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How to Get Stock Ideas

Value investor with a deep passion for understanding and a desire to improve results over time.

How do you choose stocks?

How do you choose stocks?

Where Do You Start With Stocks?

So, you're interested in buying stocks. You've done your due diligence by studying how to value companies, so you can know whether their intrinsic value is lower or higher than the current price. You understand portfolio management reasonably well; you've read all of Warren Buffett's letters to shareholders and Ben Graham's The Intelligent Investor.

What now? All of these are very good signs that you're going to be successful in your investing journey, but there's one piece of the puzzle that's missing: where to get the initial idea to start the research process. After all, it makes no sense to try to analyze many thousands of stocks, but instead, it pays to have a way to whittle down the field a great deal first.

Here are some ways to go about finding stock names worth looking into. One caveat: an idea can come from pretty much anywhere, and if you're curious about whether a stock is undervalued once it's been brought to your attention, it doesn't much matter where the original idea came from as long as the stock is a good buy. Having gotten that out of the way, it's still in your best interest to identify higher-quality names or very good bargains and not waste too much time on dud ideas. Let's dive right in.

Pundits, Proselytizers, and Preachers

One obvious place to find stock ideas is from professional traders and investors who pick stocks for a living. Equally obvious is the fact that most of these ideas are going to be terrible, but that shouldn't necessarily stop you from taking a look at what's out there. I've found some amazing resources for my own value investing journey, and I've shared some specific idea-generation hubs in this article.

Some of the platforms where you may find some success are:

  • Video (Youtube is both a gold mine and a land mine for this), but you have to be especially careful since what the algorithm insists on isn't necessarily in line with what you want. They'll show you a bunch of garbage with a small handful of gems sprinkled in there
  • Audio, such as podcasts from investors you respect
  • Publications like Barron's or the Financial Times, two highly respected finance reporters who sometimes report on single stock ideas
  • Blogs and the like, but caution is warranted here as well. Make sure you know who the person is you're learning from and whether their style matches yours (and whether they're actually successful)

Stock Screeners

If you're already sure of the type of stock you want to buy, try identifying what the characteristics of a good stock would be. Consider some key metrics that might at least eliminate bad, overpriced companies you're not interested in wasting your time on.

Keep in mind that additional due diligence will still be needed before you decide to buy, but just how much is up to you (and probably depends on how much you trust the source of the original idea, and how much you know about the company and industry in the first place).

Some respectable stock screeners can save you countless hours of research time. You don't need to copy and paste metrics into a spreadsheet to do this; instead, use Morningstar, Seeking Alpha, and Fastgraphs. These are paid services that I find well worth the investment, but you can certainly find some free screeners, and since you're going to vet the individual stock for accuracy anyway, this method can be very fruitful.

Look Inside an Index

While there's no guarantee that any given stock inside an index fund is any good, you can nevertheless get great ideas by peeking "under the hood" of index funds or ETFs. If you take a look at the components of the S&P 500, for example, you have 500 of the best companies in the world at your fingertips. All you need to find is one or two that are fairly (or cheaply) priced for this to work.

This approach can work especially well with thematic ETFs. Interested in autonomous driving, manipulating the genetic code, or copper miners? There's an ETF for that. There are literally more funds than stocks, so having some specific idea of what you're looking for is crucial if your goal is to narrow down your search.

Be a Copycat

While each investor buys or sells a stock based on their own personal view, if you identify well with a respected investor, you can often get some great ideas by taking a look at your favorite superinvestors. It's crucial that you understand why you want to buy a particular stock if you get ideas this way since the investor may not have the same goals as you.

For example, I might be looking for income generation over the next year, and this would lead me to select very different names than if I were looking to invest aggressively for 30 years in the future. No matter what, don't simply buy on faith alone! It's important that you do your own research and analyze whether a stock is a great bargain or not.

Often, superinvestors will buy stocks for very different reasons for you, but as long as you remember that the ideas are just the first step, why not benefit from some of the greatest investors out there, who have already done so much work and due diligence in identifying these selections?

Observe the World Around You

Here's one last method you can use to generate stock ideas, and I may have saved the best for last. Peter Lynch comes to mind as the investor who best embodies this concept, but Buffett and Munger also preach the same sermon: you should understand the companies you're investing in. What better way to identify such companies than by looking around?

Think about what sort of products or services you and your friends, colleagues, or family use on a regular basis. If the company is publicly traded, then you can own a little slice of it, assuming the price is right. If you find a company you love, the investment decision can be a much more personal one. Depending on your own psychology, this can be a huge benefit during downturns since you'll be less likely to do any sort of panic-induced selling (after all, you love the company you own!).

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2022 Andrew Smith