From the Archieves: Walter Schloss Checklist

From the Archieves: Walter Schloss Checklist

Walter Schloss was one of Benjamin Graham’s most successful students. From 1955 through 2002, Schloss returned 16% per annum, according to his own figures, successfully using Benjamin Graham’s net-nets strategy to outperform the market for five decades.

Walter Schloss didn’t give many interviews over his career, but he did write a number of memos and letters to various publications over the years.

Walter Schloss: Two Checklists

Checklists are an important part of investing. Some of the world’s best investors, including John Griffin of Blue Ridge Capital, Mohnish Pabrai, Charlie Munger and Schloss’ mentor, Benjamin Graham all used, and continue to use checklists to assess potential investments.

Walter Schloss produced two checklists over his life, (or two that have been published and are available for viewing).

The first list, was entitled, “16 Factors Needed to Make Money in the Market” and is something I’ve covered before, here.

Walter Schloss’ second checklist, was offered to students attending an upper level seminar in value investing at the Columbia Business School — undoubtedly the birthplace of value investing.

Titled, “What Kind Of Stocks Do We Look At For Investments?” the checklist outlined the key factors Walter Schloss considered before making a decision to buy a stock. Below is an excerpt from the checklist followed by a screen grab of the whole note.

What kind of stocks do we look at for investments?

  • We look for stocks that are depressed [Schloss liked to comb the paper for stocks hitting 52-week lows]
  • Why are they depressed
  • Are they selling below book value

  • Is good will in book value

  • What has been the high [/] low over the past 10 years?

  • Have they any cash flow?

  • Have they any net income?

  • How have they done over the past 10 years?

  • What is their debt level?

  • What kind of an industry are they in?

  • What are their profit margins?

  • How are their competitors doing?

  • Is this company doing poorly compared to its competitors?

We get their annual reports, proxies and valueline and quarterlies. What appears to be the risk on the downside vs. the upside potential?

How much stock do the insiders own?

schloss checklist

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