# What Are the Six Gates in the Investment-Checklist Skill?

> Discover the six gates in the investment-checklist skill: Ability Circle, Good Business, Moat Depth, Management Trustworthiness, Price/Margin of Safety, and Position Discipline. Enhance your investment analysis.

- Repository: [Xbt Lin/ai-berkshire](https://github.com/xbtlin/ai-berkshire)
- Tags: how-to-guide
- Published: 2026-07-25

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**The six gates in the investment-checklist skill are Ability Circle, Good Business, Moat Depth, Management Trustworthiness, Price/Margin of Safety, and Position Discipline—forming a systematic filter to eliminate poor investment opportunities before deeper analysis.**

The `ai-berkshire` repository codifies Warren Buffett’s value-investing principles into reproducible, code-based workflows. The **six gates in the investment-checklist skill** defined in [`skills/investment-checklist.md`](https://github.com/xbtlin/ai-berkshire/blob/main/skills/investment-checklist.md) enforce a "filter-first" methodology that prioritizes risk avoidance over upside hunting, requiring analysts to pass distinct qualitative and quantitative checkpoints before allocating capital.

## The Six-Gate Framework Overview

Each gate acts as a hard filter designed to identify "no-go" decisions early. According to the source code in [`skills/investment-checklist.md`](https://github.com/xbtlin/ai-berkshire/blob/main/skills/investment-checklist.md), a company must pass every gate—or at least not trigger a hard-stop—to proceed to comprehensive valuation. The framework mirrors Buffett’s first rule: *never lose money*.

## Gate-by-Gate Breakdown

### First Gate – Ability Circle (Lines 48–62)

**First Gate – Ability Circle** asks: *Can I understand the business?* This qualitative screen evaluates whether the analyst can articulate the company’s operations, long-term business model, and key value drivers. It distinguishes between deep industry knowledge and surface-level research, ensuring the investor stays within their **circle of competence**. If the business model cannot be clearly explained, the checklist triggers an immediate stop.

### Second Gate – Good Business (Lines 67–90)

**Second Gate – Good Business** asks: *Is it a good business?* This gate relies on quantitative economic traits to assess quality. The skill analyzes metrics including **ROE**, **gross margin**, **free cash flow**, capital-expenditure intensity, and debt levels. Companies with inconsistent profitability or high maintenance capex requirements typically fail this quantitative screen.

### Third Gate – Moat Depth (Lines 93–112)

**Third Gate – Moat Depth** asks: *Does the company have a sustainable competitive advantage?* The checklist evaluates specific moat elements: brand strength, switching costs, network effects, cost/scale advantages, and technology or patent barriers. It also applies a **"copy-competitor" test**—if a rival could replicate the business easily, the moat is deemed shallow, and the gate rejects the opportunity.

### Fourth Gate – Management Trustworthiness (Lines 116–132)

**Fourth Gate – Management Trustworthiness** asks: *Are the people trustworthy and competent?* This governance review examines management honesty, historical capital-allocation decisions, shareholder alignment, ownership mindset, and corporate governance standards. A critical sub-check assesses **survivability without the CEO**—if the business depends on a single charismatic leader, the gate flags elevated key-person risk.

### Fifth Gate – Price / Margin of Safety (Lines 136–161)

**Fifth Gate – Price / Margin of Safety** asks: *Is the price sufficiently cheap?* Leveraging utilities from [`tools/financial_rigor.py`](https://github.com/xbtlin/ai-berkshire/blob/main/tools/financial_rigor.py), this gate compares valuation multiples—including **PE**, **forward-PE**, **PB**, **dividend yield**, and **FCF yield**—against historical percentiles. It also runs multi-scenario valuation models to quantify the **margin of safety**, ensuring the purchase price includes a buffer against estimation errors or adverse market movements.

### Sixth Gate – Position & Discipline (Lines 165–171)

**Sixth Gate – Position & Discipline** asks: *Can I stay disciplined and control emotions?* This behavioral filter screens for red flags such as **FOMO**, herd-following tendencies, or inability to tolerate a prolonged trading suspension. The gate requires a concise **200-word investment thesis** that articulates the specific catalyst and risk controls, forcing the analyst to document conviction levels before execution.

## Running the Investment-Checklist Skill

You can invoke the six-gate analysis from the command line as a Python module. The skill accepts tickers as arguments, resolves them in parallel, and generates a markdown report containing separate six-gate tables for each company:

```bash

# Example: run the checklist for Apple (AAPL) and Tencent (0700.HK)

python3 -m skills.investment-checklist "AAPL, 腾讯"

```

The command executes three phases: parsing arguments and resolving tickers, spinning up parallel agents to fetch gate-specific data, and producing a markdown report with an overall comparison table when multiple tickers are supplied.

For programmatic integration, import the underlying function directly:

```python
from skills.investment_checklist import run_checklist

# Returns a dict with gate scores and a markdown report

result = run_checklist(["AAPL", "NVDA"])
print(result["markdown_report"])

```

## Summary

- **Ability Circle** ensures you understand the business model deeply.
- **Good Business** validates economic quality through ROE, margins, and cash flow.
- **Moat Depth** confirms sustainable competitive advantages via the copy-competitor test.
- **Management Trustworthiness** verifies governance quality and capital allocation.
- **Price / Margin of Safety** quantifies cheapness using multi-scenario valuation.
- **Position & Discipline** enforces emotional control with a mandatory 200-word thesis.

## Frequently Asked Questions

### What is the investment-checklist skill in ai-berkshire?

The investment-checklist skill is a codified slash-command (compatible with Claude-Code and Codex) that automates pre-investment due diligence. It encapsulates the six-gate framework defined in [`skills/investment-checklist.md`](https://github.com/xbtlin/ai-berkshire/blob/main/skills/investment-checklist.md) into a reusable script that fetches data, scores each gate, and outputs a structured markdown report.

### How does the six-gate framework prevent investment losses?

The framework enforces sequential filters that identify risks before capital commitment. By requiring passage of gates covering **Ability Circle**, **Moat Depth**, and **Management Trustworthiness** before reaching valuation, it eliminates emotionally driven purchases and businesses outside the analyst’s competence, directly applying Buffett’s principle to avoid permanent capital impairment.

### What valuation metrics does Gate 5 (Price/Margin of Safety) analyze?

Gate 5 evaluates **PE**, **forward-PE**, **PB**, **dividend yield**, and **FCF yield** against historical percentiles. It utilizes functions from [`tools/financial_rigor.py`](https://github.com/xbtlin/ai-berkshire/blob/main/tools/financial_rigor.py) to run multi-scenario models that calculate the discount to intrinsic value, ensuring the entry price provides a quantitative buffer against downside scenarios.

### Can I customize the six gates for my own investment strategy?

Yes. The gate definitions reside in [`skills/investment-checklist.md`](https://github.com/xbtlin/ai-berkshire/blob/main/skills/investment-checklist.md), and you can modify the scoring criteria or line ranges (e.g., lines 48–62 for the Ability Circle) to align with your specific investment philosophy. After editing, run [`scripts/sync-codex-skills.py`](https://github.com/xbtlin/ai-berkshire/blob/main/scripts/sync-codex-skills.py) to regenerate the Codex-compatible artifact and update the skill responses.