Part 3 – Lesson 4


In this lesson, we will discuss where to look for new investment ideas and how to focus your efforts into a specific niche.  Finding new investment ideas is generally referred to as “sourcing ideas.”  The process of sourcing new ideas is really the first step in the investment process.  Think of the investment process as funnel.  You must find new ideas to put into the funnel, your research process will then filter through these ideas, and in the final step, you will have actionable ideas that you can invest in.

As the above illustration implies, you will likely have to filter through multiple ideas before finding a stock that is worth investing in.  You may have to go through 3 potential ideas or 10 ideas or 50 ideas before finding the one investment that is compelling to you.  The key is to stick to a process that allows you to eliminate the bad ideas to narrow down your list to the high-quality ideas.

Sometimes, at the end of your research process, you may like an idea but conclude that the price (valuation) is too high.  In these cases, you’ll add these ideas to your backlog of stocks that you are monitoring for better entry points.

But where do you begin the search to find new ideas to put into the funnel?  Below, we will cover a few of the resources we employ in building our backlog of potential stock ideas.

Leverage Your Personal Experience

As an investor, it is helpful to take notes in your day to day life when you are particularly impressed by a product, brand, or service.  If this product or service was provided by a publicly traded company, this can often be the basis for researching this company’s products and financials to decide if it is a worthwhile investment.

On the flipside, you should also steer away from companies whose products you don’t like.  For example, if you are researching a homebuilder but have noticed that they build low quality homes, you should be very cautious in purchasing this company’s stock even if the valuation is very attractive.  In other words, if you wouldn’t buy that company’s product, don’t buy their stock.

Leverage Your Friends

Pay close attention to what your friends are discussing.  If a product or service seems like it is becoming increasingly popular, it may be worth doing research on that company.  Social media can often be helpful in this regard particularly when friends post about positive or negative experiences they’ve had with certain companies or products.

Additionally, it can often be helpful to talk about stock ideas with friends.  On your own, you may only be able to come up with a list of 10 ideas worth researching, but if you have regular dialogue with 10 friends who each have 10 ideas they are researching, you can see how quickly your pipeline of ideas can grow.

However, it is extremely important to always do your own research.  This is to 1) avoid losing money on poorly researched ideas by your friends.  Don’t assume that just because a friend of yours sounds smart that they’ve done proper research on the company and 2) build your own conviction in the stock.  Too often, you may have a friend that does give you a great recommendation, but if you don’t understand the company and the stock yourself, you won’t have the conviction to hold onto the stock during rough patches.

Read the Newspaper and Follow the Major Financial Media Outlets

Our favorite resources to keep up to date on financial news are below.  These resources are useful not just for keeping up to date on corporate and economic news, but it may often pique your interest in a certain company or industry.

Wall Street Journal (
Bloomberg (
Barron’s (

Please keep in mind that the financial media can also be very distracting due to the large volume of information that is communicated.  Over time, you will develop your own internal filtering process to learn to ignore irrelevant information and pay closer attention to information that is helpful or important to you.  For example, we generally ignore most stock market prognosticators that appear in the financial press.  Our experience suggests that very, very few people (if anyone) can accurately predict market direction and timing, so spending time listening to predictions on whether the market is going to go up or down is generally a waste of time.

Sell-Side Research

Sell-side research consists of company specific analysis that is published by the investment banks and other broker dealers.  “Sell-side” refers to the banks and broker dealers that provide services to the “buy-side.”  The sell-side includes Goldman Sachs, Morgan Stanley, Bank of America, UBS, Credit Suisse, Citigroup, etc.  The buy-side includes institutional investors such as hedge funds, mutual funds, family offices, university endowments, etc.

Sell-side equity research reports consist of buy/hold/sell recommendations, earnings estimates, review of recent corporate and industry news, corporate management team meeting notes, and any other analysis that could be helpful to an investor in publicly traded companies.  Many buy-side investors use sell-side research to assist them in idea generation and keeping up to date on the companies they are invested in.

Unfortunately, sell-side research is generally only available to institutional investors.  At the time of writing, Ameritrade and E-Trade do offer some research for free from Credit Suisse.  Additionally, Barron’s, which is a weekly publication, will recap some specific recommendations from sell-side reports from the previously week.  Lastly, CNBC and some financial journalists will highlight changes in recommendations from sell-side analysts on occasion.  For example, if the Goldman Sachs research analyst were to upgrade his rating on Google from Hold to Buy, some journalists may publish this information.  While the full report won’t be available, savvy investors can follow the changes in recommendations as reported by the media.

Investor Conferences

In addition to publishing sell-side research reports, most major broker-dealers will host investor conferences where they invite corporate management teams to speak about their businesses.  Additionally, large institutional clients are invited to come meet with these management teams.  For example, Goldman Sachs hosts an annual tech and internet conference, called “Communicopia” which is held every year in September.  At this conference, Goldman Sachs will invite the large and mid-cap tech, media, and telecom companies to come speak about their business.  Typically, the Goldman Sachs’ research analysts will interview the company management teams on stage, asking about the growth outlook, recent trends, the competitive environment, etc.

During these investor conferences, corporate management teams will also meet individually with major clients (hedge funds and mutual funds) of Goldman Sachs, giving these large investors an opportunity to ask more detailed questions about their business.

Similar to sell-side research reports, these investor conferences are inaccessible to individual investors.  However, almost every conference presentation is webcast over the Internet.  Therefore, as an individual investor, you should create a calendar of conferences throughout the year and aim to listen to the company presentations.  This will often spark ideas on new investment ideas.

These webcasts can usually be accessed through the investor relations section of the company website.  To find the investor relations landing page, you’ll simply need to search “XYZ Company Investor Relations” in Google.

For example, try searching “Microsoft Investor Relations” to navigate to the Microsoft investor relations homepage.  On the Microsoft investor relations homepage, there is a link for “upcoming events” and “past events.”  The events on the IR homepage is usually a link to the webcast presentations at upcoming and past investor conferences.  See below for a screenshot of the Microsoft IR homepage:

Follow what institutional investors are buying – 13-F Filings

One of our favorite resources for finding new ideas is to look at the holdings of institutional investors that we know and respect.  For example, if you are a follower of Warren Buffett, you can look up the holdings list of Berkshire Hathaway by accessing their 13-F filing.  The 13-F is a quarterly report that large institutional investors must file with the Securities and Exchange Commission (SEC) to highlight all their holdings as of quarter end.

When accessing the holdings list of institutional investors, it is important to know the investment style of the fund that you are looking up.  Some funds trade in and out of their positions frequently, and since the 13-F filing is typically not accessible until 6-8 weeks after quarter end, many of the positions could be stale by the time you see the holdings list.  However, with an investment company like Berkshire Hathaway, it is usually a fair assumption that most of their holdings will be long-term in nature.

The next caveat regarding finding ideas from 13-F filings is to always do your own research.  Similar to getting recommendations from your friends, don’t assume that the fund/investment firm you are looking at has done adequate research on the company.  Additionally, you must always build your own conviction level in a company to have the confidence to hold onto your investment during rough patches.

You can look up 13-F filings through the following resources:

The above picture is the homepage of as of July 2018.  In the EDGAR search box, we have typed in “Berkshire Hathaway.”  We will come to the next screen after hitting enter:

Sometimes, it can be a bit confusing to find the right entity that holds the investment company’s primary holdings.  This can be because an investment fund has different legal entities, some of which may be US formed entities while others are foreign entities.  Different investment funds may also have different legal entities for different funds within the same fund family.

In this case, the Berkshire entity we are looking for is the fourth one down (0001067983).  After, clicking on this entity, we come to the next screen.

This screen shows all the SEC filings for Berkshire Hathaway.  If we scroll down a bit, we will find the 13-F filing which was filed on 5/15/2018.  Clicking on the “Documents” button for the 13-F brings us to the next screen.

From this screen, we can find the holdings report either in the primary document or in one of the information tables.  In this case, we must click on the information table link to bring us to the actual holdings report for Berkshire Hathaway.

This screen outlines all the securities that are owned by Berkshire Hathaway, which you can see includes American Airlines, American Express, Apple, Bank of America, and so on.

Another good website, which we’ve found to be a bit easier to use than the website is  This website brings you straight to the fund’s holdings list with a bit less searching than the SEC website.  See below:

When we get to the home screen of the Whale Wisdom website, we type in Berkshire Hathaway which populates the 13-F we are looking for.  After clicking on this, we go to a summary page of the holdings.  After clicking “See All Holdings,” we get a full list of all Berkshire’s holdings per the 13-F.

The nice feature of this website is that it shows some the change in holding (position size) from the previous 13-F filing, which allows you to quickly determine if the fund has increased its position size or sold down its position from the previous quarter.

As we’ve mentioned, if you are going to source ideas from 13-F filings, it is important to always do your own research.  Even professional investors make mistakes (and make mistakes often).

Paid Investment Newsletter Services

There are some high-quality paid investment newsletter services that provide stock recommendations.  However, we would urge investors to be cautious in selecting a newsletter service since just about anyone can claim to be an experienced investor.

Avoid newsletter services that sound like get rich quick schemes.  Newsletters that claim to “double your money” or with track records that seem too good to be true probably are too good to be true.  If you will invest based on recommendations from a newsletter service, it is important to research the qualifications of the newsletter writer and their investment style to determine if their style and risk tolerance is compatible with yours.

Similar to trading off sell-side recommendations, you must always do your own research.  Recommendations that you identify out of a newsletter service is still at the beginning point of your funnel.  You must then research the company, value it, and then, make your own determination.

Stock Screens

Stock screens are a great tool to come up with a list of stock ideas to research.  Using a stock screening tool, you may choose to focus on valuation.  For example, you can screen for companies with low P/E multiples or low P/FCF multiples.  If you are looking to focus on mid to large-capitalization companies, you could limit your search results to companies over a specific market capitalization.

Alternatively (or in conjunction), you could screen for high earnings or revenue growth rate companies.  Stock screens can provide a great starting point to identify companies with attractive valuations and good growth rates.  While these companies may look great on paper, you will then continue your investment process by researching the company fundamentals and building a valuation of the company.