As investors, we need to study cognitive biases (also known as misjudgments) and take steps to counter these psychological tendencies.
When analyzing a business, I am a big believer that before you dig in you should make a list of questions you want to answer about the company. This will focus your research. Instead of simply ploughing through the annual report, you will be looking to validate or invalidate a particular thesis.
A good generic question is, “Does the business have a durable competitive advantage?”
A poor questions is, “What will the company’s earnings be next quarter?”
Not convinced that the questions you ask can impact your awareness and what you focus on? Watch this short video.