The Value Of Using Research When Investing

By: ispeculatornew
Date posted: 06.14.2012 (5:00 am) | Write a Comment  (3 Comments)

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As you can see on this blog, I do many different types of investments but the two main ones are centered about long term retirement investing and shorter term more speculative picks. In both cases, I often use research done by analysts in order to help me get a better idea of the companies that I am considering but also finding ones that I didn’t know or didn’t think of. In general, my main questions are:

Speculative Picks: Is there an opportunity for greater gains with this stock than the market seems to anticipate?

Long Term/Retirement Dividend Picks: Will this company be able to increase its dividend at a high rate over the long term and if so is it trading at a reasonable price?

It’s Not Just About Numbers

I’m able to get a lot of data about these companies, either through public websites or sources such as Google Finance, Bloomberg, etc. However, numbers don’t always tell the whole story. I wrote a bit of an ironic post about that last week comparing a Facebook analysis to how Groupon was being valued. My main point was that I can easily accept the fact that someone thinks a stock is overvalued or undervalued but only if there are some good arguments behinds them. I might not agree with them but I can certainly understand and respect them. Sometimes, number simply cannot tell the whole story.

Many different things such as the moves by competitors are difficult to judge without some level of analysis.

A Recent Example: Canadian Tire (CTC/A)

Last week, I received what I thought was fascinating research regarding Canadian Tire in a newsletter by The Successful Investor.

Basically, the research discussed the impact that the entry of US store Target (TGT) into Canada would have on Canadian Tire (CTC/A) and how there might be a very good opportunity in buying. It explained exactly how CTC/A should be able to compete with Target and continue to do well. I also learned about their acquisition of some sport merchandise stores which provides great diversification in a fast growing sector of the economy. You would have to read the 2 page report but that was enough to convince me to look a very strong look at Canadian Tire (CTC/A). Its dividend is a bit under 2% but everything else seems to compensate for that fact.

How I Don’t Use Research

Research is a good starting point and of great help to get a better opinion. But I would never:

-Using a buy or sell rating as my only basis…there are too many terrible stories
-Use the target price as any kind of indication

Research That I Use

In general, I visit a few select websites and also receive a few newsletter that help me make better decisions in my trading. The two main ones that I’m using are:

John Mauldin’s Newsletter: It is mostly about macro-economics so it might not be very specific (rarely gives out a specific stock) but having a great perspective on what’s coming and what is going on has been invaluable to me. It is free so very much worth the try (newsletters are a bit lengthy but very interesting)

The Successful Investor: I rarely give out recommendations regarding products but I do believe this one can greatly help, it has done that for me. They discuss Canadian stocks, provide research and commentary about specific stocks to look out for. I did let them know that I would be discussing the newsletter in the blog and they were nice enough to offer a special discount for any of you who wish to sign up. You can get half off by clicking here.

Do you use research? If so, how?

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3 Comments

  1. Pingback by Dividend Link Time — June 15, 2012 @ 4:01 am

    […] 1. The Value Of Using Research When Investing @ IS. […]

  2. Comment by SPBrunner — June 16, 2012 @ 2:29 pm

    Good Post. I looked at a one of John Mauldin’s videos and it looked interesting, so I signed up for his newsletter.

    I have CTC.A since 2000. Total return has been 11.06% per year with 9.37% from capital gain and 1.69% from dividends. Dividend income was only 15% of my total return.

    I must admit I do my own research. However, I am always very interested in what others have to say.

  3. Comment by IS — June 17, 2012 @ 5:47 am

    @SPBrunner – Thanks for the good words, and yes I think you will appreciate his newsletter!

    Solid returns on CTC.A, very well done!

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