The Equity Toolkit is an educational resource for Equity Analysts and Investors.  There are three key elements to this resource:

1.  The Philosophy Behind our Approach

The Equity Toolkit is about organising the vast repository of investing theory and anecdote in a way that makes it easier for investors to incorporate this information into a personal investment framework.  There are five elements to this philosophy:

  • The Equity Toolkit is designed to help investors develop their own framework for analysing equities.  (The Analysis Problem)
  • The foundation to this framework is a willingness to learn and practice.  (The Framework Foundation)
  • The framework is required to analyse a complex adaptive system, not isolated facts.  (The System Solution)
  • The key to understanding this system is to have a broad range of analytical tools (mental models) at your disposal. (The Toolkit Approach)
  • These tools should be applied in a way that is as simple as possible.  (The Simplicity Standard)

Whilst The Equity Toolkit is designed to be read in discrete pieces in any order, we think you will get the most benefit if you spend a short amount of time reading about this philosophy in more detail here

2.  The Tools which we use to analyse the Investment System

The Equity Toolkit is not just a collection of analytical tools and mental models, but a way of organising these tools in a way that is easy to navigate.  This organisation occurs in two ways.

The BREADTH of tools is represented by grouping them into one of eight top level Frames, which in turn are split into two groups:

Analysis Frames – The traditional tools of equity analysis

Application Frames – The background or inter-disciplinary tools that help in understanding how to apply and interpret the analysis frames

  • Systems (Distinction between mechanistic and systems analysis)
  • Behaviour (The difference between how we should and how we do behave).
  • Probability (Risk and Uncertainty)
  • Process (General analytical tips for any discipline)

The DEPTH of tools is represented by splitting each top level frame into various sub-frames, individual tools and technical notes and examples.

For example:

Top Level Frame – Financial Analysis

Sub-Level Frame (1) – Earnings Quality Analysis

Sub-Level Frame (2) – Accruals Analysis

Analysis Tool – Operating Cash Flow Reconciliation

Sub-Tool – Provision Analysis

Technical Note – Accounting Standards

In navigating between the depth and breadth of tools on offer, there is no correct order. The nature of the mental models approach is that there is no obvious start or end, just a series of inter-related ideas that work in many directions. Once the idea of a toolkit approach to a systems problem has been grasped, the tools can be assessed in any order according to the readers preference.

To help find your way around, we suggest you look at the SiteMap.

3.  The Blog

The Blog serves two purposes.

The first is the traditional role of any blog in keeping you up to date with what is happening on the website and highlighting new developments, examples or ideas that are relevant to equity analysis.

The second role is to provide a different perspective on the various tools.  Some tools don’t fit neatly into our linear classification; some problems require multiple tools; in many cases, it is better to start with the problem and work out the tools, rather than explaining the tools and finding examples that fit.  In short, the blog is an attempt to escape from the two dimensional layout of the website.

You can subscribe to receive email updates of the Blog here, or follow us on Twitter here.

We hope you find The Equity Toolkit useful and informative.  We welcome all feedback and suggestions on how we can improve the offering: