the people who are actually running the show on your behalf. Right? So the the bigger question is can I trust these people with my capital. Now the management column is is the column that most investors underweight the most. I think they spend hours analyzing the financials. They build big complex spreadsheet, Excel sheets. They argue about growth rates and margins and return on capital and all those things and then they they spend about 10 minutes reading about the people actually running the company. Most people even don’t do that. That I believe I think is backward thinking over a decade which is the kind of time horizon that actually matters in investing. The quality of the management I think is one of the biggest determinants of what happens to your money maybe the biggest determinant. So the first question that you ask here is would I trust these people to run my family money? Now this is a gut check. It comes before this this Excel calculations before the numbers before any of it. Imagine you had to hand this person a large sum of your family’s money and then walk away for 10 years. And imagine there would be no updates and no oversight. Just trust. Would you feel at peace or would you feel uneasy? Most of us actually know the answer to this question before we even finish asking it. We just do not want to admit it out loud. It’s because admitting it means saying no to stocks we already own or stocks we are excited about or stocks our friends are making money on. That is really really hard. But your gut is usually right on this one. So listen to it. I have learned painfully that when I ignored my gut on this question, I regretted it. The second question on the management side that I think is very important is how do the people how do these people the management they treat minority shareholders when no one is watching especially when no one is watching and I think this is where the real character of management shows itself are there real related party transactions that benefit the promoters other businesses it’s an important question that you ask are their shares pledged and how much do they dilute shareholders through regular fundraisers do they pay themselves excessive salaries do they run the company primarily for the family or for their owners including you. Such important questions and I think in Indian market especially this question matters more than almost any other question you can ask. I have seen great businesses destroyed by promoters who treated public shareholders as secondass citizens. The business was fine. The industry was fine. The management was the problem. If the answer to this question is not a clear unambiguous yes, you simply walk away. No matter how good the business looks on paper, no matter how cheap the stock is, this one is non-negotiable for me. The third question on the sheet on the management side is what do their last 10 years of capital allocation tell me? This is one of my favorite questions on the entire template simply because management does not prove its worth through what it says in presentations or conference call. It proves its worth through what it does with the cash or capital that we have given to them over the years of which which the business generates and they are interested to manage it well. What what have they done with that capital over the past few years? Do they reinvest in business when returns are high? Do they buy back shares when the stock is cheap? Do they acquire other companies wisely or expensively and stupidly? Do they pay dividends when reinvestment returns are okay? Do they take on debt thoughtfully? I think these are all important questions you ask when you are assessing a management’s track record with dealing with the company’s cash and the answer gives you deep insights into the quality of the management and whether they could be wealth creators or wealth destroyers and 10 years I think is the right window. Anything shorter and luck dominates the picture and you can be fooled by one good bet the management took or one bad bet that they took which hurt them. And I agree that reading 10 years of annual reports back toback is is a tedious job, tough job. I will not pretend it is fun. Even after 20 years of doing it, I it sometimes still feels like hard work. But even with AI giving you annual report summaries, conference call summaries, I think actually reading annual reports is also one is one of the highest return things you can do as investor. You can treat it as homework and I think homework is how you earn the right to own something. The fourth question on this template about management is do they tell the truth in good years and in bad. And it’s very important to read at least three annual letters or four annual report letters to really find whether they are telling the truth in good or bad years. Now anyone can sound wise and honest in a good year. But the real test is what they say when things are not going well. Do they admit mistakes clearly? Do they take responsibility for decisions that did not work out? Do they explain what went wrong and what they are doing differently? or do they blame the economy, the regulator, the weather, the market, their their predecessor or customers who just did not get it? I think the best way I know to test this is is simple. Find the worst year the company has had in the last decade. Pull up the annual CEO or chairman’s letter from that year and read it slowly. If the letter feels honest, grounded, and takes responsibility without getting dramatic, the management is trustworthy and you can tell that. If the letter feels defensive, vague, and filled with excuses and external blame, you also have your answer. You do not need more data. You just have it. The fifth question on the management side of this template is, do they have real skill in the game and for how long? And I’m not just talking whether they own some shares. I am asking whether they own enough shares that this company’s fate genuinely painfully affects their net worth. And I’m asking how long they have been at it. Someone who’s run the company of for 20 years and still keeps most of their wealth inside it is in a completely different category from someone who joined 3 years ago and has been quietly selling shares in small parcels. Now skin in the game is not really about money. It is about alignment. It is about whether the people at the top feel what you feel when things go wrong. You want to own stocks where if the business gets into trouble, the people running it feel the pain before you before you even do where their wealth, their name, their reputation all go down with yours. I think this is real alignment and it is rare where if and when you find it, you protect it. The check question for this entire management section of the template is simple. Can I trust these people with my capital? And if you cannot answer that, you don’t move on to price and you don’t even think about buying the business or owning the business because the management is where you’re doubtful. You just stay away from that business. Moving on to the third and the final section of this template which is price and the bigger broader question is am I paying a sensible price? So the the various ways to check that out. We not going to do the mathematics part of it. It’s about the thinking process that we are talking about in terms of business management and price and we taking the price now. Now I think the price column is the one where most investors do the least honest work. They will do the hard homework on the business. They form a view on the management. They feel good about what they have found and then almost as an afterthought they pay any price at all simply because the story has become so exciting in their head. And also because of the biases we hold in our heads like the liking bias or the sunk cost bias after having spent some time doing the hard work of analyzing a business. It’s tough to give it up just because the price is expensive. You think that you’ve sunk so much time into it or you’ve started liking the business. How can you not buy it or how how can you waste your effort? So people go on to buy businesses even when they understand that the price is not right. But I believe this is exactly how great businesses become terrible investments for a lot of investors and not because the business was bad but because the price was unreasonable. So the first question that you ask under price is what am I paying today? So you can check for numbers like price to earnings, earnings yield, price to book value, price to sales or any such ratio. You can also do some discounted cash flow analysis. So use whatever lens, whatever valuation model actually fits the business you’re looking at. The point is not to find the one perfect metric or one perfect uh valuation number. Different businesses are best valued with different lenses and we can talk about that in a different episode of the videos. The point is to know in plain numbers exactly what you are handing over in exchange for the piece of the business and to say that numbers out aloud to yourself. That’s such an important part of the entire process. The second question that we talk about when we talk about price is what is the market implicitly expecting and do I agree? Now this is something most investors never do. They look at a multiple like a P of 80 or 90 or 100 and they say wow that is expensive and then they stop thinking. But a P of 80 is not just expensive. It is the market telling you a story about the future. It’s a market expecting the high growth to continue or profit margin to hold or to expand. Maybe the market expects a long runway of growth or near flawless execution for years to come. It’s very important for us to remember that every one of those is an assumption and a lot of assumptions can go wrong especially when they don’t allow for a reasonable margin of safety. Your job as an investor is to decode that story not to accept it. So instead of saying this stock is expensive, it’s important to ask a better question which is what would have to be true about this business over the next 10 years for this price to make sense and then ask do I actually believe all of those things? I think sometimes the answer is genuinely yes and you should buy. More often the answer is no and you were about to pay for someone else’s optimism. I think that distinction is everything. The third question that you answer in this part of the uh uh template which is price is what would I pay if I were buying the whole of business? Imagine just as a thought experiment that the stock market did not exist. The only way to buy this company was to buy the entire thing with your own money and you could not sell it for at least 10 years. How much would you actually pay? Now the number is almost always very different from the listed price on the screen. And the gap between that number and the current market price tells you something really honest. It tells you whether you are investing in a business at a rational price or whether you are paying for a story that the market has already priced into the stock. When the listed price is close to your private buyer number, you have found something real. When it is double or triple or quadruple of your number, you are mostly buying the enthusiasm of other people. I think that is certainly not investing purely speculation. The fourth important question that you ask under the price section is at what price would I sell and why? And it’s very important to decide before you buy not after. Personally, I try to identify only those businesses that I don’t need to ever sell. But even then, I think understanding the idea of when to sell a stock is very important, right? And as I mentioned, you you decide that before you buy, not after. I believe uh when to sell like I think is is the single most underrated question in all of investing because the time to think about selling is not when the stock is already falling and you are panicking. It is also not when the stock is soaring and you are getting greedy. The time to think about selling is in the calm boring moment before you buy. So write down two numbers in a notebook somewhere you will actually see them again. The number one is the price of valuation at which the stock has run so far ahead of the business that even a believer would pause and the second number the level at which the business itself is no longer performing the way you assumed when you bought it. Maybe the management is not allocating capital well or something fundamentally has changed for the words for the business. Now if either of those triggers hits, you do not act automatically. you stop, you reexamine and then you decide with a clear head without much emotion. The fifth question that we move the final question on the price side is if the stock drops 40% next month, do I buy more or panic? Now, this one question tells you more about how well you actually understand your position or your stock holding than any Excel sheet will tell you. Because if your honest answer in the calmness or quietness of your own head is panic, then you do not really own that stock. The stock owns you. You just have not realized it yet. I think the investors who do well over decades are not the ones with the smartest Excel sheets, calculations of the fastest reflexes. They are the ones whose honest answers to this question or to all these questions is that if the stock falls 40% or lower, I would buy more and I would sleep fine though. That is it. That is the whole game. Know your business well enough and your price well enough. And then a 40% drop is a gift. It’s not a nightmare. And if you see the check question at the end of the price section, right? It’s simple. Am I paying paying a sensible price? Such an important question that a lot of us forget to answer. All right. So now we have walked through all 15 questions in theory. Let us do what most investing videos never do. Let us actually apply them. life to a real company. And for this episode, for this template, I’ve chosen Demart as an example. And I want to say this one more time clearly. This is not a recommendation. I am not telling you to buy Demart and I’m not telling you to avoid it. I am showing you how the template works on a real business. Your job as a viewer is to watch the process and not to copy the conclusion. So we start with the first question and on the first uh column which is business. What does demart actually do? So in simple words, Demart runs a chain of no frrill supermarkets. It sells groceries, household items and apperal at prices that are genuinely lower than most competitors. And importantly, it owns most of its stores instead of leasing them. Now this sounds simple on the surface uh that it’s a supermarket chain, but the interesting part of Demart is that most of its edge does not lie in what it sells. It lies in how it operates. and we will come to that. The second question that we move on on the business side is how do they make money and from whom? Now this part is very interesting. Demart’s operating margins are actually quite thin around 8%. But that’s how most retail businesses operate. The model of a retail company like Demart depends on three things which first is high menry turnover then tight working capital uh and own real estate not high per item profits. Now while a lot of retailers chase the wrong thing which is margins, Demart chases the right thing which is inventory turnover and that has helped the business over the years and and to the question about its customers I think they they are largely a middle-ass Indian families doing their monthly or buy weekly grocery runs the kind of customer for whom value matters more than atmosphere that’s that what you understand about what the business does and who pays them. The third question am I pretending to understand this business or do I really understand it? So the product is simple. Anyone can describe what a supermarket does. But like I said earlier, the operating model is less simple than it looks. The real question worth thinking about is how does Demart manages to sustainably sell below competitors and still make money year after year. Is it scale? Is it the promoter’s philosophy of low cost? Is it the real estate choices? Or is it all three working together? That’s these are the questions you need to answer. And if you cannot answer that you you do not really understand the business or maybe you just understand the surface of it. Moving on to the fourth question. Would I be happy owning this for 10 years if the market shut tomorrow? I think this depends entirely on a view of how Indian grocery shopping behavior evolves over the next few years or next decade. Right now the monthly store visit are still dominant. Families still want to walk through aisles, pick up things, fill a card. that has not changed much over years. But whether that still holds in 10 years as quick commerce scales and habits shift, I think that’s a real question. So nobody can answer that with certainty and acknowledging that uncertainty I think is is really really useful for analyzing a business like Demart. The fifth question, what could kill this business? Now I can think of uh three real possibilities worth taking seriously. The first is a permanent shift in Indian shopping habits from monthly store runs to daily quick-commerce deliveries and that would hurt a storebased model. The second risk or what could kill a business like demand is sustained price competition from deeper pocket players who can afford to burn the cash for us and a lot of business big businesses in India like Reliance have that kind of money. The third big risk that can kill a business like Demar is a slow erosion of the cost discipline culture after the founding generation steps back and I think this is the most important risk one has to be careful about. So the check question for the business column do I really understand this business? I think my honest answer after going through all five questions is that while Demart’s business is simple to describe, it is harder to genuinely be honest about the durability of uh its operating edge over the next decade. I can describe Demart easily. I can also see clearly where my confidence ends and my guessing game begins. That is uh what this column is supposed to be. Not give me any certainty but give me a clear map of where I am certain and where I am not certain. That is column number one. Now to the second column which is management. Question number one. Would I trust these people to run my family’s money? I think the promoters of Demart who’s Mr. Radakash Damani. He has a long track record of capital discipline, low ego and and and good long-term thinking. A lot of people in our industry look up to him for for good reason. But there is a very recent change worth noting. The company had a new MD and CEO recently. That was after Neville Norona’s two decade tenure ended and the new MD CEO comes from a 30-year career at deliver. So I think the answer on trust right now needs to be revisited over the next 3 years to 5 years. It cannot be assumed blindly even if it’s a company like Demart. The second question on the management side is how do they treat minority shareholders when no one is watching. Historically the answer for Demart has been that they have treated minority shareholders reasonably well. Also promoter holding has been stable. the no shares pledged, no related party dilutions that I’m aware of. The IPO in 2017 was also price was also actually priced reasonably. It was not really really high the kind of things that we’ve seen of late in the Indian IPO market. U so overall the track record has been good but the real test now is whether this culture survives the CEO transition or whether it gradually shifts under new leadership. We will only know that over the next few annual reports. The third question that you check on the management side is what do their last 10 years of capital allocation tell me. Now this is actually a strong column for demart on paper and I’ll list what they have done. So they owned their stores rather than leasing. They they’ve expanded slowly and deliberately geography by geography uh rather than mindlessly. They have taken on minimal debt. They have not done any large acquisitions. they paid no dividends because the returns on reinvesting back into new stores have been higher than paying it out. Every one of those choices I think is textbook capital discipline. Uh but the open question is whether this discipline holds under new leadership. Uh so it’s not a close question. It’s a very open question that we still need to assess over the next 3 to 5 years for the company. The fourth question is do they tell the truth in good years and bad? Now the past few annual reports and conference calls have largely understated the real pressure from quick commerce competition. But the tone has remained largely honest instead of being defensive or hyped. That’s what my view is. The tone under the new CEO is I think still being established like it happens with all companies when the management changes the top guys change. I think one or two quarters is not enough data for to form a view. It is I think worth reading his views uh first two or three annual letters which means two or three years carefully before forming a settled view on the capabilities on this dimension. So it’s very important to have patience here like um I think that’s the right move and again to remind I’m not specifically talking about demart I’m talking about any company that you analyzing this is how you analyze rather than forming the view on that moment of time or the on the person who’s running the show or the business at that point of time um it’s very important to understand that a a business is like a movie is not like a static picture it’s like a movie which is evolving a story which is opening up over time so you need to not just look at a business how it has come from the past few years but also before forming a clear settled view you also need get time in the future to even analyze stuff of how they really pan out in the future so this is a business analysis not a demart analysis so don’t forget that the fifth question is do they have real skin in the game and for how long so Mr. Damani remains the anchor. His wealth is heavily concentrated in demand. He has been building this business since 2002. I think that his real long-term skin, but the new co does not yet have the tenure or the accumulated stock ownership that built trust with Norona over two decades. So, he’s just starting. So, there’s some asymmetry here at this point of time. The founder is deeply committed. The operational leader is is very new. I think that asymmetry is real and it needs time to resolve one way or the other. The check question for the management column, can I trust these people with my capital? My honest answer, I think the founder as I said is still the anchor but the operational leadership is in transition. So conviction on this column requires patience right now, not a quick conclusion and that is actually fine. The template is not asking me to have a strong answer today as I said earlier. It is asking me to be honest about the strength of my answer and on this column my answer is let us see that is column two. Now moving on to the third column which is price. So the first question that we try to look at again on the price front is what am I paying today and demart if you look at demand it is it has typically traded at a very high PE multiple often in the 80 to 100 times range sometime 120 as well. uh subsequently earnings yield uh which is just the inverse of PE is is is very low barely above 1%. uh so it’s very important to check the latest numbers before you apply this template yourself uh and it moves around but the broad picture that demar trades at a premium multiple I think has been consistent for years so what am I paying now you’re paying a high P multiple if you are wanting to buy the stock now second question is what is the market implicitly expecting and do I agree now at a multiple that high of like 80 to 100 the market is not just saying this is a good business the market is saying very specific things about the next decade it is saying there will be sustained high earnings growth. It is saying margin will hold steady or even expand despite quit commerce pressure. It is saying execution under the new co will be flawless or close to it. Now whether an investor personally agrees with all three of those assumptions I think is a central question of this entire column not whether the multiple is high but whether the assumptions behind the multiples are reasonable. Moving on to the third question what would I pay if I were buying the whole of business? Now a useful exercise I sometimes do is to ask what multiple would this business actually command if it were private and could not be sold tomorrow. Now for most good but not exceptional retail businesses globally that private market number is materially lower than the listed markets multiple and the gap between those two numbers tell you something important right it tells you what part of today’s stock price is actually the business and what part is the enthusiasm of other people for demand that gap is large what you choose to do with I think that information is up to you the fourth question at what price would I sell and why now two triggers is worth writing down in advance before even buying. First multiple expansion without earnings catching up is to to justify it. If the P goes from 90 to 120 while earning grow only modestly, the gap between price and business is widening even further, not closing. The second number, a sustained slowdown in same same store sales growth, which is an important metric for a retail business like demand or a meaningful margin squeeze. I think that is not explained by one-off factors. These are important things that you note uh to decide if you own the stock when would you want to start selling or sell the stock. I think having these written down as I mentioned earlier before you buy the stock I think is a completely different exercise from deciding after the fact where emotions are running the show. Once you already own the stock it’s very difficult to have no buyers while deciding whether you want to sell or not. So you need to do this exercise before you even buy a stock demart or something else. The fifth question, the final question on the price front is if demart drops 40% uh next month, do I buy more or panic? I think the answer depends entirely on why it dropped. If it dropped because the broader market corrected sharply uh and demart got swept along, that is very different from demart dropping on its own because of bad quarterly results or a credible new competitor or some trouble in the management. And knowing in advance which scenario would make you buy more with conviction and which would make you pause and to reexamine. I think is the work of an investor. It’s not a reflex action. It’s a preddecided plan. And the check question for the price column, am I paying a sensible price? My honest answer, a good business run by good people and a sensible price are three separate judgment points. The template asks all three. It does not let you skip the price question just because the first two felt strong. And on the prize for demar today, the honest answer requires you to personally agree with some fairly demanding assumptions about the next decade. Whether you do or you do not is your call. The template does not decide that for you. It just makes you see it clearly. That is column number three. So what’s the key takeaway of the template and the analysis that we’ve done in general and for demand? What are the real lessons of this template? Now before answering that I think first notice what happened over the last 20 or so minutes. We did the same exercise on the same company three times. Once for the business, one for the management and once for the price and we got three different answers. The business is largely understood but with real uncertainty about the next decade. The management has strong founder but operating leadership is transition. The price is demanding and leaves little room for disappointment. Three columns, three different answers. one company. This I think is a tension that most of us investors simply cannot hold. We want a yes or a no. We want clear recommendation. We want someone anyone to just tell us whether to buy or not. But I think good investing almost always lives in this uncomfortable middle place. A business you partly understand, a management you partly trust, a price you partly agree with or you partly disagree with. this or I think any template will not remove all that discomfort but what it does it makes the discomfort visible so you can work with it rather than pretending that it does not exist. So here is what I want to leave you with today. A template like this does not give you the answer. It gives you a clear picture of what you do do not know and that I have learned slowly over years painfully is usually more useful than a recommendation from anyone including me or from anyone. I think it’s because a recommendation is somebody else’s conviction. A template or your own analysis is your own conviction honestly bit one question at a time. If you found any of this useful, I made the blank template available for you to download. The link is in description. Print it, keep it at your desk. Work on it and let me know how you felt working on it. Pick a stock. Pick your pick a stock doesn’t mean buy a stock. Choose a stock to analyze. Either one you already own or one you have been considering. Fill the template by hand, not on computer by hand. Take your time and be honest. And notice which column is the easiest for you to fill in. And notice which column is the hardest. I think that hard column, the one you keep wanting to skip, is usually the one telling you something worth reflecting on. Thank you so much for watching this episode. I will soon see you in the next one. And one last thing before I let you go. Over the last decade, I have helped more than 15,000 investors from 30 countries build a clearer way of investing. These are people who like you were tired of stock tips and noise and wanted a real process they could trust. The analysis and process you saw today is a small piece of the much larger system I teach in my mastermind membership. It is not a course of stock tips. There are no tips and there’s no urgency. Inside mastermind you get a complete value investing course taught across seven modules and 50 lessons built around real Indian companies. You get my monthly newsletter which is the value investing almanac where I think out loud about businesses and behavior. You get a few master classes on rethinking financial freedom, the art of valuation, the art of investing and clear thinking in a market crisis. You also get the stock analysis spreadsheet I use in my own research. An active membersonly forum with thousands of past discussions and live sessions with me where you can ask anything. Here I want to be honest about who mastermind is and is not for. It is not for someone looking for a quick tip or ideas to make money fast. It is it is not for someone who wants to be told what to buy tomorrow. It is for the kind of person who has watched a 45minute video about businesses and analysis all the way to this point which means it might just be for you. The link is in the description below. There’s no pressure either way. Thank you for staying with me till the very end. I will see you in the next episode.