4 Simple Sources for Great Investing Ideas
This article is part of ourBetter Investorseries, in which The Motley Fool goes back to basics to help you improve your returns and be more successful with your investing.
When I tell people what I do, the most common question I get asked is: Where do you get your investing ideas from?
The question makes all the sense in the world, but when I tell people my answer, they're a little disappointed. It's as if they expect that because I work for the Fool, I have access to an equivalent of the Oracle at Delphi: an omniscient being that bestows us all with his/her investing wisdom.
In truth, there are four places I go looking for investing ideas. I'm far from being the next Warren Buffett, but anyone who wants to reach that level will likely need to use these same four sources as well.
1. Stock screeners
The Motley Fool has a screening tool for any investor to use. By punching in a few criteria, you can check on everything from a stock's rating in the CAPS universe to its three-year EPS growth rate.
Personally, I've used the screener to help me look for the next Rule Breaking stock. Specifically, I've looked for stocks with one-star ratings that have appreciated 100% or more in the past 12 months, and that have P/Es over 40. That may sound like a strange screen, but it actually fits with what founding Fool David Gardner says about finding Rule Breakers.
If you want to read up on more about some screens that the pros use, I suggest you start with fellow Fool Rex Moore, who uses a number of different screens in putting together his Rising Star portfolio. For instance, read how Rex used a small-cap screen to find LSB Industries (NYS: LXU) , a little-known chemical and climate-control company with plenty of potential.
2. Trade publications
There are more trade publications out there on the Internet than you could ever imagine. While they aren't necessarily geared toward the lay investor, you can easily glean some ideas by perusing their pages.
Fellow Fool Aimee Duffy recently confided that she finds a wealth of information on the energy sector just by following a couple key sources on Twitter and constantly checking back on them.
Personally, I was reading up on green solutions for the environment when I came upon Solazyme (NAS: SZYM) , a fascinating company that can produce tailored oils from feedstock like grass and forest rubbish, all with the use of their patented micro-algae.
3. The real world
Peter Lynch is famous for urging investors to buy what they know. He even went so far as to talk about how his wife's purchasing behavior led him to some of his biggest winners.
One need not look far to get these ideas; you simply need to put on your investing goggles the next time you're at the mall, at work, or simply walking down the street.
When my wife and I moved to Costa Rica last year, there was only one place to go for some of the products we loved so much from home (like peanut butter!). That place was PriceSmart (NAS: PSMT) . Seeing it as a Latin American version of Costco, and witnessing firsthand the number of baby boomers choosing to retire in the country, I wrote about PriceSmart right away. Since then, the stock has gone up over 90%!
I also keep my eyes peeled while I'm out on my daily run. One thing I've noticed is that there always seems to be a line forming at Coinstar's (NAS: CSTR) Redbox DVD machines, located right outside our local 7-Eleven. Though I haven't bought in yet, this simple observation has me strongly considering a small investment in the company.
4. Investing publications
There's absolutely nothing wrong with getting your ideas from other people. Sometimes, people (myself included) only want their ideas to come from within. Call it ego, pride, or whatever you want -- these sentiments can ruin an otherwise healthy portfolio. The bottom line in the game of investing is that the market doesn't give one hoot where we get our ideas from.
I've gotten several ideas from Fool newsletter services, but there's plenty of great material you can read without a subscription. For instance, one recent special free report details why your credit card may soon be worthless; you can get your copy of that report simply by clicking here. Even founding Fool David Gardner openly states that sometimes, his best ideas come from simply reading the board postings of other Fools.
Take the first step right now
So don't assume that other investors have the inside scoop that you can't hope to follow yourself. With simple, easy-to-find sources, you can find the stocks that will help you get wealthier.
Stay tuned throughout our Better Investor series and get the advice you need to succeed with your investments.Click back to the series intro for links to the entire series.
At the time this article was published Fool contributor Brian Stoffel owns shares of lululemon athletica, Travelzoo, Costco, and PriceSmart. You can follow him on Twitter at @TMFStoffel.The Motley Fool owns shares of Costco, Solazyme, LSB Industries, and lululemon athletica. Motley Fool newsletter services have recommended buying shares of lululemon athletica, Travelzoo, and Costco. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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