Someone emailed me this question:
“How do you source your ideas?”
My answer to this question might not be that useful to you. If I remember right, Phil Fisher once wrote about where he got his best ideas – and the answer was from financial analysts who knew him and the kinds of companies in which he was interested.
The same is pretty much true for me. It’s not necessarily financial analysts. I do sometimes talk to analysts, but more often I talk to other value investors. Some of these people are individual investors, some manage other people’s money, some write about stocks on their own blogs, and some write about stocks on other people’s websites. What they all have in common is they spend some time looking for stock ideas. They share those ideas with me, and I share ideas with them.
I have a blog where I put up podcasts and I always include my email address. I also write articles for GuruFocus, and I always include my email address at the ends of those articles, too. I’ve been writing about stocks online for over a decade now. A lot of people have my email address (you can email me here), and a lot of people like to talk to me about stocks they already own or are thinking about buying. I don’t allow comments on my blog, and I have never read a single comment at GuruFocus.
That’s intentional. I’m interested in what people have to say to me if they want to engage in the kinds of conversations people have offline. I don’t care what comments people want to make. I only care if they are interested in a give and take of ideas. People are much more personal and polite in emails than in comments. If you want to get a conversation started that might involve the exchange of stock ideas back and forth between the two of you for years and years to come – the way to do that is privately via email not publicly via a comments section or Twitter (TWTR, Financial) or something like that.
It’s good to have a partner with whom to brainstorm. When Quan Hoang and I were working on the Singular Diligence newsletter, we probably emailed each other close to once a day, and we certainly talked via Skype for hours and hours once a week. I’d say we usually spent something like three to seven hours messaging about specific stocks on Skype. There’s no substitute for having an opportunity like that. You can spend the rest of the week thinking about stocks on your own. That’s good and necessary work, but it’s more fun and often more of a challenge to your own notions to talk it out with someone else.
Quan worked very hard on the newsletter, and we were pretty much sympatico on most of our thinking about investments. It was a good and easy match, but that’s not really the most important thing. It’s a help just to be able to hear yourself think and to interrogate someone else’s ideas through a series of questions. You will be more explicit in your thinking when talking with someone else than when you are just doing research on your own. Research that you carry out with someone else is usually going to be more active than research you carry out on your own. Another person is able to bring ideas to your attention that you’d never considered before.
This process isn’t that helpful if the other person doesn’t know you well. I don’t mean they need to know you as a person. That’s not important. They just need to know how you think about investing. I write about investing so I pretty much think aloud on the page. The people I meet online who want to meet offline with me and talk investments or who want to email back and forth already know how I think. These people are less likely to waste my time with ideas that just aren’t in my circle of competence than a general investing audience would.
Anyone you talk to about investments needs to start with an understanding of what you’re looking for in a stock. Otherwise, the conversations aren’t going to get that deep. There needs to be some common ground.
For example, I have a broker I use who I talk to on the phone from time to time to place trades. We talk about the market in the most superficial way. There’s nothing wrong with that. It’s just that what he does and what I do are different things, and we understand that. He doesn’t try to suggest any idea to me ever – he knows I have no interest in that. We can talk about an upcoming IPO or something because he knows I will have read the SEC documents for that company. But, he also knows I don’t buy IPOs and that I’m not interested in doing anything but talking a little about the business as a business. We don’t have a lot of common ground in terms of the kinds of investments we spend time looking at. Even if we had all the time in the world to chat, there wouldn’t be much point in it.
That’s why you need to find some people who share some – not necessarily all but some – of your investing interests. Different people have different areas on which they focus. There are people I talk to via email almost exclusively about microcaps, and there are people I talk to almost exclusively about net-nets, etc. I talk to some people in different countries. They often have more to say about the stocks in that country than anyone else would. I talk to people who live in Scandinavian countries, the U.K., Hong Kong, Australia, Canada, etc. – also, some countries in Latin America, some countries in Europe, and of course there are people who live in India.
I talk to a lot more people from English-speaking countries because my articles are written in English. I wouldn’t say I buy foreign stocks all that often, but I usually am knowledgeable enough or can quickly read up on a country to talk to someone from almost any country about at least a few companies in that country. If I can’t do that, I can at least compare the stocks in which they are interested to peers from other countries.
If someone wants to email me about a brewery in Europe, I can at least talk to them about breweries in the U.S. I’m the one giving out my email address. They’re the ones contacting me. Generally we talk about whatever they want to talk about. Selfishly, that works out better for me because it means they are bringing me information about countries, industries, companies, etc., that I’ve probably never seen.
The best source of my ideas is just talking to other people. As I said, this is usually by email. Sometimes it goes beyond that. There’s someone local here in Texas who contacted me when he realized we lived one town over from each other. He asked if we could meet. I said sure. He had interesting things to say about stocks. He was passionate about value investing. We decided to meet in person from time to time.
That’s along the same lines as what happened with Quan. He contacted me out of the blue after reading things I had written. He asked if he could help me research stocks – for free, he didn’t want pay. He included a resume. It was a good resume, but it was a highly mathematical background – and so not really what I was interested in. If he had just sent the resume, I wouldn’t have followed up, but he sent his educational info and job experience along with an actual email where he talked a bit about investing. I could tell he was passionate about value investing. I decided we should keep talking.
Generally, that’s all it is. Someone emails me and we get to talking a bit. When I can tell someone is really passionate about the subject, I try to respond to the emails in more and more depth and tailored more and more to what I’ve learned about the person's investing interests. We get a bit of a conversation going. If people are at all interested in value investing and I can tell they’re passionate about the subject, it should work out. There’s no reason we can’t be emailing from that point on whenever they have something they want to say.
I’m pretty clear about my investing philosophy in my articles. It’s a self-selection process. No one who is mainly a trader, into technical analysis, into momentum, etc., is going to email me in the first place. The people who email me tend to be a little more buy and hold, more into quality businesses, more into small stocks, more into value investing, etc., than the general population. We start from a lot of common ground.
Now, of course, I have an unfair advantage. I write articles about investing. I give out my email address. People come to me. How are you going to find people with whom you can share ideas?
You can email me. I include a link with my email address at the end of every article I write. It’s easy to find. If you have a question that I can answer in a helpful way, I probably will. If you have noticed anything interesting in a specific country, industry, stock, etc., and bring that to my attention, that’s even better. A good first rule when contacting anyone – including me – you only know from reading their stuff online is to indicate you are passionate about whatever they are interested in and then offer them something without asking for anything in return.
Remember, I give out my email address. Most emails I get all day are going to be from people asking for something from me – review their books, recommend their websites, give them stock tips, solve their problems, etc. – and not communicating with me the way they would talk to someone in real life.
Emails are a little better than comments. That’s why I don’t allow comments on my blog and why I completely ignore them on GuruFocus. I’ve literally never read a comment on one of my articles – and I never will. I’m sorry if you comment and expect an answer from me, but that’s why I always provide my email address. I long ago learned that the quality of conversations conducted via email are better than the quality of conversations conducted in a comments thread. I don’t waste my time with comments threads.
The same is even more of true of conversations taken offline. If you can move from emailing someone with whom you talk stocks to talking with them by phone, by Skype or – best of all – in person, you should definitely do that. You won’t regret it. You will become a much better investor by getting yourself some sort of investment partner.
What if you don’t want to find someone with whom to talk stocks? What if you just want to passively listen to someone else’s ideas without engaging in the more socially demanding give and take of two-sided conversation?
You can read blogs you like. You can also follow the portfolios of investors who share some of your interests. I notice that a lot of investors read widely and especially with a focus on recent news. They also tend to be too deferential to authority. They aren’t as focused as they should be on paying attention to their own tastes. You are probably already reading articles, blogs, etc., written by different people. Which blogs are consistently your favorites? Which make the most sense to you? Focus more on those. Go through the backlist of everything that author has written. Read it all once or even two or three times. Your time will be better spent focusing on the people whose ideas are most compatible with your own way of thinking.
The same is true with “gurus.” Don’t waste your time looking at what 100 different “gurus” have bought. Pick the 10 gurus you like best. Focus on learning everything you can about the stocks they own. For example, I said I met in person with someone who had read my articles. He brought up Allan Mecham. We both know Mecham’s portfolio. We both follow it. We could talk about the stocks in that portfolio. I was able to mention one that I had written about in the past and suggest that industry (MRO distributors) as a group this person might be interested in. There are only maybe a dozen investors – Mecham is one of them – that this person could have named I would have been able to remember which stocks were in his portfolio and talk a little about them. I really don’t know what most “gurus” own because the style of most gurus just doesn’t overlap with the kinds of stocks I look for. Don’t bore yourself with slogging through a diversified list of stocks that don’t mean much to you. If you really like Mecham’s style or Greenberg’s style or Warren Buffett’s style or Bruce Berkowitz’s style or whoever’s style – zero in on that guy’s portfolio.
Over a month, you can work your way through preliminary research on literally everything they own, and you can try to understand not just the business as an objective thing you might buy but also their own subjective reasons for buying that stock. You learn both about the investors and the stocks in which they are invested. In this way, you can have a one-sided conversation with them. You can steal the ideas they have that you like best.
It’s not as good as finding an investment partner of your own. The best way to get stock ideas is to find like-minded investors and just talk stocks with them as often as you can for as long as you can. That’s the route I suggest for anyone willing to follow it. As I said, just scroll down and you’ll see a link with my email in it. Find something I’ve written about in the past, mention your thoughts on it to me and strike up a conversation. If you have interesting things to say about investing, I’m sure I’ll email you back. I get as much out of these conversations as readers do.
Strike up a conversation with Geoff
Disclosures: None.
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