How to write an investment thesis

Use a five-part research note

1. Business question: what might change, and through which operating channel?
2. Evidence: which dated filing or statement supports the starting condition?
3. Assumption: what must happen next for your interpretation to hold?
4. Counterargument: what is the strongest plausible competing explanation?
5. Review condition: what new evidence would change your conclusion?

The SEC's filing guide points to business descriptions, risks and management discussion. Those sections provide inputs to a thesis; our five-part note is a research method, not a regulator's investment recommendation.

Challenge a fictional growth thesis

Hypothetical business: Atlas Software, an invented company. Its fictional 2025 revenue was 100 million dollars and operating profit was 15 million. In 2026 revenue was 120 million and operating profit 18 million. Growth was 20%, while operating margin remained 15%. These values represent invented full-year results, not a real issuer or forecast.

Initial idea: “Revenue growth may support higher operating profit if the business can keep its margin.” The observed figures fit that explanation. They do not show improving operating leverage, because profit and revenue grew at the same rate.

Strong counterargument: customer acquisition costs or contract renewals could weaken future margins. Growth might also come from an acquisition rather than the original business. The current totals do not resolve either issue.

Review condition: inspect the next comparable period's sales composition, expenses and customer disclosures. A margin decline or dependence on one customer would prompt a new explanation. A 15% margin is an example condition here, not a suggested buy or sell threshold.

Connect the business idea to the price

A good business explanation still leaves a valuation question: what expectations are already reflected in the share price? Record the price date and use a clearly identified trailing or forward earnings measure. A forecast should remain labeled as a forecast.

Write the competing case in plain language: “The company could deliver my expected growth and still disappoint investors if the current price assumes more.” Then identify the evidence needed to assess that possibility, rather than inventing a precise price target.

Use the P/E guide for the denominator and the interest-rate guide for a channel-specific macro argument. Neither ratio nor rate opinion establishes a stock's future return.

Keep the note and its evidence together

For a company you are only researching, keep your thesis in your own notes and add the ticker to a research watchlist. The current Watchlist organizes symbols; it does not store a thesis for each watched company.

For an actual holding, ScalarQuant's position form has an Investment reasoning field. Enter your real shares and average cost, add the note and save. Enter submits a single-line field; in reasoning, Return makes a new line and ⌘Enter or Ctrl+Enter saves. Do not invent a holding just to store a research idea.

When using signed-in AI research, compare its interpretation with both sides of your note. Use the verification checklist to distinguish cited statements, supplied figures and unknowns. Date your revisions and retain what changed your mind.