Finding Investment Ideas for Your Portfolio
Investment ideas can come from a variety of sources. From the library to your local family-owned mom-and-pop shop, with the right mindset, investment ideas will abound. No matter if you are a new investor just starting to invest on your own or a well-experienced one, many investors are interested in selecting individual stocks for their portfolios, but aren't sure where to begin their search. To help you get started, try taking into consideration the four tips discussed below.
Standard and Poor's Guides
Each year, Standard and Poor's (S&P) releases three financial guides containing historical data on the selected companies making up its small-cap, mid-cap, and large-cap indices. The reports are two pages and include the full company name, ticker symbol, industry, contact information—including phone numbers and web addresses—dividend records, officer listing, and business summary. An investor would be well-served to ignore the buy, sell, or hold recommendation S&P attaches to each of the reports, and instead look at the growth in earnings, debt levels, and the return on equity rates for past several years.
A good starting point is to take out a scratch pad and write down the name and ticker symbol of all companies that look interesting to you. Your list of investment ideas will probably reveal a lot about your area of expertise and particular investment approach. Afterward, call each company and request information or order its annual report online. The three guides combined contain information on 1,700 companies, providing enough investment ideas to keep you busy for some time.
Browse the Value Line Investment Survey
The Value Line Investment Survey is one of the most convenient ways to access data and historical figures on hundreds of companies in only a few minutes. It tracks roughly 1,700 companies across more than 100 different industries and provides recommendations based on professional research.
Each week, the company sends out full-page reports on 130 stocks including the following information:
- Gross and operating profits
- Debt-to-equity ratios
- Return on equity
- Return on invested capital
- Average price-to-earnings ratios over time
- Dividend yields
- Payout ratios
Investors can purchase a subscription in either print or electronic form, and if you can't afford the $598 subscription price, you can take a trip to your local library. More likely than not, they maintain a subscription, and you can peruse the reports for free and copy only the companies that meet your criteria.
Visit Different Businesses
Grab a pad of paper and run to a few of the shopping locations you regularly frequent. Make a list of the name-brand products you come across—such as products like Clorox bleach, Coca-Cola, Tide, M&M's, Wrigley's gum, Dawn dish soap, Energizer batteries, and Hershey's Chocolate. Consider each item a potential investing idea.
Pick up the item and inspect the packaging to find the name and address of the manufacturer. Search the net or call the number provided and ask if the company is publicly-traded. If it is, tell them you would like to request an annual report. In most cases, they will transfer you to the investor relations department. Give them your name and address, and they will mail you a copy of the report free of charge.
Look Around You
Peter Lynch, one of the greatest mutual fund managers of all time, claims he got several of his best investment ideas from his wife and children. In one case, Lynch investigated a particular store after his daughter furnished her entire back-to-school wardrobe with its clothes. In another, Lynch purchased shares of Hanes, the maker of L'eggs hose, after his wife came home with a pair she picked up at the supermarket.
Underneath all the financial numbers, you want to invest in a company that produces products and services that people love and use in their daily life. Searching through pages of financial statements and watching financial media stations can be tedious and time-consuming, but it doesn't take much effort to pay attention to the products and services people are using around you. Look around to find companies and then do your due diligence to make sure their business is sound.