84 - Would you buy your employer's stock?

Mental Models discussed in this podcast:

• Scuttlebutt
• Circle of Competence

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Show Outline

The full show notes for this episode are available at https://www.diyinvesting.org/Episode84

Scuttlebutt Challenge: Your Employer's Stock

• If your company isn’t public, assess it qualitatively or do this work on your spouse's company or where a friend works.
• If you work for a non-profit or government, do the same.
• Email me your write-up during the month of July 2020 and I'll send you a response.

Questions to Ask / Areas to Assess

• Assess the industry
• Assess your company’s place in the industry
• What is the culture of your company like?
• What is the priority of management? Are they shareholder friendly? Are they employee-friendly? Other concerns?
• How are capital allocation decisions made?
• How are CapEx decisions made?
• Does your company earn high returns on capital?
• Does it use leverage?
• In summary: Is it a high-quality business?
• What are the risks?
• How would you value your employer’s stock? (Write down an explicit intrinsic value)

Summary:

The company you work for should be the first place you look to begin understanding how to perform scuttlebutt. Investors should analyze their employer's stock as a potential investment candidate. Culture, Quality, and Management are key areas.