The art of stock research

I find stock research to be an art rather than a science although it's more based in science than art. It's an art to me as you can have many people researching the same freaking stock and everybody comes up with a different opinion on it. Whether it will outperform, buy, hold, underperform, sell or no opinion. That's 6 choices for any 1 stock that's analysed. That's before the price targets which vary as well. But that's only one part of the equation as you need to have the art of execution in order to make $$$.

I started to wonder about my research methodology as ACCICB says I tend to find great companies to invest in. To be honest, I never really thought about how I spotted these companies. Maybe because I don't consciously do a like 123 and lo and behold, this is a great company. Sometimes I probably miss a few things here and there as well. Today, I shall attempt to put down how I go about conducting research.

1. Look around you for inspiration as the companies that you can invest in are probably close by. It could be an industry that you work in or an industry that you are familiar with as you spend a lot of time and $$$ on it. This could be your company's competitors or customers or suppliers or the ancillary industries that are connected to your industry.

It could be in the everyday little things in your life that you use or see but never consider it as a potential stock investment. You may come across the big companies like RB which makes Dettol for example but this can make you go and look for a similar stock on SGX. 

2. Be observant to not only the news or market trends or people's behaviour but try be more aware in your daily life. I must saying having a puppy really helps me in this aspect as he can never talk in his lifetime and I spend a lot of time everyday trying to observe him and anticipate his behaviour and his wants. Make a conscious effort to be quiet and quiet your mind sometimes and just observe. 

3. Decide on whether you are looking to trade or am happy with a stock that provides capital gains and some nice dividends over time. This will narrow down the industries and then the companies as some stocks e.g. some REITS are like flat most of the time so it is hard pressed to trade them and make $$$. But they do provide capital gains and some dividends over a period of time.

4. Read the annual report, analysts' reports for numbers if you are too lazy to calculate them, recent news etc. In terms of analysts' opinion, I am divided and its up to your discretion as we are only humans and can't be 100% right all the time. See whether there are any unusual movements or figures or statements and then go forth and research around a bit more. It's always good to do peer comparison in terms of numbers as well as stock movements.

I am assuming that you are already on top of the local and world news, US jobs numbers, US futures, FX movements, political issues such as elections and regulations, industry news and outlook blah blah blah which would also affect your stock price either in a small or big way. There are too many to list and honestly ACCICB would probably write better on this topic of macro factors.

5. Monitor the price trends, read the technical charts, go into forums and read about what people think of the company and its products/services (applicable to both B2B and B2C businesses) so that you have an idea of word on the market and can see how big boys are playing with this stock which will affect you as you are just a small retail investor before deciding to take the plunge.

6. Lastly for me, I discuss my findings with ACCICB and he goes and take a look and we talk and debate, research further and agree and then disagree. It is good to seek the counsel of others but also know when to listen to yourself as you can't always have everybody agreeing with you. At the end of the day, it's your $$$ and your decision to take. 

Comments

  1. Between me and my wife, your money is mine and my money is yours. But on certain stock investing for herself, she will stick to her own decisions even after having discussing about it with me. My wife can be hard-headed and it turns out she is right about it at times. l will need to learn certain stock investing skills from her. haha ...

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    1. Haha, your wife is very lucky to have you as her hubby since your money is her money and her money is her money! It's best that each person decides what and how to invest in as any downfall would cause much unhappiness and disagreement in the family! Then all the money in the world would not be enough if there's no harmony in the family.

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