Value investing · Course 26 of 39 · The practice
The investment thesis
A decision procedure for the months after you buy. What a thesis is, what makes a reason checkable, how a condition is chosen, and what a break means.
Buying a company well takes an evening. Owning it well takes every quarter after that, and almost nothing written about investing is about the second part.
This course is. It teaches one document and one habit: a thesis, meaning the reasons a business is worth more than its price together with the numeric conditions on filed figures that have to stay true for those reasons to hold, and a review of that document on a calendar the reader sets in advance.
The whole thing works with a pencil and a folder of filings. No part of it requires software, and the lessons say so where the temptation to imply otherwise is strongest.
The nine lessons
The first two are about the document. What a thesis is, and why a reason paired with the condition that would refute it behaves completely differently from a reason on its own. Then the test that does most of the work in the whole course: a reason is falsifiable when you can name, in advance, the filed figure whose movement would refute it.
The next two are mechanics. How a figure qualifies to carry a condition at all, and how the level is chosen once the figure is settled. The second of those is the one place in this course where market-wide distributions appear, and the argument it makes about them is not the obvious one.
The last five are about what happens after the purchase. The reasons that can never produce a break because nothing files them, which filings can test a condition, what a break means, the review schedule the other lessons exist to feed, and, last, when a thesis gives a reason to sell.
Where this sits
Level 5, the practice, and it cannot run earlier. A guardrail is a condition on a figure, and choosing the figure requires knowing which figures are filed, which are durable, which are noisy and which are artefacts of an accounting choice. Every course in the four levels before this one is a prerequisite in the strict sense. A company end to end follows, and runs the whole sequence on one set of accounts.
It names no company except in one lesson, where two are named for a single teaching point and nothing is claimed about either of them. It suggests no level and no figure worth conditioning on, and it contains no view about any security.
The method, not the running of it
The investment thesis is 9 lessons on running the whole method on one company. Running it is the part that only happens against real filings, on a real date, and this course has none of yours. It also cannot tell you the day one of your reasons stops being true, which is the part that matters after you have bought.
Related
- About states the failure mode this course was written against, in the founder's own words.
- The value investor's mindset is the method that produces the reasons this course puts conditions on.
- Methodology sets out every definition and refusal rule behind the figures a condition can rest on.
See our methodology for how the product reads a filing and what it refuses to compute.