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rukawa
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Any value investor has to do research. Lately I have been trying to determine comprehensively what all the sources of information are for research. A few that I think are pretty important:

 

1) ValueLine - get this free at the library

2) Mergent Online - there modern version of Buffett's Moody's manuals - get free from library

3) Annual statements and other assorted mandated financial filings - free online

4) Wall Street Journal, Financial Post and other newspapers

5) Business Biographies and stories

6) Trade publications

7) Scuttlebut - basically investigation of employees and others

8) First hand knowledge - think Peter Lynch's One Up On WallStreet idea of investing in what you know

 

What else?

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I think there's a mirage of value with some of these things.  What value do you really get from the WSJ or CNBC?  Have you ever made money from those things?  Maybe corporate announcements, but for a lot of those announcements you can setup a RSS and get the same information for free.

 

My concern with your list is that you might read all that stuff but not end up with a better thesis.  Try to start with only what you need then build from there instead of getting swamped with information.

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Personally, I find "7) Scuttlebutt" the least useful.  It's more for my own interest and a little more understanding of the business, than any real value about whether it is a good investment.  Business biographies are often useless as well...they give a historical perspective, but really do not assist you in finding investments that are out of favor. 

 

I find the newspapers useful.  Mainly for a general understanding of what is going on in the world, as well as often I find an idea or industry that is out of favor and the newspapers are just ripping into it.  Magazines, trade publications, television (including Bloomberg, PBS, CNBC, etc) all work for the same reasons as newspapers. 

 

The most useful thing is reading 10-Q's and 10-K's.  Digging into various businesses, building that circle out and formulating an extensive library in your own head for easy, quick reference.  I could not have imagined 10 years ago, that I would grasp the hundreds of stocks that are now in my head, or the dozens of companies I follow everyday and can value in just a few minutes.  If for some reason their price falls a significant amount for an inexplicable or irrational reason, it's very easy to just buy that business.  You also end up creating mental checklists rather than actual checklists like many people recommend you use. 

 

The one thing that I don't use yet, but probably will get in the next couple of years is a Bloomberg terminal.  I generally get our brokers to dig up anything I'm interested in and then send me quotes, screenshots, etc.  But I can see that I would be able to do alot of things on a Bloomberg terminal, that take up alot more time now by trying it to do it manually or through other sources.  Cheers!   

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I find "scuttlebutt", if I'm using the term correctly, the most useful. I base a lot of my investing on qualitative things that aren't found in the annual reports. I think in terms of questions like. "How often do you buy things from Parker-Hannifin?". "Do you see firms switching away server software from Red Hat to Oracle?".  "Ever switched search engine away from Google?". I like to base decisions on info from people who are familiar with the product space.

 

Perhaps that's not a great idea, then again, I am not really a traditional value investor who digs deep into 10K's of out of favor stocks, but more of a Lynch style "moat" investor. Let's see how it works out...

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I think there's a mirage of value with some of these things.  What value do you really get from the WSJ or CNBC?  Have you ever made money from those things?  Maybe corporate announcements, but for a lot of those announcements you can setup a RSS and get the same information for free.

 

You can get deluged by information. But the obvious next question is...what is your method? I guess part of what I am trying to do right now is figure out what's out there and what a useful set of habits would be to be a great investor. Right now my game plan is:

 

1) Read the WSJ everyday

2) Go through ValueLine or Mergent everyday

3) On an Adhoc basis perform stock screens or read the 13F of good investors

 

Beyond this I would like to read 10-K for stocks I am very interested in or look promising. My view is that reading the 10-K is a fairly in depth analysis which only makes sense if the stock is really interesting.

 

As for the WSJ being valueless. Perhaps this is correct. Certainly I haven't made a cent from it but then I only just started getting serious about this a few weeks ago. The WSJ is however something Buffett claims he is unable to live without and Greenblatt stated is the single best source for special situation ideas. Maybe there is a better way to do this...what are your suggestions?

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One cheap source of data I like in Morningstar.  Although scuttlebutt can be a point of competitive advantage, you need to ask yourself how much of an advantage is it going to provide and would buy because of it.  I tend to look at valuation first then try to tear the idea apart.  If it still stands then I invest.  Remember most of the value added is going to come from purchasing mispriced securities not buying great companies for slightly below average prices.  (As these firms are only really cheap in once in a century swoons)  Most of the mispriced securities I have looked at have something wrong with them and/or are miscategorized.  I just have to determine if this blemish is fatal.  The other aspect of scuttlebutt is what was previously scuttlebutt can now be partially obtained via the net and boards like this.

 

Packer

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It only seems odd that almost nobody seems to remember Outstanding Investor Digest (OID) and it's editor Henry Emerson. The last issue had some excellent in-depth article about Chesapeake Energy,

Southeastern Asset Mgmt. / Longleaf Fund's Mason Hawkins & Staley Cates.

 

 

OID is great, but the editor's difficulties have led to erratic issuance.

 

Screens are the least useful source of profitable information because screens lead to adverse selection of problematic companies or frauds.  We may pride ourselves on our perspicacity, but cleverly hidden or latent proplems often pop up later to our loss.

 

The most certain source for profit is plans of reorganization (PORs).  Some of these present free money after confirmation when the probability of certainty is virtually 100%.  For example, in Nextwave's first reorganization, we bought a lot of restricted stock that was eligible for a cash distribution two months later that was 10% above what we paid when it was illiquid.  Another was Muerelo Maddux with three competing PORs, each  of them with value that was two to four times what the stock was trading for.  Buying stock of a company in bankruptcy is usually a way to lose all your money, therefore, distressed debt investors often overlook these opportunities.  :)

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Anyone who really thinks that scuttlebutt can't add tremendous value should watch this terrific interview with Paul Lountzis: http://www.simoleonsense.com/conversation-with-paul-lountzis-investing-scuttlebutt-research/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+SimoleonSense+%28Simoleon+Sense%29

 

Thanks for posting this interview, well worth the hour it takes to watch.  Paul Lountzis is remarkable and fearless!  Qualitative factors are critical but hard to indentify.  His approach is as good as any I have seen and very likely to uncover insights that the market has missed.  I wish I was this good.

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Guest deepValue

Any value investor has to do research. Lately I have been trying to determine comprehensively what all the sources of information are for research. A few that I think are pretty important:

 

1) ValueLine - get this free at the library

2) Mergent Online - there modern version of Buffett's Moody's manuals - get free from library

3) Annual statements and other assorted mandated financial filings - free online

4) Wall Street Journal, Financial Post and other newspapers

5) Business Biographies and stories

6) Trade publications

7) Scuttlebut - basically investigation of employees and others

8) First hand knowledge - think Peter Lynch's One Up On WallStreet idea of investing in what you know

 

What else?

 

That's a decent list if you're just starting out. Morningstar is also a good resource for larger companies (also available for free through most libraries).

 

But as you get more comfortable with investing, you'll want to spend nearly all of your time reading the Ks and Qs; there's no better way to learn how to invest than to read the filings of as many companies you can possibly squeeze into each year. Focus on figuring out what makes a company special -- why it's different than most companies and can earn outsized profits. If it isn't special, then move on.

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How much does Mergent cost? It looks great, but after hunting for the subscription costs and not being able to find it, I'm guessing it is very expensive.

 

The most I am willing to pay for any source of information is free. Mergent and ValueLine are free online at the wonderful Toronto Public library.

 

http://www.torontopubliclibrary.ca/databases/

 

The trade publications you can get them at the library and for the WSJ I get retrieve from my employer.

 

OID is wonderful and fantastic. I know about it but I still haven't figured out how to get it for free

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Ks and Qs; there's no better way to learn how to invest than to read the filings of as many companies you can possibly squeeze into each year

 

Buffett did say that he would read a couple of thousand financial statements every year. However I wonder what you focus on when reading these statements. Is there a thread on this?

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Any value investor has to do research. Lately I have been trying to determine comprehensively what all the sources of information are for research. A few that I think are pretty important:

 

1) ValueLine - get this free at the library

2) Mergent Online - there modern version of Buffett's Moody's manuals - get free from library

3) Annual statements and other assorted mandated financial filings - free online

4) Wall Street Journal, Financial Post and other newspapers

5) Business Biographies and stories

6) Trade publications

7) Scuttlebut - basically investigation of employees and others

8) First hand knowledge - think Peter Lynch's One Up On WallStreet idea of investing in what you know

 

What else?

 

That's a decent list if you're just starting out. Morningstar is also a good resource for larger companies (also available for free through most libraries).

 

But as you get more comfortable with investing, you'll want to spend nearly all of your time reading the Ks and Qs; there's no better way to learn how to invest than to read the filings of as many companies you can possibly squeeze into each year. Focus on figuring out what makes a company special -- why it's different than most companies and can earn outsized profits. If it isn't special, then move on.

 

I could care less if a company is special or earning outsized returns, I'd rather buy cheap and sell dear.  It's nice that most value investors these days are really growth investors in value clothes, a lot less competition for the real cheapies…to each his own!

 

As for what to look for when reading an annual report?  I'm looking for a reason to not invest, deepValue is looking to see why a company is special, others are looking at different aspects I'm sure.  The bottom line is to figure out the purpose for your reading before you start to read.  If you are just reading reports to read them you won't gain anything, read with a purpose.

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Any value investor has to do research. Lately I have been trying to determine comprehensively what all the sources of information are for research. A few that I think are pretty important:

 

1) ValueLine - get this free at the library

2) Mergent Online - there modern version of Buffett's Moody's manuals - get free from library

3) Annual statements and other assorted mandated financial filings - free online

4) Wall Street Journal, Financial Post and other newspapers

5) Business Biographies and stories

6) Trade publications

7) Scuttlebut - basically investigation of employees and others

8) First hand knowledge - think Peter Lynch's One Up On WallStreet idea of investing in what you know

 

What else?

 

That's a decent list if you're just starting out. Morningstar is also a good resource for larger companies (also available for free through most libraries).

 

But as you get more comfortable with investing, you'll want to spend nearly all of your time reading the Ks and Qs; there's no better way to learn how to invest than to read the filings of as many companies you can possibly squeeze into each year. Focus on figuring out what makes a company special -- why it's different than most companies and can earn outsized profits. If it isn't special, then move on.

 

I could care less if a company is special or earning outsized returns, I'd rather buy cheap and sell dear.  It's nice that most value investors these days are really growth investors in value clothes, a lot less competition for the real cheapies…to each his own!

 

As for what to look for when reading an annual report?  I'm looking for a reason to not invest, deepValue is looking to see why a company is special, others are looking at different aspects I'm sure.  The bottom line is to figure out the purpose for your reading before you start to read.  If you are just reading reports to read them you won't gain anything, read with a purpose.

 

Oddball,... good that you are picky and selective reading annuals, because otherwise it would be some waste of time. There are probably more than 50,000 publicly traded companies worldwide,... just to put that into comparison to a human life expectancy, maybe 30,000 days (7days x52wks x80yrs =29,120 days)... it shows how silly it would be if someone only tries to go on a reading marathon. The real task is to be picky and selective into which reports someone reads,... 99.9% of reports, I wouldn't touch, only while looking one minute over a Value Line. Either way, good company, but current share price seems to be excessively at historic upper PE ranges, or some unknwn mid-cap company, that has never produced some net profit since it's founding, and it's equity is slowly melting away. The remaining few gems are occasionally worth a weekend read.

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Guest deepValue

Any value investor has to do research. Lately I have been trying to determine comprehensively what all the sources of information are for research. A few that I think are pretty important:

 

1) ValueLine - get this free at the library

2) Mergent Online - there modern version of Buffett's Moody's manuals - get free from library

3) Annual statements and other assorted mandated financial filings - free online

4) Wall Street Journal, Financial Post and other newspapers

5) Business Biographies and stories

6) Trade publications

7) Scuttlebut - basically investigation of employees and others

8) First hand knowledge - think Peter Lynch's One Up On WallStreet idea of investing in what you know

 

What else?

 

That's a decent list if you're just starting out. Morningstar is also a good resource for larger companies (also available for free through most libraries).

 

But as you get more comfortable with investing, you'll want to spend nearly all of your time reading the Ks and Qs; there's no better way to learn how to invest than to read the filings of as many companies you can possibly squeeze into each year. Focus on figuring out what makes a company special -- why it's different than most companies and can earn outsized profits. If it isn't special, then move on.

 

I could care less if a company is special or earning outsized returns, I'd rather buy cheap and sell dear.  It's nice that most value investors these days are really growth investors in value clothes, a lot less competition for the real cheapies…to each his own!

 

As for what to look for when reading an annual report?  I'm looking for a reason to not invest, deepValue is looking to see why a company is special, others are looking at different aspects I'm sure.  The bottom line is to figure out the purpose for your reading before you start to read.  If you are just reading reports to read them you won't gain anything, read with a purpose.

 

Oddball,... good that you are picky and selective reading annuals, because otherwise it would be some waste of time. There are probably more than 50,000 publicly traded companies worldwide,... just to put that into comparison to a human life expectancy, maybe 30,000 days (7days x52wks x80yrs =29,120 days)... it shows how silly it would be if someone only tries to go on a reading marathon. The real task is to be picky and selective into which reports someone reads,... 99.9% of reports, I wouldn't touch, only while looking one minute over a Value Line. Either way, good company, but current share price seems to be excessively at historic upper PE ranges, or some unknwn mid-cap company, that has never produced some net profit since it's founding, and it's equity is slowly melting away. The remaining few gems are occasionally worth a weekend read.

 

I wasn't suggesting reading a stack of annual reports of companies that are clearly not bargains. I meant to say that you should spend most of your time researching and less time reading secondary sources for possible ideas. Get a list of stocks that look cheap and read, read, read.

 

As for being a growth investor, I kind of feel like a Burkean conservative who isn't accepted by any group these days! There are growth investors, value investors, but no "investors." If you agree with the principles of the founder of conservatism/liberalism, you aren't a conservative or a liberal these days! Likewise, if you adhere to the principles of the richest "value" investor who ever lived, you aren't accepted by the Graham value or growth guys.

 

It's easy to get caught up in growth vs value; better to just do what makes sense! Oddball and I both invest with a margin of safety, we just find it in different ways.

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