Investment thesis research

June 19, 2020

by a searcher in Chicago, IL, USA

Hello,

I'm working on coming up with investment thesis but I feel like I'm spinning my wheels. I'm taking a top-down approach, using IBIS, pitchbook, public into, and I have the financial criteria (growing industry, low capex, etc) but I haven't come up with a single hypotgesis in 1 week. Am I overthinking it?

What's your approach to developing an investment thesis?
How long does it take you to come up with one?
What resources do you use to test it?

Thanks!

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Reply by an investor
from Dartmouth College in 80 S Main St, Hanover, NH 03755, USA

At the risk of regurgitating much of Alyssa's comment above: Where we have found frequent "wheel spinning" in thesis development process is the space between "too high level" and "to narrow". Some good advice precedes, but I encourage students to look at a combination of filtering variables to get to interesting high level areas (think of these as axes on a market map): growth/secular trend driven, pick a vertical area of the economy that interests you, and maybe a horizontal "business model" or other something to make it tangible --- this sort of combination should yield you a broad area like "agricultural efficiency SAAS" -- you should be able to map to general growth and trend drivers. from there, a suggestion is to test if you can identify companies (just "can I find a place with a list of companies in this space" or "can I google and find 2-3 companies") in general that fit the bucket. Finding unique ideas will come as you get deeper into a segment and identify more niche subsegments, but would not recommend beginning with too narrow an approach, but narrowing as you find an area that fits your broader criteria and feels tractable. An underappreciated (but also potentially risky) filtering variable is "is it interesting to you". If you are intellectually interested in learning about the application of technology to ag production (to use the above example) you may find it easier to dig - but also may get distracted more easily. Good luck!

Reply by a searcher
from Universitas Indonesia in Jakarta, Daerah Khusus Ibukota Jakarta, Indonesia

This is new, I'm working with my thesis to with subject marketing related shared economy for the investor in peer to peer lending industry

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