The Silent Strategy: How Strolling Unveils Hidden Stock Market Gems
The Best Stock Research Method No One Talks About
Dear readership,
No, I’m not trolling you with the headline. I’m serious. Let me explain.
Investors encounter two main problems when searching for stocks:
The first problem is the large amount of information we have to sift through to choose a few good stocks out of the thousands available. Time is valuable and we want to use it efficiently.
The second problem is that when we analyze companies, we rely on information that is already available, and we can only react after something has already happened. After a quarterly report, after an announcement, after an analyst upgrade or downgrade, and so on…
However, there is a simple and efficient solution to save time and stay ahead of other investors: going for a city walk.
I do this every 3-4 months and it has helped me countless times to discover companies before Wall Street did.
Here’s my step-by-step approach that you can steal:
Pay attention to billboards
When a company rolls out a new marketing campaign you are the one who sees it first. Wall Street sees its results only in the following report. You see that Nike NKE 0.00%↑ is promoting a new sportswear line? Good, not only does this benefit their branding, but chances are high that those ads will increase revenue.
You see a new candy bar on dozens of billboards? Check out which company is behind it. You might be on to something.
Go to supermarkets
Whenever I go grocery shopping I check out which products are sold out. Most people would be angry if they do a shopping list and notice that one item is missing when they arrive at the supermarket. You, on the other hand, should see the bigger picture: High demand.
Around ten years ago the Swiss chocolate manufacturer Chocoladefabriken Lindt & Sprüngli AG started a marketing campaign for chocolate bars with exotic flavors targeted at millennials. It was a bold move back then because the company was known for selling conservative products like chocolates. Did it pay off? Yes, it did!
And all you need to do to foresee this was going to the supermarket and noticing that those bars were sold out most of the time.
Go to construction sites
On your way to work, you pass noisy construction sites? Good, don’t be like other people and complain about the noise and traffic. Instead, check out who’s working on the project. Most projects have signages at the entrance that shows which companies are involved in them. Architects, insurers, Real Estate Investment Trusts, construction companies, future renters, and developers. Check out if some of them are publicly listed.
Bonus Tip: Pay attention to whose construction equipment is being used. Caterpillar CAT 0.00%↑ is just one of many companies that enables us to build our daily infrastructure but gets rarely discussed in investing forums. Yet, when you pass construction sites chances are high that you see their excavators.
Go to electronics stores
New gadgets, smartphones, wearables, etc. are released all the time. When I walk into an electronics store I pay attention to which products are best represented. Companies like Apple AAPL 0.00%↑, Samsung, and Alphabet GOOGL 0.00%↑ often have their own shop-in-shop concepts with qualified sales representatives. Meanwhile, other brands are dependent on the store’s salespeople who normally have a superficial knowledge of their products.
Guess who is going to sell more products?
Bonus Tip: Talk to the salespeople to gain insights about customer satisfaction, how often products are returned, which ones are especially popular, etc. You’ll get first-hand information from the people who matter: Buyers.
Pay attention to new store openings
A new consumer brand recently went public to finance its growth? And they are opening one or more new stores in your town? Great news. Every time you walk past it, pay attention to how crowded it is.
The share price barely moves although its stores are full and people are buying? Well, the increasing sales will sooner or later get noticed by Wall Street, and your portfolio will be ready for takeoff because you saw the writing on the wall before everyone else did.
Final thoughts
Your everyday life is full of investment opportunities you’re often not aware of. Learn how to pay attention to changes in your surroundings and become a contrarian investor.
When others look one way, you need to look the other way.
When others source insights from financial media and analyst reports, you source your information from places that the herd ignores. Otherwise, you just become reactive to news that are already priced in and get mediocre results as everyone else does.
Use this strategy to your advantage.
Until the next issue. 👋
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Disclaimer: This analysis is not advice to buy or sell this or any stock; it is just pointing out an objective observation of unique patterns that developed from my research. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice.
Similar to scuttlebutt method by Phil Fisher. This can also be called reverse engineering or second level thinking. Eventually, it trains your mind to always keep asking this question:"Does this product have a public company?" Or " How is this going to show up in the results?"
Great article, agree with your takes. One side-note though. It must not necessarily be a city-walk. Sometimes, you find interesting notes in investor presentations where management talks about 5 year plans. Often only a few people/funds notice..