Recreating a Billionaire's Stock Buying Checklist
The Investing for Beginners Podcast - Your Path to Financial Freedom
Valuation Methods: DCFs and Reverse DCFs
Andrew and Dave describe using discounted cash flows and reverse DCFs to estimate intrinsic value.
You can read the full blog post “Mohnish Pabrai’s Stock Buying Checklist” here:
In this episode, Andrew and Dave walk through a stock-buying checklist inspired by Mohnish Pabrai and his book The Dhandho Investor.
Instead of reading all 34 questions, they “draft” their favorites like a fantasy football team, using each pick to highlight a key principle of smart, long-term investing.
They discuss how to think about a company’s future prospects, why understanding how a business actually makes money is non‑negotiable, and how to identify key risks before you get too attached to a stock.
They also dig into moats, capital allocation, balance sheets, and valuation tools like DCFs and reverse DCFs—always tying it back to practical ways individual investors can avoid big mistakes and focus on quality businesses.
Key Topics Covered:
- Understanding how a company makes money (and why that’s rule #1)
- Identifying key risks before you “drink the Kool-Aid”
- Using ROIC to spot great businesses and efficient capital allocation
- Earnings growth history and what’s really driving it (revenue, margins, divestitures)
- Independent thinking in management vs. following the industry herd
Timestamps:
00:00 Intro: Checklist episode and fantasy draft format
00:24 Background on Mohnish Pabrai and the stock-buying checklist
01:14 Andrew’s first pick: future prospects of the business
03:36 Dave’s pick: how the company makes money
06:48 Identifying key risks and avoiding blind spots
09:44 Does the company have a durable competitive advantage (moat)?
12:27 Using ROIC to measure efficiency and moat strength
14:44 Capital allocation as job #1 for the CEO
18:28 What pain does the business solve for the customer?
21:40 Assessing the strength of the balance sheet
25:36 Has the company grown earnings above the market average?
29:08 Calculating intrinsic value with different valuation methods
36:28 Does management have a plan, and do they communicate it?
39:50 Where to find the full 34‑item checklist blog post and closing thoughts
Resources Mentioned:
- Mohnish Pabrai’s Stock Buying Checklist blog post:https://einvestingforbeginners.com/stock-buying-checklist-daah/
- Digging into Semiconductors: Analyzing Skyworks with Tyler Nash:https://einvestingforbeginners.com/digging-into-semiconductors-analyzing-skyworks-with-tyler-nash/
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Remember, invest with a margin of safety—emphasis on the safety. Have a great week, and we’ll talk to you next time.
Timestamps are generated by artificial intelligence, and are not 100% accurate depending on the platform used for listening.
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