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How Much Time Do You Spend on Research?

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August 20, 2010 – Comments (29)

How much do you research your picks and holdings? I'm just really curious.  I'll go first.  I'll break it down into steps.

1. In the first 3-5 minutes, I have a general picture how the company's done in the last 5 quarters and last several years.  It's pretty clear which ones are worthy of further research and which ones aren't.  I'm often willing to pick something in CAPS at this point.  I'm just looking to see if something's potentially undervalued here. 

2. If I'm seriously considering a company, I'll do a 2-3 hour look.  In that time, I can read the latest annual report, look at a more recent quarterly report, and maybe listen to the latest earnings call.  This is about how much time I spend for my long pitches, such as GNK and TWGP (more to come, I promise).  In these 2-3 hours, I want to get an idea how a company makes money, how the company expects to make more money in the future, and any potential risks or catalysts.  If I don't understand a company's industry, I have to take extra time to learn it.

3. Anything after that varies greatly.  I research companies I own and companies in which I'm interested much further, but I don't do it all at once.  I check my watch list daily for news tidbits and anything else that is worth knowing about the companies I follow.  If I'm feeling ambitious, I'll read more past annual reports, research competitors, listen to past earnings call, and the like. 

How about you?

29 Comments – Post Your Own

#1) On August 20, 2010 at 1:25 PM, GeneralDemon (21.11) wrote:

Are you saying that your screening time is 3-5 minutes?

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#2) On August 20, 2010 at 1:32 PM, allstarvulture (< 20) wrote:

For CAPS picks, maybe 10-20 minutes.  I look for something particular on the surface (unusual price movement) and then look for any reasons that the price move may have occurred.   That's about it for CAPS. 

When it comes to my real life holdings, I delve quite deeply, looking at current metrics, reading SEC filings going back two years, learning the particulars of the business (especially, as you mentioned, how they make money and how they plan to keep on making it), etc.  Depending on the company, that can take quite a while. 

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#3) On August 20, 2010 at 2:26 PM, chk999 (99.97) wrote:

For CAPS picks, a couple of minutes.

For real money investments it takes at least a couple of hours to read the 10-K, poke around in ValueLine and do some scuttlebutt searching. 

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#4) On August 20, 2010 at 2:27 PM, Valyooo (99.44) wrote:

How do you do step 1? Read the balance sheet and last 5 quarters EPS?

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#5) On August 20, 2010 at 2:28 PM, throwerw (29.39) wrote:

all day every day :)

this market is all upside down by the way

got any CGPI yet? 

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#6) On August 20, 2010 at 2:35 PM, EnigmaDude (95.76) wrote:

Probably more time than I should given that this is really just a "hobby" for me  :)

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#7) On August 20, 2010 at 2:37 PM, anticitrade (99.61) wrote:

Anytime you make a particular stock pick you are making a call that you are able to recognize and profit from an inefficiency in the market. To justify this opinion, you require a credible advantage over other investors who will theoretically push the market towards this efficiency.  I imagine that Bullishbabo advantage lies in him spending more time than the average investor, and in his ability (based on experience or intelligence) to better analyze the stock pick.

The reason I explain that seemingly basic idea in such detail, is that my method is similair in concept yet very different in approach. 

I invest a lot of time up front building my stock picking model, then 15-20 minutes picking my actual investments from the recommended list my model generates.  Hence I focus on a stocks value relative to the whole market, rather than on the story of the individual stock. 

Assumptions of efficiency (although wrong), can be very valuable in determining what aspect of investing you want to focus on.  While it would be ideal to do all aspects of investing well, I dont think this is very realistic.  It is much MUCH better to be an expert at one route than average at all.  Where Bullishbabo seems to be an expert at diving into a companies story and reports, I try to be an expert in quantitative analysis of the broad market.

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#8) On August 20, 2010 at 3:51 PM, TMFBabo (100.00) wrote:

@GeneralDemon: Yup, the initial screen is 3-5 minutes.  Most stocks don't get past that initial screen.  Stocks I'd possibly consider buying after more research are often added to CAPS.  That's not the only reason I make CAPS green thumbs, as some are speculative and I would never own them.

@allstarvulture: Excellent point about why the stock's price did what it did.  Stocks that drop like a rock seem to almost always have news accompanying that drop.  It is often justified, but sometimes it is not. 

@chk999: Our timeframes seem similar.  I've heard good things about Valueline.  How useful do you find it?

@Valyoo: That all depends.  For a micro cap, I look at the values and trends of sales, gross profit and margins, operating and net income, common shares outstanding, and various things on the balance sheet and statement of cash flows.  I also check to see debt levels and whether any of it is currently due.

For a dividend aristocrat, the most important things to me are growing sales/income, stable margins, growing dividend to match earnings growth, and a safe payout ratio.  I also love dividend increase history (obviously aristocrats have 25+ years).

I'm pretty sure I've done it well over 1000 times over just the past 2 years.  I did it a few hundred times just for the TigerPack experiment in the past month, submitting my own picks and reviewing the others' picks.

@throwerw: Hey, long time no chat! CGPI looks intriguing.  I'm going to add it to my list of stocks to analyze 2-3 or more hours.  You're right on all day every day.  With so many stocks to analyze, there are only so many hours in a day.

@EnigmaDude: I agree, I spend way too many hours on this stuff.  At least our hobby helps us make money in real life, right? I like to think that has value.

@anticitrade: I actually think very highly of quantitative methods and mechanical investing in general.  I first became interested in trying to beat the market when I read about Joseph Piotroski.  That an accounting professor could thrash the market using just the financial statements was amazing to me at the time.

The quantitative aspects of a stock are still the most important to me.  I care quite a lot about the numbers.  However, I've found that it's hard for me to hold onto a stock I bought based purely on the numbers as it continues to dive.  That's where I added the part where I find out how the company makes money and will make more money in the future.  If I think a company has great numbers, I understand the business, and I expect greater earnings in the future...well we have a winner.

I like how you speak of efficiency.  After doing these analyses over and over, I've gotten into a groove and scan the financial statements extremely quickly to collect everything I need in  short order.  I think a strong mechanical approach would be most efficient in terms of delivering strong returns for least amount of time spent researching.

For what it's worth, I believe your model would beat the market given time.  I went through your picks for the peer review project from TigerPack and I thought you picked a lot of solid companies. 

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#9) On August 20, 2010 at 6:40 PM, williamjoneal123 (31.88) wrote:

I don't spend hardly any time researching.  I just watch top players with proven track records on here, and pick what they pick when the stocks they pick start moving say 5 or 10 percent then buy.  So basically I just let people like you do all the research and then just ride yall coat tails lol.

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#10) On August 20, 2010 at 9:19 PM, HarryCarysGhost (99.69) wrote:

B.B

I would say that I could figure out if I don't want to own a stock in five minutes. My actual holdings take much longer, in the case of BRK-B two decades.

Wanted to mention that I really liked your reply on the Tigerpack live chat as to whether the fund would outperform even in a declining market.

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#11) On August 20, 2010 at 10:30 PM, TMFUltraLong (99.95) wrote:

Since I follow so many companies it doesn't take very long to form my opinion. Much like BB it doesn't take long to tell if I'm not interested from a long or short perspective. Beyond that it can be a matter of minutes to a half hour or so before I have all the information I need to make a logical decision. Do I spend more than a half hour researching a company.. yeah, occasionally, but it's usually not needed. Like I've said before, when you're looking for "stupid"..."stupid" tends to be very prevalent and in your face, it doesn't hide often.

UltraLong

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#12) On August 20, 2010 at 11:11 PM, williamjoneal123 (31.88) wrote:

I just follow, UL, BB, TM, SM etc.  Hey if you can't beat em join em lol.

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#13) On August 21, 2010 at 2:31 PM, ChrisGraley (29.78) wrote:

Really, for caps picks, 2 minutes tops.

For my portfoilio, 2 - 3 hours before I buy. (sometimes a lot more) At least a half hour a week on each pick after I buy.

 

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#14) On August 22, 2010 at 4:23 PM, TigerPack1 (97.78) wrote:

Sometimes I watch a stock and learn about its business over 6-12 months before actually investing in it!

Usually days and weeks of research and thinking about the pros and cons... especially in comparison to similar businesses in the industry.

I am old school I guess.  I can trade the same stock several times per year, over many years, also if I feel I understand the business and the supply/demand players in the stock float.

-TigerPack

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#15) On August 24, 2010 at 11:55 PM, JestYourFool (< 20) wrote:

Thank you, BB, for this post.  It's wonderful to hear how some of the best investors research stocks.  Great information for those of us who are novices.

Jest

P.S.  My research is like some others.  I read the opinions of some of the best here and do a little research myself.  As williamjoneal123 said, if you can't beat 'um, join 'um.

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#16) On August 25, 2010 at 3:17 PM, toshimelonhead (38.20) wrote:

My initial investment screening is to look for stocks that have strong all star support and have strong dividend yields and little to no debt.  The next step for me is to look at past earnings to see if the company beats estimates consistently and if it has some type of bullish trend.  If a stock passes these two "tests" I pick outperform.  Since CAPS is not "real money", I would spend much more time looking for just the right investment.  A 200 pick CAPS might be a watchlist for a real portfolio that might contain ten stocks or fewer.  The rest of research time would be going through annual reports to try to sway me to one great stock over another.  Of course, if you note my rating, this hasn't done so well, but I still have time to figure this out.  Timewise for CAPS might take 10 minutes at the most, whereas for real stocks it might take an hour or more.

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#17) On August 26, 2010 at 9:09 AM, JaysRage (88.77) wrote:

I'll put a company on a watch list off of a screen and about 10-15 minute look at detailed financial information and quick check on related message boards for any deal breaking information.  At that point, I may or may not put it in my CAPS portfolio. 

Once on my watch list, I'll usually I'll watch the price action and communications of a stock for a few months before putting money into the stock.  If the stock does not continue to show potential or if news comes up that I'm not comfortable with, I will cull the company from my watch list.    If I'm getting close to purchasing the stock, I will spend an additional hour or two digging for little nuggets of information. 

I spend less time if it is a stock that I have been in and out of before.   I will usually check for unusual news to keep from being blind-sided, but I will usually proceed much more quickly, because I'll already have a comfort with the real valuation and potential of the company.  

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#18) On August 26, 2010 at 6:18 PM, TigerPack1 (97.78) wrote:

bullishbabo #1 and UltraLong #2 at the end of the day on CAPS... I am stuck at #17!  You guys are making me feel left out, LOL.

Give me a week or two to catch up!  One of my best proprietary intermediate-term indicators is moving into sell territory today and tomorrow.  It had been rather bullish, and in buy territory for over 2 years.

-TigerPack

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#19) On August 30, 2010 at 9:43 PM, zacher88 (< 20) wrote:

I was just wondering what website most of yu prefer to use when doing online trading?  People have recommended a variety of different websites and I currently use sharebuilder, but am seriously considering switching because of the lack of research tools they have available, and any help anyone could offer would be greatly appreciated.  Also what are some websites and other sources people liek to use to do research?

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#20) On August 31, 2010 at 4:17 PM, creek138 (33.19) wrote:

Similar to Tiger, I typically look over a few weeks to over a few months.

 I learned early that knee-jerk investing typically creates losses for me, but at the same time, I'll still have some instances where I'll do the knee jerk thing....GFRE in Feb was one of those instances, but I'm sticking with my gut and staying in for now.

 My biggest problem is liking a stock and doing a lot of research on it, but getting tunnel vision when I'm near the end and not looking at alternative, and possibly more profitable investment ideas.

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#21) On September 02, 2010 at 12:14 PM, ikkyu2 (99.31) wrote:

It really depends on how windy the C-level guys are on the last few quarterly earnings reports.  I do like to look through the last few of these conference calls transcripts, and in particular see how their predictions panned out - were they consistently overestimating or underestimating prospects?  were they lying?  were they clueless or caught flat-footed repeatedly?

And I like to compare the earnings calls to the income statements, not because I think they're fibbing, but because a conference call tells a story with an overall tone, and an income statement also tells the same story, and I like those to be the same story.

This can take 30 minutes or a couple hours.  There's probably a good case to be made that the less time it takes to verify that management is on the same page with reality, the better bet the stock is. 

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#22) On September 03, 2010 at 11:51 AM, TigerPack1 (97.78) wrote:

Looks like I have a copy cat!  LOL  They say "imitation is the ultimate form of flattery."

TigerPackPro on CAPS is not mine, just for the record (although the name does have a nice ring to it).

Some of the stocks on this list I actually DO NOT like.

http://caps.fool.com/player/tigerpackpro.aspx

-TigerPack

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#23) On September 03, 2010 at 11:56 AM, dragonLZ (99.45) wrote:

bullishbabo #1 and UltraLong #2 at the end of the day on CAPS... I am stuck at #17!  You guys are making me feel left out, LOL.

28 today, and falling...

I think you made too many wrong red-thumb calls... (JMO)...

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#24) On September 04, 2010 at 1:07 AM, TraderMikeSays (77.81) wrote:

I don't do any research, I hardly ever even read the news. Stocks are just blips of light on a screen, I try not to get attached to them. All the information you need to trade a stock is in the price movement. Price movement can tell you things that aren't in the news or the reports. The best way to analyze price movement is technical analysis.

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#25) On September 04, 2010 at 1:36 AM, BearishKW (< 20) wrote:

For CAPS just a few minutes of research.

 

For picks in my brokerage account I pour over any info I can possibly find, then hit the pavement and try to find any possible way outside of financials to analyze the business...visit websites, storefronts, go through the CEO's garbage on Tuesday mornings, etc.

 

But once I own them, the research does not stop.

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#26) On September 04, 2010 at 1:37 AM, BearishKW (< 20) wrote:

And a good, below 1 PEG number usually does the trick too.

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#27) On September 10, 2010 at 9:55 PM, chimpcontest (< 20) wrote:

bullishbabo,

you have a guaranteed seat on my next contest.  you can only pick an S&P 500 company.  you received a guaranteed seat for being the top caps player as of today.

if happen not to get this message in the next week, don't worry I will only allow 99 entrants until you provide your pick for the 100th.

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#28) On September 17, 2010 at 7:30 PM, GyroDynasty (98.88) wrote:

Prima facie.

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#29) On May 14, 2012 at 3:04 AM, diegorgazzi (< 20) wrote:

OK you guys, with a rataing over 90%... How in the world do you guys get so good results? I've read tons of books on Value investing, I don't get even close to getting the same results. What Am I missing?

Many of you buy today and sell within a few weeks! Just don't get it.

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