A 17-step deep-dive research process

*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.* \-------------------------------------------------------------- # 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. \-------------------------------------------------------