Here's a question I've recently started asking myself before I buy a stock, and it's changed the way I invest more than any valuation model or chart pattern ever has:
Would I want to own 100% of this business, run by this management team, for the next ten years?
Most investors in my experience, myself included, ask a different question: "will price rise?" That question is about the stock. That question is about sentiment, momentum, price action and other peoples opinions.
The question I want to ask instead is about the business. And that shift, as small as it sounds, changes almost everything about how I manage a position and maybe most importantly how I behave when the share price drops 20% for no reason I can find.
Owning a Stock is Owning a Business
It sounds obvious written out like that. A share of stock is a fractional claim on a real company and its cash flow, assets, and future earnings. But it's easy to lose sight of that when the position exists as a number on the screen that constantly fluctuates. The price action creates somewhat of a psychological disconnect from the thing you actually own.
Now imagine you couldn't sell this business for five years. Imagine there was no ticker, no daily price, no way to check how “Mr. Market" feels about your position today. All you have is the business itself. Its revenue, its margins, its competitive advantage, and the people running it. Would you still want to own it?
If the honest answer is no, that could mean the reason you bought the business in the first place had absolutely nothing to do with the business itself.
A Practical Filter
Here's the checklist I've started running every investment through. These are the same questions I'd ask if I were actually acquiring the whole company, and not just a few shares of it:
Do I understand how this business actually makes money well enough to explain it to someone with zero finance background, in a couple of sentences?
Would I be comfortable owning this if the market shut down for ten years and I had no price to check, only the business's results?
Do I trust the people running it with my capital, the way I'd trust a manager I personally hired to operate a business I own outright?
Is this business generating real cash flow, or is a "growth" narrative doing the work that actual earnings should be doing?
If a position doesn't clear most of these, it doesn't necessarily mean it's a bad investment. It might just mean it's outside what I actually understand well enough to own with conviction. And that's useful information on its own.
The Liquidity Trap
Liquidity is optionality, not obligation. Just because you can sell doesn't mean you should treat every position as if you're constantly deciding whether to. The real discipline isn't pretending the exit doesn't exist, it's choosing not to use it just because price moved. Treating a public position as if it were as illiquid as a business you personally own and operate is, in practice, the single most useful output of this whole mindset. It doesn't just change what you buy. It changes how you behave when volatility hits, which for most investors, is where the actual money is lost or made.
This Keeps Me in My Lane
The owner's mindset does something else, almost as a side effect: it naturally filters out businesses I can't actually evaluate. If I can't explain how a company makes money, I can't honestly answer question number one and that means I have no business owning it, regardless of how the chart looks or how loud the narrative is on social media.
That's really the whole point. Not a stricter set of rules, but a more honest one: own what you'd be proud to run, understand what you're actually buying, and let the price take care of itself.
The Close
Thanks for reading!
- Eric Seel