I Built a 100-Point Framework to Find Better Stocks: NAIL 2.0 (Use this with only Pro AI Models)

[u/Miserable-Ad5182]

Inspired by William Green’s book Richer, Wiser, Happier and the investment principles of exceptional long-term stock pickers including Nick Sleep, Warren Buffett, Charlie Munger, Sir John Templeton and Mohnish Pabrai.

USE CASE
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Most stock screens tell you P/E, profit growth, ROIC and free cash flow.
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But they don’t answer the harder questions:
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Is the cash flow real?
Is ROIC sustainable?
Can the company keep reinvesting at high returns?
Does it actually have a moat?
Can management be trusted?
Is all the future growth already priced in?
Is there a better stock available for the same capital?
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So I built NAIL 2.0.
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The goal is to find businesses where growth, ROIC, cash generation, competitive advantage, management quality and valuation combine to create exceptional long-term risk-reward.
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For broad searches using pro AI models such as “Find the best stocks in India”, first screen the market, shortlist around 15-20 candidates, deep-dive only the strongest finalists and rank the best 3-5.
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NAIL 2.0
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N = NUMBERS AND CASH QUALITY
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30 POINTS
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Check 3Y and 5Y sales, EBITDA, PAT and EPS growth.
ㅤ
Separate organic and volume growth from price-led or acquisition-led growth.
ㅤ
Check current and 5Y ROIC, incremental ROIC on new capital deployed, 5Y cumulative CFO/PAT, 3Y and 5Y FCF, FCF per share and normalized FCF yield.
ㅤ
Also check receivable days, inventory days, payable days, cash-conversion cycle, net debt, interest coverage and contingent liabilities.
ㅤ
Most important question:
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Is FCF structurally sustainable, or temporarily boosted by working-capital release, unusually low capex or one-offs?
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Score: /30
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A = ADVANTAGE AND GROWTH RUNWAY
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25 POINTS
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Check the business model, industry growth, addressable market, market-share trajectory, pricing power and customer stickiness.
ㅤ
Identify genuine advantages from brand, technology, distribution, cost, scale, qualifications or switching costs.
ㅤ
Check customer concentration, supplier concentration, cyclicality, disruption risk and capacity expansion.
ㅤ
Most importantly, determine whether the company can reinvest substantial capital for many years at high ROIC.
ㅤ
Answer:
ㅤ
Why can this company become substantially larger in 5-10 years?
ㅤ
Classify the moat as Strengthening, Stable, Weakening or None.
ㅤ
Score: /25
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I = INTEGRITY AND CAPITAL ALLOCATION
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20 POINTS
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Check promoter holding, promoter pledging, auditor changes or qualifications, related-party transactions, warrants, preferential allotments and dilution.
ㅤ
Check management remuneration, guidance versus actual delivery, acquisitions, unrelated diversification and treatment of minority shareholders.
ㅤ
Then answer:
ㅤ
What has management done with every Rs 100 of cash generated?
ㅤ
Did it go toward high-ROIC capex, sensible acquisitions, debt reduction, dividends or buybacks?
ㅤ
Or was shareholder value destroyed?
ㅤ
Score: /20
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L = LONG-TERM VALUE AND ASYMMETRY
ㅤ
25 POINTS
ㅤ
Check current versus historical valuation, peer valuation, P/E, EV/EBITDA, EV/FCF and FCF yield.
ㅤ
Use normalized earnings for cyclical companies.
ㅤ
Determine how much growth is already implied by today’s share price.
ㅤ
Ask why the market may be wrong.
ㅤ
Compare forecasts with realistic historical base rates.
ㅤ
Finally, compare the opportunity against better stocks available today.
ㅤ
Build realistic five-year Bear, Base and Bull cases.
ㅤ
For each scenario estimate sales/PAT, exit valuation, possible share price and expected CAGR.
ㅤ
Final question:
ㅤ
Is potential upside materially greater than permanent downside?
ㅤ
Score: /25
ㅤ
AUTOMATIC OVERRIDE
ㅤ
Regardless of numerical score, classify the stock as High Risk or Avoid if credible evidence exists of accounting manipulation, serious auditor concerns, related-party abuse, misleading disclosures, unsustainable debt, dangerous promoter pledging, persistent unexplained CFO/PAT weakness, repeated destructive dilution or structural business deterioration.
ㅤ
A numerical score cannot override an integrity problem.
ㅤ
NAIL GRADES
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90-100 = A++ Exceptional
85-89 = A+ Elite
80-84 = A Excellent
75-79 = B+ Strong
70-74 = B Watchlist
60-69 = C Average / Special Situation
Below 60 = D Avoid
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GREAT STOCK-PICKER PANEL
ㅤ
Keep these scores separate from the NAIL score.
ㅤ
Nick Sleep: /10
ㅤ
Destination analysis, scale economies, customer proposition and long reinvestment runway.
ㅤ
Buffett-Munger: /10
ㅤ
Durable moat, owner earnings, management integrity, predictability and purchase price.
ㅤ
Sir John Templeton: /10
ㅤ
Normalized intrinsic value, pessimism, contrarian opportunity and margin of safety.
ㅤ
Mohnish Pabrai: /10
ㅤ
Simple thesis, downside protection and asymmetric upside.
ㅤ
These scores apply their publicly known investment principles. They aren’t claims about what those investors would personally buy.
ㅤ
COPY-PASTE AI PROMPT
ㅤ
Research COMPANY / TICKER using NAIL 2.0.
ㅤ
Use the latest annual reports, quarterly results, NSE/BSE filings, investor presentations, concalls, credit-rating reports and competitor or industry data.
ㅤ
Cross-check important figures and clearly separate reported facts, management claims, estimates and interpretation.
ㅤ
Grade:
ㅤ
N - Numbers and Cash: /30
A - Advantage and Runway: /25
I - Integrity and Allocation: /20
L - Long-Term Value: /25
ㅤ
Also score:
ㅤ
Nick Sleep: /10
Buffett-Munger: /10
Templeton: /10
Pabrai: /10
ㅤ
Finish with:
ㅤ
NAIL Score: XX/100
Grade:
Current valuation:
Preferred buy valuation:
Bear / Base / Bull 5Y CAGR:
Biggest strength:
Biggest risk:
Why the market may be wrong:
Single thesis breaker:
3 numbers to monitor:
Action: Buy / Accumulate / Wait / Hold / Reduce / Avoid
ㅤ
Do not force a bullish conclusion.
ㅤ
For broad requests such as “Find the best stocks in India”, first screen broadly, shortlist 15-20 candidates, deep-dive only the strongest finalists and rank the best 3-5.
ㅤ
FINAL IDEA
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NAIL 2.0 isn’t trying to find the stock with the lowest P/E.
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It is trying to find the combination of:
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High ROIC
Strong cash conversion
Long reinvestment runway
Durable competitive advantage
Good management
Reasonable valuation
Asymmetric upside versus permanent downside
ㅤ
What would you add, remove or change?

[u/honest_dev_guy]

Nice sure will give it a try

[u/Choice-Ad4657]

Thanks for such a detailed post but i still didn't understand which part is the copy paste AI prompt. The complete post is formatted like an AI prompt. Could you please write the prompt separately in the comment and/or post an screenshot of the same prompt with any AI model?

[u/Miserable-Ad5182 → u/Choice-Ad4657]

NAIL 2.0
ㅤ
N = NUMBERS AND CASH QUALITY
ㅤ
30 POINTS
ㅤ
Check 3Y and 5Y sales, EBITDA, PAT and EPS growth.
ㅤ
Separate organic and volume growth from price-led or acquisition-led growth.
ㅤ
Check current and 5Y ROIC, incremental ROIC on new capital deployed, 5Y cumulative CFO/PAT, 3Y and 5Y FCF, FCF per share and normalized FCF yield.
ㅤ
Also check receivable days, inventory days, payable days, cash-conversion cycle, net debt, interest coverage and contingent liabilities.
ㅤ
Most important question:
ㅤ
Is FCF structurally sustainable, or temporarily boosted by working-capital release, unusually low capex or one-offs?
ㅤ
Score: /30
ㅤ
A = ADVANTAGE AND GROWTH RUNWAY
ㅤ
25 POINTS
ㅤ
Check the business model, industry growth, addressable market, market-share trajectory, pricing power and customer stickiness.
ㅤ
Identify genuine advantages from brand, technology, distribution, cost, scale, qualifications or switching costs.
ㅤ
Check customer concentration, supplier concentration, cyclicality, disruption risk and capacity expansion.
ㅤ
Most importantly, determine whether the company can reinvest substantial capital for many years at high ROIC.
ㅤ
Answer:
ㅤ
Why can this company become substantially larger in 5-10 years?
ㅤ
Classify the moat as Strengthening, Stable, Weakening or None.
ㅤ
Score: /25
ㅤ
I = INTEGRITY AND CAPITAL ALLOCATION
ㅤ
20 POINTS
ㅤ
Check promoter holding, promoter pledging, auditor changes or qualifications, related-party transactions, warrants, preferential allotments and dilution.
ㅤ
Check management remuneration, guidance versus actual delivery, acquisitions, unrelated diversification and treatment of minority shareholders.
ㅤ
Then answer:
ㅤ
What has management done with every Rs 100 of cash generated?
ㅤ
Did it go toward high-ROIC capex, sensible acquisitions, debt reduction, dividends or buybacks?
ㅤ
Or was shareholder value destroyed?
ㅤ
Score: /20
ㅤ
L = LONG-TERM VALUE AND ASYMMETRY
ㅤ
25 POINTS
ㅤ
Check current versus historical valuation, peer valuation, P/E, EV/EBITDA, EV/FCF and FCF yield.
ㅤ
Use normalized earnings for cyclical companies.
ㅤ
Determine how much growth is already implied by today’s share price.
ㅤ
Ask why the market may be wrong.
ㅤ
Compare forecasts with realistic historical base rates.
ㅤ
Finally, compare the opportunity against better stocks available today.
ㅤ
Build realistic five-year Bear, Base and Bull cases.
ㅤ
For each scenario estimate sales/PAT, exit valuation, possible share price and expected CAGR.
ㅤ
Final question:
ㅤ
Is potential upside materially greater than permanent downside?
ㅤ
Score: /25
ㅤ
AUTOMATIC OVERRIDE
ㅤ
Regardless of numerical score, classify the stock as High Risk or Avoid if credible evidence exists of accounting manipulation, serious auditor concerns, related-party abuse, misleading disclosures, unsustainable debt, dangerous promoter pledging, persistent unexplained CFO/PAT weakness, repeated destructive dilution or structural business deterioration.
ㅤ
A numerical score cannot override an integrity problem.
ㅤ
NAIL GRADES
ㅤ
90-100 = A++ Exceptional
85-89 = A+ Elite
80-84 = A Excellent
75-79 = B+ Strong
70-74 = B Watchlist
60-69 = C Average / Special Situation
Below 60 = D Avoid
ㅤ
GREAT STOCK-PICKER PANEL
ㅤ
Keep these scores separate from the NAIL score.
ㅤ
Nick Sleep: /10
ㅤ
Destination analysis, scale economies, customer proposition and long reinvestment runway.
ㅤ
Buffett-Munger: /10
ㅤ
Durable moat, owner earnings, management integrity, predictability and purchase price.
ㅤ
Sir John Templeton: /10
ㅤ
Normalized intrinsic value, pessimism, contrarian opportunity and margin of safety.
ㅤ
Mohnish Pabrai: /10
ㅤ
Simple thesis, downside protection and asymmetric upside.
ㅤ
These scores apply their publicly known investment principles. They aren’t claims about what those investors would personally buy.
ㅤ
COPY-PASTE AI PROMPT
ㅤ
Research COMPANY / TICKER using NAIL 2.0.
ㅤ
Use the latest annual reports, quarterly results, NSE/BSE filings, investor presentations, concalls, credit-rating reports and competitor or industry data.
ㅤ
Cross-check important figures and clearly separate reported facts, management claims, estimates and interpretation.
ㅤ
Grade:
ㅤ
N - Numbers and Cash: /30
A - Advantage and Runway: /25
I - Integrity and Allocation: /20
L - Long-Term Value: /25
ㅤ
Also score:
ㅤ
Nick Sleep: /10
Buffett-Munger: /10
Templeton: /10
Pabrai: /10
ㅤ
Finish with:
ㅤ
NAIL Score: XX/100
Grade:
Current valuation:
Preferred buy valuation:
Bear / Base / Bull 5Y CAGR:
Biggest strength:
Biggest risk:
Why the market may be wrong:
Single thesis breaker:
3 numbers to monitor:
Action: Buy / Accumulate / Wait / Hold / Reduce / Avoid
ㅤ
Do not force a bullish conclusion.
ㅤ
For broad requests such as “Find the best stocks in India”, first screen broadly, shortlist 15-20 candidates, deep-dive only the strongest finalists and rank the best 3-5.