Kill scenario

A kill scenario is a specific, quantified mechanism by which the investment thesis breaks. It is distinct from a bear case (a probability-weighted unfavorable forecast): a kill scenario is the trapdoor — the single concrete event or development that makes the thesis wrong. We typically identify two to four kill scenarios per stock, each with three components: a triggering risk, a transmission mechanism (how the risk converts into financial impact), and a quantified fair-value impact. Common kill scenarios include regulatory moves that strand a revenue stream, technology shifts that obsolete a moat, capital-cycle reversals that compress margins, key-person or governance failures, and customer concentration unwinds. The discipline of writing kill scenarios in plain language with quantified fair-value impact serves two functions: it forces explicit acknowledgment of where the thesis is fragile, and it gives the position-management framework specific tripwires that shift the rating before the full damage is realized.