Investment professionals know that 99% of the time, identifying a good investment opportunity begins with identifying a good company. But, qualitatively, what makes any particular company “good”? Drago Dimitrov shows readers how to make such evaluations and comparisons across many industries in his new book, What Does This Company Do? Understanding a Business and its Risks.
“You cannot understand the risk of an investment if you do not understand the business model of the company. The two go hand in hand,” he said.
Dimitrov demystifies qualitative due diligence by using the concept of Spectrum Thinking to take an abstract idea like “How to determine whether a company is ‘good’” and break it down into steps. He applies Spectrum Thinking across a wide range of business factors — including products and services, nature of revenue and nature of expenses — to create frameworks to help readers begin their own analyses of potential business investments.
Additionally, the frameworks can be used to help analysts put together compelling “stories” when pitching ideas to investment committees and answer the committee’s toughest questions.
“The book provides subject matter that, I think, is essential yet missing from a traditional education in finance,” Dimitrov noted. “It has the kind of content I wish I had access to during my first few years out of school.”
Written in clear, easy to understand language accessible to a wide audience — including rising investment professionals, experienced managers, casual investors and CFA students — What Does This Company Do? offers tools to help readers identify how to think and what to think when assessing an investment opportunity.
“Far from limiting you, having some framework for what to look for helps channel in and focus your vision, so you can see with more clarity,” Dimitrov added.