How to generate equity ideas
Land was the raw material for Agricultural Age,
Iron was the raw material for Industrial Age,
Data for the Information Age,
Information synthesis is the raw material for the Knowledge Age.
Equity Idea generation is the raw material for the Equity Analysts.
Before I go to the HOWTO, end goal must be clear.
End goal is to:
a) Not lose money;
b) Compound above inflation;
c) Improve the character and quality of the portfolio;
d) Leave a legacy.
If you start with 10,000 USD today, and compound at 15% CAGR via NGO/family/fund/institution for 150 years, your fund would have accumulated 13 Trillion USD, size of US economy. You would have achieved point d), you can actually influence the planet’s direction in many fields of human endeavor.
Investors focus on Rate-of-return but ignore Time dimension.
Fortunately there are only 60,000 listed companies in the world (opposed to millions of unlisted) and Buffett suggests that you start with alphabet A. Read annual reports.
Blogs / Newspaper / Discussion Forums
Tailcoat other investors or take lead from existing news articles. You need to have superior information processing ability, which comes with time, so the same news article could mean alarm bells ringing in your mind or an idea of opportunity, when others do not take a cue.
Eg: Automated driving cars and pay-as-you-go model means real estate prices in CBDs will go down, parking buildings will be vacant.
Malls / Shopping / Consumption
Ideas can come from things you and your family already consumes. Movie hall, pop corn, cosmetics, food brands etc.
52 week high / low
This can be an interesting place as well, depending on your mindset as trader or investor.
Companies are required to make disclosures to the exchange. Its fact, not fiction or fabrication by a journalist.
This can prove to be useful if searching on quantitative parameters.
Post shortlisting of an idea, further research is required on the company. Half the people like to meet management and other half feel no need to (eg: Walter Schloss). I fall in the latter half. Over a 2-3 year period the management intentions are automatically reflected in their actions and corporate announcements. If you have a long horizon, then there is no need to meet management. I believe that you can find out more by doing industry research, phone calls, google search, scuttlebutt by calling as a customer, trade partner and competitors, going through past ten years of management actions than meeting management in person.