1. Always have a buy rule
2. Always have a sell rule
3. Always check for management and insider skin in the game
4. Always check for low levels of debt
5. Always make sure your potential reward outweighs your potential risk 5 to 1
6. Always identify WHY the company is currently undervalued or has the ability to grow
7. Always understand the macro environment on at least a basic level

#1 – Always have a good, research supported buy rule

Of all the things an investor requires to both maximise gains and minimise losses, a buy rule is the most important. A lot of research has been carried out on the best ways to approach buying a stock. There a variety of valuation models which go on to inform an investor on when a company is ripe for purchase. I personally use either the Acquirer’s Multiple or the CNAV formula. Both formulas have one goal – to buy cheap companies so cheap that even if they are temporarily distressed, there won’t be an issue....