Fundamental Research Sequence
Understand the business first, value it last.
The Fundamental Research Sequence orders due diligence so that valuation comes last. Coffin describes how he and his firm approach a company: read the filings to understand what the business actually does, then layer on industry, regulatory, and macro context, then form a view on the business quality, and only then ask whether the current price is reasonable.
The sequence prevents the most common retail mistake: starting with 'is the stock cheap?' before knowing what the company sells. By front-loading qualitative understanding, valuation becomes a yes/no on a business you've already vetted, not a screen for bargains in unknown companies.
It's a multi-day to multi-week process per name, transitioning into ongoing maintenance once a position is opened.
- Understand the business before asking whether it is cheap.
- Qualitative factors (product, competition, regulation) are weighted alongside the numbers.
- Valuation is the final gate, not the first filter.
- Research is ongoing; the initial dive is just entry into a maintenance loop.
- Good businesses rarely go on sale — be willing to pay a fair price for quality.
- Read the filingsStart with the company's own filings to understand products, services, segments, and geographies. This is non-negotiable — third-party summaries are not a substitute.Pro tipRead the risk factors and the segment breakdown before any analyst report.
- Layer on contextMap the economies, regulatory frameworks, and competitive landscape the company operates in. Heavily regulated areas demand more legal-framework reading than light ones.WarningSkipping regulation costs you in regulated industries — banking, healthcare, energy, telecom.
- Cover the qualitative factorsForm a view on product quality versus competitors, customer dynamics, management, and structural advantages. Don't reduce the company to a spreadsheet.
- Layer in the quantitative metricsBring in revenue growth, profitability, margins, returns on capital, and cash flow. These confirm or challenge the qualitative thesis.Pro tipReconcile net income to free cash flow each year — gaps tell you where to look.
- Decide if you like the businessBefore opening any valuation work, answer: is this a company I'd want to own a piece of for the long term? If no, stop.WarningThis is the most-skipped step — investors race to the price screen.
- Run the valuationCompare the current stock price to your estimate of intrinsic value. Decide whether the price is a good deal for what you're buying, accepting that valuation is the hardest, least precise step.Pro tipSet a maximum multiple you'll pay even for a great business.WarningOverpaying for a great business can still produce poor returns.
- Move into maintenance modeOnce you own the position, replace deep-dives with periodic check-ins on filings, news, and thesis-relevant metrics.
Coffin says a first pass on a company takes him three days to a full week of work, longer for complicated or fast-moving situations. The output is enough conviction to make an initial investment, not the end of research.
He highlights that valuation has been the hardest piece for over a decade, with US stocks getting steadily more expensive. Hunting for bargains has become difficult while business quality remains identifiable.
Coffin describes himself as a fundamental investor in contrast to quantitative investors like Patrick O'Shaughnessy, who weight statistics-driven relationships. His sequence is the working method he uses both at his firm and personally: filings first, business understanding next, then valuation as the gating decision.