Investment Thesis: Writing a One-Page Case for a Stock

The order ticket is filled in: 100 shares, limit price $28. Before you submit it, write one page.

Everything in the first three lessons fed this. You know what a share entitles you to. You’ve read the three statements and checked price against earnings. Now you put your view on paper, where it can be tested later, because without a written record it’s easy to buy a stock for one reason, keep holding it for a different one after the first reason fails, and never notice that the switch happened.

The six parts of the page

Each part gets a few lines. No more.

What the business does. Use words a friend would follow. Who pays the company, for what, and why do they come back?

Why it could be worth more. This is your reason for buying. It should connect to something in the filings, like margins widening or free cash flow growing, and it should be specific enough that someone could argue with it.

What must go right. List the two or three things the case depends on.

The main risks. Name what could go wrong. Put the worst first.

The price you would pay. Tie it to the valuation check from price against earnings: the P/E you’re willing to accept, times earnings per share, gives a ceiling.

What would make you sell. Write the evidence that would tell you the case is broken, and a price above which the stock is fully valued even if everything goes right.

A worked page for a hypothetical retailer

Here’s the template filled in for a made-up home goods chain.

Part	Hypothetical home goods retailer
What it does	Sells furniture and kitchenware through stores in mid-sized towns and a website; customers return for seasonal ranges
Why it could be worth more	Online sales are growing and cost less to fulfill than store sales, so margins could widen over several years
What must go right	Same-store sales hold steady; online growth continues; free cash flow keeps covering capital expenditures
Main risks	A slowdown in consumer spending; a larger rival cutting prices; inventory building up faster than sales
Price to pay	Earnings per share of $2 at a P/E of 15 or less: $30 or below
Sell triggers	Two quarters in a row of falling same-store sales, operating cash flow below net income for a full year, or a price above $40 without earnings growth to match

Notice that the sell triggers point back to the statements. Falling same-store sales would show up in the quarterly report, and a gap between operating cash flow and net income is the pattern the three financial statements lesson told you to watch.

Decide now what would change your mind

Write the sell section most carefully. Once you own a stock, bad news gets easier to explain away, whether the story is that the quarter was unusual, that the market overreacted to one weak line, or that management has a plan it will explain on the next call. Writing the evidence down while you’re still neutral means that when the evidence arrives you’re comparing it with a test you set yourself, on a day when you had no position to defend.

Make each trigger observable. “The business weakens” can’t be checked. “Two quarters of falling same-store sales” can. The same goes for valuation: “the stock gets expensive” is a mood, while “a price above $40 with earnings per share still near $2” is a number you can look up on the day and act on without having to argue with yourself about what expensive means.

Review the page after each quarterly report

Each quarterly report is a chance to hold the page up against new numbers. Go down the “what must go right” list. Mark each item as holding, weakening or broken. Check the sell triggers. Update the price you’d pay if earnings have moved.

A weakening item is a reason to read the next report closely. Write down what you’d need to see to move it back to holding, and date the note, so the page becomes a short record of how the case has aged since you first wrote it.

A stock can also fall on a report that looked fine; why a stock fell after beating earnings covers the usual reasons. A falling price matters only if you wrote it down as a trigger; otherwise the question is whether the case still holds.

Keep it to one page

Long cases don’t get reread. Running to three pages? Cut until each part fits in a few lines. The constraint makes you choose which reason for buying really matters, and it means that when you open the file after a report, the whole argument is in front of you in the few minutes you’ll actually give it.

Write your own page now for the company you’ve followed through the course, using the market capitalization, free cash flow and P/E you’ve already worked out, and if you decide to buy, the diversification course covers why concentration hurts and how to spread risk across the rest of your holdings.