Yesterday I was exchanging emails with a friend who manages money in San Diego. Our backgrounds in the business are very similar which leads us to invest very differently, funny.
He asked me how I pick stocks. I'll paraphrase my answer and add that many of the names in client portfolios are names that I have been watching for years back to my days as a trader.
I took his question to mean how do I find new stocks. The process is not that fancy. I might read about a stock somewhere or see something about it on TV. If what I read or see is interesting I'll add it to MyYahoo to watch for a while not knowing much more than what I learned from that first story. I like to watch a name for a while to see how it reacts to micro and macro news and to see how much it is capable of moving in a day.
From that point I might then start to research it a little more at the company website and other financial content providers in an effort to learn some nuts and bolts about the company. I might also call a couple of friends in the business to see if anyone smart that they know is in the name. This does not mean that I am being told who specifically owns it but every trader has clients that are smart and some that aren't.
The sum result of this is that I have learned about the business, learned the numbers and learned what the stock might do as a reaction to various types of news. If I get more right than wrong my clients will be in good shape more often than not. At least that is my belief.
From that point I need to try stay current with events going on with each name. Obviously no one can get every news story on every stock but I try.
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1 comments:
Roger,
You could do better than that! Start by stopping by and visiting my blog, Stock Picks Bob's Advice more often :).
Your approach is a common top-down approach. I think it is a good start, but I would challenge you to find some bottom-up approach that will enable you to continually find new names and not find names from the same channels.
In other words, as you know, I start with the % gainers list each day. From there, I check the latest quarterly earnings, the Morningstar report, and what a chart looks like.
I do bias my reviews to stocks over $10...and am limited by those stocks that Morningstar has a "5-Yr Financial" that is fairly complete. But there are enough stocks like that to fill a blog!
What you are doing isn't wrong. In fact, it is probably what most investors and professionals do and will gradually increase your world of investment possibilities.
But I believe that watching the market, letting the very strong stocks bubble to the top...kind of like watching a soup simmer, with noodles or matzo balls or whatever simmering on the top, instead of having a target in your head first and going fishing for that item. I hope you follow :).
Anyhow, I think your blog is great and love to add my 2 cents!
Bob
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