I Studied Every Superinvestor for 20 Years. Here's the Checklist They Share

Forget complexity. The best investors succeed by checking the same simple things every time.

After analyzing the methods of Buffett, Munger, Klarman, Graham, Fisher, and dozens of other legendary investors, clear patterns emerge.

This isn’t what they say – it’s what they actually do.

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The Superinvestor’s Business Analysis

Understanding Before Numbers

• Can explain the business to a 10-year-old

• Know exactly how the company makes money

• Understand what customers are really buying (not the product, the benefit)

• Can identify the 2-3 factors that determine success in this industry

• Know what could kill this business in 5 years

Competitive Position Assessment

• Company has pricing power (can raise prices without losing customers)

• Customers would notice if company disappeared tomorrow

• Switching costs protect the business

• Competition isn’t based primarily on price

• Network effects or economies of scale present

Financial Simplicity Test

• Business generates consistent free cash flow

• Returns on capital exceed 15% consistently

• Can grow without proportional capital needs

• Balance sheet simple enough to understand fully

• No off-balance sheet complications

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The Superinvestor’s Management Test

Actions Over Words

• Management owns meaningful equity

• Insider buying during downturns

• Consistent capital allocation strategy for 5+ years

• Acquisitions at reasonable prices (or none at all)

• Share buybacks when stock genuinely cheap

Character Evidence

• Admits mistakes in shareholder letters

• Compensation reasonable relative to performance

• Promotes from within

• Low executive turnover

• Clear, jargon-free communication

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The Superinvestor’s Valuation Discipline

Price Consciousness

• Clear margin of safety (30-50% minimum)

• Valuation low on absolute basis, not just relative

Avoiding the Crowd

• Stock near 52-week or multi-year lows

• Industry out of favor

• Temporary problem creating opportunity

• Limited institutional ownership

• No promotional management

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The Superinvestor’s Portfolio Management

Concentration Principles

• Position sized for 5-10% initial allocation if high conviction

• Total portfolio in 10-25 positions maximum

• Top 5 holdings = 40-60% of portfolio

• Each position can be defended with conviction

• Would buy more if stock declined 20%

Patience Indicators

• Prepared to hold for 5+ years

• Not dependent on catalyst

• Can withstand 50% paper loss emotionally

• No use of leverage or options

• Ignore quarterly earnings noise

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The Superinvestor’s Psychological Framework

Intellectual Honesty

• Actively seek disconfirming evidence

• Write bear case before investing

• Track mistakes and study them

• Acknowledge luck vs skill

• No thesis drift after purchase

Emotional Discipline

• Buy when others fearful

• Sell when others greedy

• Ignore market predictions

• No checking prices daily

• Celebrate volatility as opportunity

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The Superinvestor’s Filters

They Never Touch

• IPOs and SPACs

• Turnarounds without asset protection

• Technology they don’t understand

• Levered equity in cyclical businesses

• Promotional management teams

They Always Require

• Sustainable competitive advantage

• Management integrity

• Simple, understandable business

• Favorable long-term economics

• Attractive purchase price

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The Superinvestor’s Daily Habits

Learning Machine

• Read. A lot.

• Study business history

• Read outside investing field

• Build mental models from multiple disciplines

• Think independently, not originally

Process Over Outcomes

• Focus on decision quality, not results

• Document investment thesis

• Regular post-mortem reviews

• Continuous process refinement

• Compound knowledge like returns

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The Paradox

The checklists above reveal the ultimate paradox: Superinvestors succeed by doing less, not more.

They:

• Make fewer decisions (but better ones)

• Trade less frequently

• Own fewer positions

• Use simpler analysis

• Require more conviction

The difference isn’t complexity – it’s discipline.

They stick to their principles especially when it’s hardest to do so.

Consider becoming a paid subscriber if you’d like to see how I personally apply this checklist to real investments, including my current portfolio holdings and the specific criteria that led me to buy them.

Until next week,

Dom
Schwar Capital

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