Finding Investment Ideas for Your Portfolio
Practical Places to Discover Profitable Opportunities
Investment ideas can come from a variety of sources. From the library to your local stop-n-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 common stocks for their own portfolios, but aren't sure where to begin their search for a great investment idea. To help you get started, these four tips were put together as part of our guide on how to invest in stocks and will help you find hundreds of investment ideas in your own backyard.
Investment Idea 1: Standard and Poors Large Cap, Mid Cap, and Small Cap Guides
Each year, Standard and Poors 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, instead looking at the growth in earnings, debt levels and the return on equity rates for past several years.
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. Call each company and request information or order its annual report online. Combined, the three guides contain information on 1,500 companies, providing enough investment ideas to keep you busy for some time.
Investment Idea 2: 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. Investors can purchase a subscription in either print or electronic form. If you can't afford the $500+ subscription price, take a trip to your local library. More likely than not, they maintain a subscription. You can peruse the reports for free and copy only the companies that meet your criteria.
Investment Idea 3: Take a Trip to the Mall, Your Gas Station, or Grocery Store
Grab a pad of paper and run to a few of the shopping locations you regularly haunt. Make a list of the name-brand products you come across - products such as 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 (meaning you can purchase shares of stock in it).
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.
Investment Idea 4: Ask Your Spouse and Children
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.
For more information on public vs. private companies, researching ticker symbols, obtaining annual reports and SEC filings, and enrolling in a dividend reinvestment or direct stock purchase plans, read Investment Research 101.