I Studied 46 Columbia Business School Investment Theses—Here’s How to Write a Great One
So you can write a great investment thesis
I have been studying the winning investment theses of the 5x5x5 Russo Student Investment Fund1 for a few weeks now.
This fund, which belongs to The Heilbrunn Center for Graham & Dodd Investing of Columbia Business School (CBS), is a unique student portfolio fund that holds a limited number of stocks for a long time, reflecting the value investing tradition, and was designed and funded by Thomas Russo, partner at Gardner Russo & Gardner.
These guys are known for producing high-quality investment theses that win competitions and impress professional investors.
After analyzing the 46 theses available in their website, I’ve identified a repeatable structure you can use to improve your own investment theses.
Executive Summary
Give a high-level overview of the investment opportunity in less than a paragraph.
Clearly state the company name and ticker.
Summarize why this is a good investment in one or two sentences.
Mention the price target and expected IRR (internal rate of return).
Declare if the position is LONG or SHORT.
Best practices
Keep it concise but impactful.
Include key financial metrics.
Clearly state why the market is mispricing the opportunity.
Avoid
Being too vague or generic.
Not quantifying the investment potential.
Omitting the investment rationale.
Example:
Company Overview
Explain the company’s business model and competitive position.
Brief description of the company and its industry.
Key revenue segments and growth drivers.
Competitive advantages (moat, market position, pricing power, etc.).
Financial highlights (revenue, EBITDA, margins, etc.).
Best practices
Focus on the business model and key revenue drivers.
Highlight competitive advantages.
Use recent financial metrics to provide context.
Avoid
Copying the investor relations description without adding insight.
Ignoring the competitive landscape.
Failing to provide relevant financial data.
Example:
Company history
Business summary
Competitive landscape & business model
Industry overview
Investment Thesis
Clearly explain why this stock is mispriced or has upside.
Break it into 2-3 key reasons (e.g., margin expansion, industry growth, overlooked catalysts).
Support each point with data and logic.
Compare against peers or historical performance.
Every claim should have supporting evidence.
Best practices
Focus on the most impactful drivers of value.
Back up claims with data and industry insights.
Clearly explain why the market is mispricing the opportunity.
Avoid
Listing too many reasons without depth.
Making claims without providing supporting evidence.
Ignoring counterarguments or risks.
Example
Valuation
Demonstrate that the stock is undervalued with clear valuation metrics.
Compare against historical multiples and industry peers.
Use EV/EBITDA, P/E, or other relevant metrics.
Show bear, base, and bull case scenarios.
Best practices
Use valuation multiples that are relevant to the business model.
Compare against industry benchmarks.
Include sensitivity analysis (e.g., bear/base/bull cases).
Avoid
Using valuation without explanation.
Making aggressive assumptions without justification.
Ignoring downside risks.
Example
Risks
Address key risks and how they can be mitigated.
Identify 2-3 major risks.
Explain their potential impact.
Describe how the company can mitigate them.
Best practices
Prioritize the most material risks.
Provide context on how management is addressing these risks.
Show a balanced perspective—acknowledge risks but explain why they are manageable.
Avoid
Ignoring risks completely.
Listing too many risks without explaining impact.
Failing to provide mitigation strategies.
Example
EXTRA
Management, Compensation, and Capital Allocation
Assess the quality of the management team and how they allocate capital. You can add this section before or after the “Valuation” section.
Evaluate the track record of the leadership team.
Review compensation structures—are they aligned with shareholder value?
Analyze capital allocation decisions (e.g., dividends, share buybacks, acquisitions).
Compare ROIC against competitors.
Best Practices
Look at management’s history of execution and decision-making.
Assess whether compensation incentives encourage long-term value creation.
Highlight whether capital allocation decisions are efficient and sustainable.
Avoid
Ignoring management’s role in value creation.
Assuming all buybacks or acquisitions are positive without deeper analysis.
Overlooking dilution risks from excessive stock-based compensation.
Example
Capital allocation
Management compensation
Ownership
Pre-Mortem Analysis
Identify potential reasons why the thesis might fail before they happen.
What could go wrong that would invalidate the investment thesis?
How might management fail to execute key strategies?
Are there external risks (regulatory, macroeconomic, industry shifts) that could derail expectations?
What early warning signs should investors monitor?
If you wanna learn more about the pre-mortem analysis, buy my ebook on Behavioral Investing.
Example
Catalysts
Identify key events that will drive the stock price higher.
Short-term and medium-term catalysts.
Be specific. What earnings reports, regulatory changes, or market shifts could cause the re-rating?
Best practices
Identify events with a clear impact on valuation.
Explain how each catalyst will drive price appreciation.
Prioritize near-term catalysts that the market is ignoring.
Avoid
Listing generic catalysts that apply to any company.
Failing to explain why a catalyst matters.
Ignoring potential risks to catalysts materializing.
Summary
It is always important to learn how to improve when writing our conclusions when analyzing companies to invest in.
Studying and analyzing how professionals write their investment theses is an excellent way to apply it to our investment theses.
To finish:
Here is the link to the investment theses I mentioned in the post:
1. S&P Global thesis. Richard Lalane, CFA. April 25, 2024. Link: https://business.columbia.edu/sites/default/files-efs/imce-uploads/S%26P%20Global_Richard%20Lalane.pdf
Booking Holdings thesis. Jeffrey Johnson. May 7, 2019. Link: https://business.columbia.edu/sites/default/files-efs/imce-uploads/BKNG.pdf
Otis Worldwide Corporation thesis. Stephanie Moroney. May 5, 2020. Link: https://business.columbia.edu/sites/default/files-efs/imce-uploads/OTIS.pdf
Moody's thesis. Christopher White. May 4, 2016. Link: https://business.columbia.edu/sites/default/files-efs/imce-uploads/MCO%20-%20Christopher%20White.pdf
Nike thesis. Nielsen Fields, CFA. April 25, 2017. Link: https://business.columbia.edu/sites/default/files-efs/imce-uploads/NKE_Nielsen%20Fields.pdf
O'Reilly Automotive. Derek Johnson. April 30, 2016. Link: https://business.columbia.edu/sites/default/files-efs/imce-uploads/ORLY%20-%20Derek%20Johnson.pdf
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DISCLAIMER: The content of this newsletter is distributed for informational and educational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other type of investment.
Do your due diligence and seek professional advice if necessary.
If you wanna study the theses, you can find them here: https://business.columbia.edu/heilbrunn/curriculum-courses/5x5x5-russo-student-investment-fund
Thank you for the value!
Use “valuation multiples” that are “applicable to ALL business models”:
P/E ÷ ROIC
&
P/E ÷ ROA