What Makes a Good Stock? The 5 MUST PASS Filters

Almost every week, someone slides into my DMs with a question I've stopped trying to answer directly.

"Eh Bjorn, is XYZ a good stock?"

Sometimes it's a coaching student. Sometimes it's a friend who knows I do this for a living. Sometimes it's a complete stranger who saw my TikTok videos (if you haven’t already be sure to follow me too!)

And every time, I have to stop myself from giving a yes or no answer. Because the truth is, the question isn't really about the stock. The question is whether the person asking has been honest with themselves first.

That's what this post is about. The five things I actually look for before I touch a stock. But more importantly, the part nobody talks about. Why most people already know these five things, and still mess it up.

Let me start with a stock I got wrong. Badly.

It was a Friday afternoon in June 2020. My phone buzzed and it was a WhatsApp message from an investing group I was in.

"Eh guys, Wirecard options are giving damn good premiums right now!"

I knew the name. Wirecard was one of the largest payment processors in the world at the time. Listed in Germany. The company was already under fire for accounting concerns, but the stock was still trading. The premiums on the options were juicy. Properly juicy.

I sat with my laptop and did what I now recognize as one of the worst forms of "research" you can do. I read just enough to confirm what I already wanted to believe.

"Big company, must be okay. So many institutions hold it. The accusations are probably exaggerated. The premium is too good to ignore."

You see what I did there? I'd already decided to take the trade. Everything I read after that was just me hunting for permission. And so I made the trade.

A few days later, Wirecard admitted that 1.9 billion euros on its balance sheet didn't actually exist. The stock collapsed. Bankruptcy filed within the week.

My trades all went to zero.

That moment when it hit - it was painful thinking about that money evaporating. But even more painful was knowing (in hindsight) that every single one of my 5 filters would have caught it. I just hadn't applied them honestly. Because I didn't want to.

Since then, I rebuilt how I look at any stock. Not by adding more criteria. By turning the criteria I already knew into mirrors. Each one is less about the stock and more about catching myself in the moments I want to skip.

A student once told me he was holding a small-cap AI company that had run up 70% in two months. When I asked him what the company actually did, he said "AI infrastructure". Pressed further, he didn't know what they sold, who bought it, or how they made money. He was holding because it had been going up.

When the stock dropped 30% the following week, he panicked and sold at the bottom. Not because the business broke. Because he never understood it in the first place, so he had nothing to anchor him.

There's a big difference between "I read about it" and "I understand it". Most retail investors confuse the two.

If I can't explain how the company makes money to my mum in 60 seconds, in plain English, I don't understand it. And if I don't understand it, I have no business buying it. Doesn't matter how exciting the story sounds.

When you understand a business, red days feel different. You know where the cash is coming from and what would actually have to break for the thesis to die. When you don't, every drop feels like a warning sign you can't read.

Kodak had a moat. Nokia had a moat. Blockbuster had a moat. Moats are always visible right up until the year they aren't.

The honest version of this question isn't "does this company have a competitive advantage." It's "what would have to happen for this advantage to disappear, and is that already happening quietly somewhere I'm not looking."

Take Singapore telcos as a closer-to-home example. Ten years ago, Singtel, M1 and Starhub looked rock solid. Three players. Regulated market. Sticky customers. Predictable dividends. The moat looked permanent.

Then data plans commoditized, MVNOs entered, and pricing power quietly evaporated. The dividends got cut. The share prices have spent a decade going sideways or down. Nobody saw a sudden cliff. The moat just eroded one quarter at a time, in a way you'd only catch if you were asking the second question.

When you assume a moat is permanent, you stop watching it. That's when it kills you.

At the Berkshire AGM this month, Greg Abel announced he's putting his entire after-tax salary, $15 million a year, back into Berkshire shares. Every year. For as long as he's CEO.

That's not a slide. He's tying his personal wealth to the same outcome the shareholders are betting on.

Compare that to the CEO who pays himself in cash bonuses, dilutes shareholders through endless stock options, and quietly sells his own shares every quarter. Same job title. Completely different alignment.

You can tell a lot from where the money goes. Are they reinvesting in the business? Returning capital responsibly? Or are they spending on empty acquisitions and inflated executive pay?

I don't trust investor day slides. I trust the 10-year capital allocation track record. The slides are the story. The numbers are the truth.

Look at what management does with their own money. That tells you everything about how they're going to treat yours.

This is the trap I fell into with Wirecard. I decided I want in, and then I went looking for the numbers that supported it.

The honest version is to look first at the numbers that argue against the thesis. Revenue growth slowing. Cash flow not matching reported profit. Insider selling. Auditor changes. If those numbers are stronger than I expected, I should be slowing down, not speeding up.

Most retail investors do the opposite. They build the bull case first, then go hunting for the data that supports it. Confirmation bias dressed up as research.

The fastest way to break this habit is to write down, before you buy, the three numbers that would tell you the thesis is broken. Stick them somewhere visible. Then watch them. Not the price. The numbers.

This is the hardest one. Because the thing that excites you about a stock might be the very thing you should be most suspicious of.

Cars in the 1920s. The internet in 1999. Cannabis in 2018. AI memory stocks right now. The story is always real. The technology is always going to change the world. But the price you pay for that story decides whether you actually make money from it.

Ford stock peaked in 1920. The car transformed civilization. Investors who bought at the peak waited 40 years to break even. The story won. They didn't.

A great story makes a stock easy to hold. But a great story doesn't make a great business. And when the gap between the two finally closes, it usually closes in the wrong direction.

Before you click buy, ask yourself this. If this company delivered exactly what they're promising, but it took five years longer than expected and the stock went sideways for three years on the way there, would you still be holding? If the answer is no, you're buying the story, not the business.

The real work isn't running through the list. It's noticing the moments you want to skip a question, and forcing yourself to ask it anyway. Especially on a stock you've already fallen in love with.

Think of it like buying durian.

Every uncle at the stall will tell you his durian is the best one. "Wah this one super shiok, last basket already". The auntie next to him? She'll squeeze it. Sniff it. Ask where it's from. Maybe even open one up to check.

She's not really inspecting the fruit. She's inspecting herself. Making sure she's not falling for the seller's story. Making sure she's not in such a hurry to buy that she skips the part that would have caught a bad one.

That's what these 5 questions are. They're not a stock filter. They're an attention filter. They keep you honest at the exact moment you most want to skip honesty.

Before you open a single chart, ask yourself: which of these 5 am I most likely to lie to myself about, with this specific stock?

The other four are easy. The answers come quickly because you're not emotionally invested in those answers. The hard one is the one you don't want to ask. That's the one that matters most.

The market doesn't reward the smartest analyst. It rewards the most honest one. And honesty is harder than it sounds, especially when you've already made up your mind.

For me with Wirecard, the question I didn't want to ask was number four. The numbers were already telling the truth. I just didn't want to listen.

You probably have a "number four" too. Different stock, different question. Same trap.

Find it before you buy. Not after.

And as always -

Patience builds wealth,
Bjorn

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