We present our favorite ideas each month through recommendation reports. These reports typically run around 2,000 words apiece and take around 10 minutes to read through (or 5 minutes, if you’re highly caffeinated). They are also conveniently available to print to pdf format, if you prefer a paper copy for bedtime reading.
Each report begins with a stock chart and a Style Box. The Style Box categorizes the recommendation into three fields: Investing Style, Industry, and Risk/Reward Level. We do this to help you assess whether the pick is right for you and aligned with your interests and risk tolerance.
We then present our most important section: The 7investing Key Takeaway. This is the punchline of why the company is our best idea in the stock market right now.
We follow that with some supporting context, such as what the company does and what’s taking place in its market. We also believe it’s important to lay out the stock’s key risks. Thinking critically about what could go wrong keeps investors from being blindsided.
We then conclude each report with a look at the management team and important metrics. A company’s leadership team makes the decisions that will govern the returns provided to its investors. And key metrics will help you determine whether the company is performing well or poorly – based on the areas that really matter.
Each report contains the following sections:
Stock Chart – An interactive visual chart of the stock’s previous performance. The timeframe can be adjusted from 1 day to multiple years.
Style Box – A categorization of the company to help you determine if this idea might match your personal investment style and goals. We classify based on Investing Style, Industry, and Risk/Reward Level.
We define risk as the probability of permanently losing capital or significantly underperforming the market over the next decade. A company’s risk categorization is assigned by the Lead Advisor who recommends the company and might be given different categorizations if later recommended by other advisors.
Risk can stem from various factors, including
1) failure to develop a competitive advantage;
2) failure to maintain an existing competitive advantage; or
3) a premium valuation that can cause a company’s stock price to lag even if the company executes well.
As long-term investors, we will no longer define risk as to how much a company’s stock price might fluctuate each year. We believe this is better defined as volatility, which various factors can cause outside of a company’s control (e.g., the onset of the COVID-19 pandemic in March 2020 is a perfect example of this). All stock prices will eventually see volatility and often represent buying opportunities rather than signals to sell. Long-term investors have the luxury of tuning out short-term noise and focus on returns compounded over many years.
While these are loose definitions, we believe they best characterize how we think about our assigned risk ratings:
Of course, while not always the case, the most significant potential rewards can come from the stocks with the greatest risk. Investors should choose stocks based on their risk tolerance, financial goals, time frame, and personal conviction in each recommendation.
The 7investing Key Takeaway – Our overall thesis. Why this company is our best idea in the stock market right now.
What Does the Company Do? – An explanation of what the company does and how it makes money. We’ll include real-world, relatable examples to make this more interesting and understandable.
Why is this Company a Good Investment? – An explanation of the aspects of the business that are particularly appealing, which could provide the basis for future investment returns.
What’s Happening in the Bigger Picture? – A description of what’s taking place in the broader market that the company competes in, and why that could serve as a tailwind to its success.
Thoughts on Valuation – We discuss how we think about valuing the company and its stock.
Key Risks – What could go wrong? A list of the most important risks and uncertainties that could lead to investing losses.
Management and Vision – The leadership team’s background and strategic plan. We also discuss how they’re being compensated and how they’re spending the company’s money.
What Should We Be Watching? – A list of specific metrics that we can watch to objectively determine if the company is doing well or not.
Our 7 recommendations for the current month appear on the left-hand sidebar of our 7investing homepage. Subscribers can access these at any time. Recommendations from previous months can be accessed through the “Recommendation” tab that appears in the top banner of the homepage.