The investment thesis template
Copy the block into a note, one per company. Keep it to one page; if a field needs a paragraph, the idea is not clear yet.
INVESTMENT THESIS Company / ticker: Date written: Price today: Market value: Enterprise value: 1. BUSINESS (two sentences) What it sells, to whom, and why they keep paying: 2. WHAT THE PRICE ASSUMES Implied growth or margin, and the method used: Consensus for the next two years: 3. VARIANT VIEW (one or two sentences) Where I differ, on which metric, by how much, and why: 4. CATALYSTS (event / expected date / how I will see it) a. b. 5. MUST STAY TRUE (metric / threshold / where to check) a. b. c. 6. KILL CRITERIA (trigger / action) a. b. c. 7. VALUE RANGE PER SHARE (method, horizon) Bear: Base: Bull: What I lose if the bear case happens: 8. POSITION Starting size: Maximum size: I add only if: 9. REVIEW Next results date: Full rewrite after: 10. PRE-MORTEM Two years from now this position has lost money. The most likely reason: What I would see first:
How to fill in each field
The investment thesis guide explains why each part exists. This table is the practical version: where each answer comes from, and what separates an entry you can check later from one you cannot.
| Field | Where the answer comes from | Weak entry | Usable entry |
|---|---|---|---|
| Business | 10-K business section and segment note | "Leading provider of solutions" | "Sells repair parts to factories; most sales are repeat orders" |
| What the price assumes | A reverse DCF on the current price | "The market is too pessimistic" | "Price implies about 3.6% free cash flow growth for ten years at a 9% discount rate" |
| Variant view | Your own work on one metric | "Margins will improve" | "Operating margin reaches 9.5% within three years, versus 8% today" |
| Catalysts | Company targets, product timelines, reporting dates | "The market will notice" | "Private-label share, disclosed each quarter" |
| Must stay true | Metrics printed in every 10-Q | "The business stays strong" | "Gross margin at or above 28% each quarter" |
| Kill criteria | The conditions above, at the level that breaks the case | "If things go wrong" | "Operating margin below 7.5% for two quarters in a row: exit" |
| Value range | Your DCF or multiple-based cases | "Target $60" | "Bear $25, base $60, bull $73, three years out" |
| Position | Your own risk limits | "A decent amount" | "Starter size; maximum twice that; no adding while a condition is slipping" |
| Review | The company's reporting dates | "Regularly" | "After each quarterly report; full rewrite after the 10-K" |
| Pre-mortem | Your honest guess at the failure | Left blank | "A rival's price cuts absorb the margin gain; first visible in gross margin" |
The test for every usable entry is the same: a future quarterly report can confirm or contradict it. For the priced-in line, the reverse DCF calculator turns a share price into an implied growth rate in a minute.
Investment thesis example: a completed template (illustrative)
Ferrow Industrial Supply is fictional; every figure is a round, made-up number chosen to show the method, not a real security or a recommendation.
| Field | Ferrow Industrial Supply (fictional) |
|---|---|
| Company, date, price | $40 a share; 25 million diluted shares, so a $1,000 million market value; $200 million net debt, so a $1,200 million enterprise value |
| Business | Distributes maintenance and repair parts to factories. Revenue $1,600 million, gross margin 28%, operating margin 8% ($128 million) |
| What the price assumes | EV/EBIT of 9.4× and a 7% free cash flow yield. A reverse DCF on $70 million of free cash flow, with a 9% discount rate and 2.5% terminal growth, implies about 3.6% annual growth for ten years: roughly the status quo |
| Variant view | Operating margin rises from 8% to 9.5% within three years, as higher-margin private-label parts grow and a new pricing system cuts discounting. Consensus assumes a flat margin |
| Catalysts | Private-label share, disclosed quarterly; pricing system live in every branch by year-end; an investor day with margin targets |
| Must stay true | Revenue growth of at least 2% a year; gross margin at or above 28%; operating margin above the same quarter a year earlier from the third quarter on; net debt at most 2× EBITDA |
| Kill criteria | Operating margin below 7.5% for two consecutive quarters: exit. Gross margin below 27% for two quarters: halve and re-underwrite. An acquisition above $300 million, or one paid mainly in stock: exit |
| Value range (three years out, before discounting) | Bear $25: flat revenue, 6.5% margin, 8× EBIT. Base $60: 4% growth, 9.5% margin, today's 9.4×, net debt down to $100 million. Bull $73: 6% growth, 10.5% margin, 9.4×, net debt $50 million |
| Position and review | Starter size, maximum twice that; checked after each quarterly report; rewritten after each annual report |
| Pre-mortem | A larger distributor cuts prices to win factory contracts, so the pricing system loses volume instead of adding margin. First visible as revenue growth under 2% with a flat gross margin |
Two things make this usable. First, the variant view is one number, an operating margin of 9.5% against 8%, that each quarterly report moves toward or away from. Second, the status quo is priced: holding growth at 4% and the margin at 8%, with net debt repaid to $100 million and today's multiple, gives about $50 a share in three years. The thesis claims the gap between $50 and $60, and that gap rests on a single line of the income statement.
Kill criteria: a one-page sheet
Kill criteria are the part of a thesis most often left vague, and vague criteria never fire. Write them on their own page before buying, choosing three to five from these types.
| Type | Example trigger | Where you will see it | Pre-set action |
|---|---|---|---|
| Operating | Revenue down year over year for two consecutive quarters | Quarterly report (10-Q) | Exit |
| Unit economics | Gross margin below 27% for two quarters | 10-Q income statement | Halve, re-underwrite within a week |
| Balance sheet | Net debt above 3× EBITDA | 10-Q balance sheet | Exit |
| Capital allocation | Acquisition above 30% of market value, or paid mainly in stock | Deal announcement (8-K) | Stop adding; judge it as a new thesis |
| Management | Margin target withdrawn or delayed by more than a year | Earnings call, investor day | Exit |
| Time | Main catalyst not visible by a stated date | Your calendar | Reduce; right but slow still costs |
| Valuation | Price above your bull value | The share price | Re-underwrite; the upside you bought is gone |
- Each line needs a number, a source and an action. "If margins weaken" has none of the three.
- Pair each with a must-stay-true condition. The condition is the level you expect; the kill criterion is the level that breaks the case.
- No price-only triggers except valuation. A falling price is a reason to re-check the evidence, as the guide to when to sell a stock explains.
- Decide the action now. "Review" is not an action unless it has a deadline.
Using it as a stock pitch template
A pitch is the same thinking reordered for someone else: an investment club, an interview or a published write-up. Keep the content and change the order:
- One sentence: the company, your variant view and the value range.
- What the market assumes, as a number, and why you disagree.
- Evidence: two or three facts that support the variant view.
- Valuation: bear, base and bull, with the assumptions behind each.
- Catalysts and their timing.
- Risks and kill criteria: what would prove you wrong, stated as plainly as the upside.
A pitch that skips step 6 is marketing. The thesis version stays with you and is checked every quarter.
Keep the template alive after you buy
A completed template is only useful if you check it. After each quarterly report, which the earnings calendar lists, mark every must-stay-true line as met, slipping or broken, and act on any kill criterion that fired. VALYSTR's Thesis Guardian lets you enter the conditions a thesis needs and monitors them, which replaces the manual check once you hold more than a few stocks. Log every decision, including decisions not to act, in an investment journal, and rewrite the template from scratch at the current price after each annual report.
Put your thesis conditions on watch
Enter the conditions your thesis needs to stay true, and Thesis Guardian monitors them so a broken one does not go unnoticed.
Frequently asked questions
What is an investment thesis template?
It is a fill-in structure that makes you write down, before buying, why a stock is mispriced and how you would know you were wrong. A good one covers the business, what the price assumes, your variant view, catalysts, must-stay-true conditions, kill criteria, a value range, position limits and a review schedule, all in measurable terms.
What should a stock pitch template include?
Lead with a one-sentence summary of the company, your variant view and the value range. Then show what the market assumes, the evidence for your view, a bear, base and bull valuation, catalysts with timing, and the risks and kill criteria that would prove you wrong. Leaving out the risks turns a pitch into marketing.
What is the difference between must-stay-true conditions and kill criteria?
A must-stay-true condition is the level you expect a metric to hold, such as gross margin at or above 28%. A kill criterion is the level at which the thesis is broken, such as gross margin below 27% for two quarters, with a pre-set action. Conditions warn early; kill criteria decide.
What is a pre-mortem in investing?
A pre-mortem imagines that the position has already lost money and asks for the most likely reason. Writing that reason down before buying surfaces the risk you are most inclined to ignore, and naming the first metric that would reveal it gives you an early warning to watch in each quarterly report.
What does a good investment thesis example look like?
It fits on one page, states the price and what that price implies as a number, makes one specific disagreement with consensus, lists three to five measurable conditions and kill criteria with actions, and gives bear, base and bull values with their assumptions. The fictional Ferrow Industrial Supply example above shows each field filled in.