1) We understand the business. Everyday business around us like grocery, telco, utilities etc. Improve with more reading or individual industry research to widen circle of competence
2) Favourable Long term prospects. No major headwinds or risk of being disrupted. GME is one mistake that violate this principle. Even I am not buying physical copies of games. Trend is internet download. This is one area which we can identify easily by reading more but at the same time environment changes so fast that even favourable prospects will worsen. Such as retail and shale oil etc. Safer to go with defensive business which is not cyclical.
3) Competent and honest management. Hard to gauge. Need to read more into company and management history
4) At attractive price. Long term returns are dependent on entry price (dividend or earning yields) and Long term growth rate. If purchased at a Low yield, need to depend on high growth rate to have high returns
To quote Ben Graham, stock is best seen from the perspective of a perpetual bond with growth like characteristics and price volatility. Future returns are strongly dependent on purchased yield .
Adopting these 4 criteria will help an investor stay calm during market turmoil and not sell out at price weakness and hopefully give the investor courage to buy more at the discounted price with the knowledge that the fundamentals of the company is still sound.
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