Often the hardest thing to do is to take the first steps. After opening a brokerage account, doing your share research to find suitable investments is next.
So where do you look? The answer is everywhere! Start off by observing. What products do you use? What services do you use?
If you find it difficult to switch away from one of your products then it could be a sign that a company has pricing power over you and that is one of the signs of it being a good company. It could be worth further exploration.
Share Research Tip #1
Ask yourself: What products / services do I use regularly at home / work?
Peter Lynch is in his book "One Up On Wall Street" tells his readers
that you can have an edge here. You can look at your work - what
products do you use? What companies are dominating your sector or the
sectors you use at work? You could well know more than Wall Street
analysts here. Take a look at where does your spouse likes to shop? What
toys are your kids playing with? These can all give you clues to good
companies to own.
Once you've looked at every day life, the next
thing to do to find investment ideas is to read. Pick up the business
section of the Wall Street Journal or The Financial Times. These will
report the headlines from major companies on a daily basis. Some will be
positive and some will be negative but it will help to put more
prospective investments on your radar".
Share Research Tip #2
Read investing magazines
Of course, there are many
fantastic companies out there that you may well have never have heard
of. You can find these by reading magazines or surfing websites.
Something like Forbes magazine or Business Week can give you excellent
business insight. Investor's Business Daily could be a good source for
individual share ideas.
Warren Buffett picked up his early ideas
by turning the pages of Moody's manuals. He once said "I took those
manuals and went through each one of them page by page. All 10,000
pages." Those manuals are available today through Mergent Digitized
Manual Collection where the manuals are provided on Microfiche. You can
find out more on their page here.
In the UK, I trust the weekly magazines Investors
Chronicle and Shares magazine. I also read Money Observer and
For the Australian market
then one of my best sources of ideas is Martin Roth's excellent
book called "Top Stocks" that he releases annually. In it, he features a
number of stocks from the Australian market that must meet investment
criteria such as having a good dividend history, limited debt, and
Share Research Tip #3
Free Online Resources
excellent source is Value Line. Value line enables you to use a number
of screens and allows you to put some great search filters on. They also
produce excellent weekly stock surveys.
Other good online
options for searching for stocks and using screens include Magic Formula
(created by the excellent Joel Greenblatt), Guru Focus,
Morningstar, and Yahoo Finance.
Share Research Tip #4
One of the best places to do share research
using screens there is Stockopedia (read our full review here).
option could be Sharepad. In reality, I think you should try out a few
of these sites and then settle on one or two of your favorites. You
should find that strong investment returns over a number of years repay
you the cost many times over.
Whilst identifying potential target companies is one
thing, this doesn't mean they will make great investments. It is
important that you then analyze the companies and make sure they fit
your investment criteria.
In Summary ...
For me, great companies have been able to
consistently earn high returns on equity over a long period of time,
have little or no debt, are easily understandable, have high barriers to
entry, and have a history of treating their shareholders well.
all there are thousands of companies out there but you really only need
a handful of good ideas to made you very rich. Happy searching!