Share research - Where on earth do I start ??

What is the best way to do share research, Mike?

I've been looking at different websites to get an idea of stocks and have found and pretty helpful, but are there better places to research companies that I'm looking to invest in?

Several companies offer paid services to help with share research. The one that looks best to me is Stockopedia, but is it really worth the subscription? Would I regain the $200+ cost of the service each year?

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 Moneyweek regularly.

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 sufficient size.

Share Research Tip #3
Free Online Resources

Another 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
Subscription sites:

One of the best places to do share research using  screens  there is Stockopedia (read our full review here). 

Another 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. 

After 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!

Mike - six-figure dividend earner

Mike - six-figure dividend earner

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