I have been refining how I look at stocks and ETFs, so I wrote it down. This is not advice. It is just my process, the markets I look at, and the names I am currently watching or hold. I will not share how much I put into anything. That part is nobody’s business and it is not the useful bit anyway. The useful bit is the thinking.
The whole thing comes down to one habit: before I look at a single number, I decide what I am actually looking for. Most bad buys happen because people mix up two different questions and answer them at the same time.
The two questions I never mix up
There are really only two ways I buy a stock, and they need completely different rules.
VALUE (my core) GROWTH (my satellite)
------------------ ---------------------
Wonderful business, Business getting bigger
bought cheap and better, fast
Hold for years / forever Hold until the story breaks
Buy the dip, add lower Size small, watch closely
Margin of safety matters most Runway + reasonable price matter most
If I am in “value” mode, paying a high price is a dealbreaker even if the company is great. If I am in “growth” mode, I accept a higher price but only if the growth is real and I have written down what would make me sell. The mistake I refuse to make is holding a broken growth story “forever” like it was a value stock. That is how people lose money slowly and call it patience.
So my portfolio has two buckets, or what I call sleeves:
- Core sleeve (Buffett style): proven, high quality, bought with a margin of safety. I dollar cost average in and add more when it gets cheaper.
- Growth sleeve: smaller positions, higher risk, each with a written sell trigger. If the trigger hits, I am out. No loyalty.
The value checklist I run (my core sleeve)
This is basically the Warren Buffett test, and the single most important line in it is pricing power. Can the company raise prices and keep its customers? If yes, it usually has a real moat. If it competes by being the cheapest, it does not.
Here is what I ask, in order:
1. Does it have a durable moat that is getting WIDER, not narrower?
2. Pricing power? (can it raise prices and keep customers?)
3. Consistent earnings + high return on equity (15%+)?
4. Low debt / strong balance sheet?
5. Honest, capable management that allocates capital well?
6. Do I actually understand it?
7. Is it CHEAP right now? (margin of safety)
The trap I watch for: a cheap stock with a moat that is quietly falling apart. Cheap plus deteriorating is not value. It is a value trap. A low price never makes up for a business that is slowly losing.
One number that fools people here is return on equity. A high ROE looks great until you break it down. I split it into its parts (this is called DuPont):
ROE = profit margin x asset turnover x leverage
Good ROE: fat margins, little debt (real quality)
Fake ROE: thin margins, lots of leverage (fragile, looks good on paper)
Two companies can both show 35% ROE. One earns it on 40% margins with no debt. The other earns it on 3% margins with a pile of borrowing. Same number, totally different risk. I always check which kind it is.
The growth scorecard I run (my satellite sleeve)
When I am looking at a growth name, I score it out of 14. Two points each for these seven:
[ ] Big, growing market (long runway)
[ ] Revenue actually growing fast (20%+ and durable)
[ ] Margins / returns IMPROVING as it scales
[ ] Reinvesting profits at high returns
[ ] Moat getting stronger, not just existing
[ ] Management clean (not diluting me with constant share issues)
[ ] Reasonable price for the growth (PEG under ~1 is good, over 2 is not)
The most useful single tool in there is PEG. It is just the P/E divided by the growth rate. Under 1 means I am paying a fair price for the growth. Over 2 means the market already knows the company is good and has priced it in. Paying any price for growth is the classic way to get burned.
And the rule I never skip: write the sell trigger before I buy. For a bank it might be “return on equity stops climbing.” For a software name it might be “revenue growth drops below 20%.” Growth investing is a bet on change, so I decide in advance what “the change stopped working” looks like.
How I value a business (the DCF, minus the scary math)
For value names I do a discounted cash flow. In plain English: a business is worth all the cash it will make in the future, but future cash is worth less than cash today. So I estimate the cash, shrink the far-off years, add it up, and divide by the number of shares. That gives me a rough “what is it really worth” number to compare against the price.
The honest truth about DCF: the answer swings wildly on your assumptions. So I never treat it as one number. I run four versions.
Fair value vs today's price
Bearish (slow) low far below
Conservative ... below
Moderate ... near
Optimistic (fast) high above
If today’s price sits down near the bearish or conservative line, that is interesting. If it needs the optimistic case just to justify today’s price, I wait. My buy zone is usually 20 to 30 percent below my conservative estimate. That gap is the margin of safety.
Two things I have learned the hard way:
- “Down a lot” is not the same as “cheap.” A stock that fell from a crazy price to a merely expensive price is not a bargain. I judge price against value, never against the old price.
- Banks do not fit a normal DCF. Their cash flows work differently. For banks I look at return on assets, return on equity, net interest margin, bad-loan ratios, and price-to-book instead.
The markets I actually look at
I do not stick to one country. I go where the mix of quality and price is best.
- Canada (TSX): my home market. Great for dividends and boring compounders, but heavily tilted toward banks, energy, and materials. Not much technology. So I treat Canada as my income and stability base, and go abroad for growth.
- India (NSE): great businesses, but usually expensive. The quality names trade at rich prices most of the time, so the game is waiting for them to go on sale.
- US (NYSE / Nasdaq): the deepest pool of world-class businesses, but often priced for perfection. You pay up for quality here.
- Australia (ASX): a mix. Some solid boring compounders, some beaten-down names worth a look.
A pattern I keep seeing: in India the wonderful businesses are rarely cheap, and the cheap businesses are usually cheap for a reason (commodities, no pricing power). So the rare stock that is BOTH good and cheap really stands out. That is my sweet spot.
What I am actually looking at right now
Here is where I will name names. Not amounts, just what passed my filters and what did not, so you can see the process on real examples.
Passed the value / quality test (my core watchlist):
ITC (NSE) Strong moat (pricing power in its core), high ROE,
debt-free, high dividend, and actually cheap. The
standout: quality genuinely on sale.
HDFC Bank (NSE) Best-run private bank, pristine loans, trading cheap
vs its own history after a merger digestion phase.
Bet is that returns recover.
Microsoft (US) Fortress moat, huge margins, net cash. For once not
at a crazy price. Fair, not cheap. The overhang is
heavy AI spending, which I think is temporary.
Netflix (US) Real moat and pricing power, but priced at fair value,
not a bargain. On my "buy lower" list.
Pepsi (US) Wonderful brand, pays me ~4% to wait, but the cash-
flow math says it is richer than the low P/E suggests.
Want it cheaper.
McDonald's (US) Basically a real estate + royalty machine dressed as
a burger chain. Elite. But priced full.
Computershare(ASX) Wide moat, sticky business, earns interest on client
cash. Slightly rich right now.
On my growth watchlist (smaller, with sell triggers):
Jio Financial(NSE) Huge runway, backed by Reliance, lending arm scaling
fast. But returns are still tiny and the P/E is steep.
A "prove it" bet. Sell trigger: returns stop improving.
Failed my filters (and why that is useful to see):
TCS / Infosys(NSE) Cheap and profitable, but weak pricing power and a
real question mark over how AI hits their model.
Cheap is not enough when the moat is in doubt.
Best Buy (US) Looks like value (low P/E, 5% yield) but it is thin-
margin retail with Amazon eating at the moat. Classic
value trap shape. Cheap for a reason.
Kraft Heinz (US) Cheap, high yield, but the brands are slowly losing
relevance. Even Buffett has called this one a mistake.
Robinhood (US) Fast growth, but no real moat and earnings swing with
crypto and trading volumes. A momentum bet, not
quality.
Pine Labs (NSE) Newly listed, barely profitable, senior staff leaving,
and a nosebleed valuation. Highest risk of the lot.
Notice what keeps happening. Most names fail not because they are bad companies, but because of price (too expensive) or because I cannot confidently predict them 5 years out (the “too hard” pile). And several “cheap” names are cheap for a real reason. That is the whole discipline in one paragraph.
Stocks vs ETFs
Sometimes I do not want to pick a single name. For broad exposure to a sector I will look at an ETF instead. The trade-off is simple:
Picking stocks: more work, but I can buy ONLY the cheap, good ones
ETF: one click, diversified, but I buy the whole basket
including the expensive names mixed with the cheap ones
An ETF averages away the gap between the cheap name and the expensive one. If my edge is spotting the mispriced one, an ETF throws that edge away. So I use ETFs when I want the sector but do not want to choose, and I pick individual stocks when I have actually found the mispriced gem. When I do buy an ETF, I pick on cost and liquidity, not on the brand, because they mostly track the same index anyway.
Two ETFs I hold, as real examples of using them as building blocks:
VFV Vanguard S&P 500 (in CAD) My US growth engine. The 500 biggest
US companies, one ticker, 0.09% fee.
Cheap, simple, tech-heavy. Unhedged,
so the CAD/USD rate moves my returns.
VDY Vanguard FTSE Canadian High My Canadian income sleeve. High-
Dividend Yield dividend Canadian names, but very
concentrated: the top 5 (Royal Bank,
TD, Enbridge, BMO, CIBC) are about
45% of the fund. Really a bet on
Canadian banks and pipelines.
The way I think about those two together: VFV is my growth and US exposure, VDY is my income and home-market stability. One is tech-heavy and pays almost nothing. The other pays well but leans hard on banks and energy. They cover each other’s gaps. The thing I stay aware of is that VDY is already stuffed with banks, so if I also buy individual banks I am doubling down on the same bet without meaning to.
The rules I actually live by
If you take nothing else from this, take these:
- Decide value or growth BEFORE you look at the numbers.
- Pricing power is the heart of a moat. No pricing power, no moat.
- Cheap plus a shrinking moat is a trap, not a bargain.
- “Down a lot” is not “cheap.” Price against value, not against the past.
- High ROE is only good if it comes from margins, not just debt.
- For growth, never pay a PEG over 2, and write your sell trigger first.
- Missing a good stock costs nothing. Overpaying costs real money.
- Be willing to wait. The right price often comes to you.
That last one is the hardest and the most important. Most of my watchlist is just that: a watchlist. I am waiting for good businesses to go on sale, and I am fine holding cash until they do. The patience is the strategy.
This is my personal approach and not financial advice. I am not a financial advisor. Do your own research, and remember that everything I named here can still go down. I share the thinking, not recommendations.