The Three-Category Investment Scorecard
A fast gut-check scorecard for whether you'd actually want to own a company's stock.
- Difficulty
- Easy
- Time to result
- ~days to results
- Steps
- 4
- Confidence
- 75%
When the hosts felt a traditional letter grade didn't fit a company with as much drama as Porsche, they built a simplified three-category scorecard — Revenue Growth, Profitability, and Defensibility — each scored 1-10 for a total out of 30. The scorecard deliberately ignores current stock price and asks instead whether you're excited about the company's prospects 10-30 years out. Profitability and growth are scored relative to the right industry context (auto industry, not tech), and Defensibility is tested with a simple thought experiment: 'can you kill it?' — imagining the worst-case mismanagement and asking if the brand/business would still have value. It's a lightweight, repeatable way to rate any business for investability in under ten minutes.
Origin
Created live during the Porsche episode as a variant of Acquired's normal letter-grade system, using guest Doug DeMuro's name for the 'Doug Score' branding.
Core principles
- 01Score relative to the right peer set, not the entire economy (compare auto margins to auto margins, not to software margins).
- 02Separate business quality from entry price — you can love a company's prospects and still think its stock is overpriced today.
- 03Test defensibility with a 'can you kill it?' thought experiment about brand resilience under worst-case mismanagement.
- 04Sum the three scores into a single comparable number so different companies can be ranked against each other over time.
How to run it
- 1
Score Revenue Growth (1-10)
Rate historical growth relative to scale, then separately weigh forward growth drivers such as new product categories or geographic expansion.
Pro tip Consider resilience in a downturn, not just the growth rate in good times.
- 2
Score Profitability (1-10)
Compare gross and operating margins against true industry peers, not unrelated high-margin industries like software.
Watch out Scoring profitability against the wrong industry (e.g., comparing an automaker to Apple) will unfairly tank the score.
- 3
Score Defensibility with the 'can you kill it?' test
Imagine the worst realistic mismanagement scenario and ask whether the brand/business would still retain real value afterward.
- 4
Sum for a total out of 30
Add the three category scores together to produce one comparable number that can be tracked and compared across companies and episodes.
In the wild
The hosts score Porsche 7 on Revenue Growth (strong but not hypergrowth), 5 on Profitability (excellent for autos, mediocre versus tech), and 10 on Defensibility (brand equity that would survive even bankruptcy), for a total of 22 out of 30 — among the highest scores given on the show.
→ A single comparable score that let the hosts rank Porsche against other episodes' companies at a glance.
A team scores a regional airline: moderate growth (5), thin profitability typical of the industry (3), and low defensibility (2) since brand loyalty rarely survives a bankruptcy in that sector.
→ A total of 10/30 flags the airline as a weak long-term holding despite decent near-term growth.
Common mistakes
Scoring profitability out of context
Comparing a capital-intensive business's margins directly against software margins produces an unfairly low score; scores must be industry-relative.
Conflating score with entry price
A high score reflects business quality and prospects, not whether the stock is a good buy today — valuation still has to be assessed separately.
Is it for you?
Not ideal for
Making an actual buy/sell decision, since it explicitly excludes valuation/entry price — a high score doesn't mean the stock is cheap.
From the transcript
“grading feels a little bit odd on this episode and and we killed grading but we do have Doug deiro with us so we are…”
“we simplified this down to um to to just three categories for the acquired Doug score um Revenue growth profitability and defensibility like would you…”
“my barometer for this is uh something I took from the lvmh episode of evaluating Brand Power can you kill it is there anything that…”
From the episode
Porsche (with Doug DeMuro)