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*Since the sub does not allow any images I am linking my substack where I’ve compiled all the points into a downloadable image for easier reference:*
*This is a buy side institutional grade research process that we follow at my firm. Some points may not be directly relevant to everyone, but they are still useful to understand.*
*It is not a checklist that was handed down to me. I put it together myself, so it may reflect certain preferences or biases that I, and my firm, have toward particular methods over others.*
*Feel free to reach out if you have any questions.*
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# The Deep-Dive Research Process
**1. Triage & variant perception** (0.5–1 hrs)
* State the anomaly that surfaced the name and write a one-line variant perception before committing research hours
* Name the edge type, whether informational, analytical, or behavioral / time-arbitrage; if you cannot name it, pass
* Treat this as a 30-minute kill gate: most names should die here
**2. Understand the business from primary sources** (5–7 hrs)
* Read the 10-K cover to cover; map segments, customers, and unit economics
* Read the proxy: incentive structure, insider ownership, related-party items; alignment precedes analysis
* Read 2–3 sell-side initiations last, bracketed as consensus framing rather than foundation
**3. Build a simple annual operating model** (4–6 hrs)
* Reconstruct 10+ years of organic volume, price, and mix; separate cyclical from structural
* Study incremental margins and major capital-allocation decisions
* Derive a base-rate algorithm for revenue, EBITDA, and EPS growth
**4. Isolate the top 3 fundamental drivers** (3–4 hrs)
* Decompose revenue and EBIT by segment; identify which line items truly move profit
* Read the last 6 months of sell-side notes to map the live bull–bear debate
* Reduce the thesis to the 2–3 variables the outcome actually turns on
**5. Reverse-DCF the embedded expectations** (3–4 hrs)
* Run the DCF in reverse: solve for the growth, margins, and duration the current price implies
* Judge those implied assumptions against base rates: the DCF is a diagnostic, not a forecast
* Sketch preliminary bull / base / bear bands, labeled explicitly as a rough first pass
**6. Absorb the current stock narrative** (8–10 hrs)
* Reconstruct management’s message to the Street: investor days, last 8 earnings calls, recent conference webcasts
* Track how the narrative has shifted versus how the fundamentals have; the gap is where the debate lives
**7. Build the full quarterly model & earnings-quality screen** (12–14 hrs)
* Granular revenue build and cost structure; tie the three statements; trace cash through the cycle
* Forensic overlay: accruals, non-GAAP bridges, revenue recognition, stock-comp treatment
* Weight the forensic pass heavier on shorts, since earnings quality breaks before earnings do
**8. Comparative competitive analysis** (4–5 hrs)
* Benchmark organic growth, margins, and capital efficiency against key peers
* Determine whether out- or underperformance is structural or cyclical; this is the symptom layer
**9. Supply side & the capital cycle** (5–6 hrs)
* Map industry capacity, competitor capex, and whether capital is entering or exiting the industry
* Assess aggregate returns on capital and the direction of mean-reversion pressure
* Locate the industry’s position in the capital cycle: the cause layer beneath peer margins
**10. Study the historical analogues** (3–5 hrs)
* Identify past cases with the same setup and study how the business, and the stock, resolved
* Extract base rates for the recovery or expansion path the thesis requires
**11. Test the thesis with management** (1–2 hrs)
* Walk a prepared question list with IR or the CFO, probing the three key drivers
* Compare your assessment with management’s framing; judge their capital-allocation credibility
**12. Build the primary research network** (10–12 hrs)
* Interview competitors, customers, and channel contacts for direct evidence on the key drivers
* Attend non-sell-side industry conferences (e.g., Becker’s Hospital Review)
* Compound a durable expert network per industry; the network outlives any single idea
**13. Handicap the upcoming catalysts** (6–8 hrs)
* Map market-embedded expectations for each catalyst; identify where your view diverges
* Score divergence against the PSUC hurdle: 1 − (win% ÷ (win% + |loss%|)), i.e. the breakeven win rate
**14. Define the re-rating mechanism** (1–2 hrs)
* Specify why, and roughly when, the market converges; cheap can stay cheap without a forcing mechanism
* Check reflexivity: does the price path itself alter the fundamentals?
**15. Construct informed bull / base / bear cases** (3–4 hrs)
* Rebuild scenario values on the full evidence base and assign explicit probabilities
* Compare reward price to risk price; underwrite only demonstrable asymmetry
**16. Position construction & pre-commitment** (2–3 hrs)
* Size to conviction and asymmetry; check correlation, liquidity, and portfolio fit
* For shorts: borrow cost, crowding, and squeeze risk before sizing
* Write invalidation triggers before entry: kill criteria bound to the mast
**17. Continuing diligence plan** (1 hr)
* Standing check-ins with industry contacts; monitor filings, conferences, and catalysts
* Review every update against the step-16 triggers, so monitoring never drifts into rationalization
**Total process: \~70–95 hours, or 5–7 days of work.** Granular training modules on each step. The gate at step 1 and the triggers at step 16 are the process's own margin of safety.
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