Kill criteria
Also called: invalidation criteria, thesis-breaking evidence
Specific evidence, written before investing, that would show an investment thesis is wrong.
Good kill criteria are tied to the thesis's key assumptions, specific, checkable and about the business rather than the share price. When one is met, the original reason for owning the share no longer holds and a fresh decision is needed.
Example
For a thesis that depends on volumes growing about 8% a year, a kill criterion might be volume growth below 3% for two consecutive years.
Learn more in these lessons
- What would prove you wrongHow do you decide in advance what would make you change your mind?
- Monitoring an investment thesisWhat should you keep checking after you have bought a share?
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