Uncategorized

Differentiating your view on a stock

close

Email a Friend

Last week, I interviewed Jim Valentine, author of Best Practices for Equity Research Analysts: Essentials for Buy-Side and Sell-Side Analysts. For professional researchers, Jim emphasized the need to have a differentiated view on a stock.

From our chat:

I think another thing that may be getting more into the investment arena, in terms of best practice, is to identify the two to four critical factors that impact every one of your stocks. This kind of goes back into the time management thing. What I find is that there are a lot of really smart analysts who know a lot about other companies, but they don’t have a differentiated view from consensus on any particular issues that are going to drive the stock. Ultimately they become a company analyst, rather than a stock analyst.

So the best practice, in effect, is to do some research, figure out what are those two to four critical factors, and then focus all your time on those for your companies, as opposed to all the other factors out there that are, in effect, noise.

Pro analysts vs. the rest of us

This need to differentiate makes sense for equity analysts: ultimately, the good ones get paid to pick spots when their information and view on an investment diverges from consensus.

But I’m torn if this makes total sense for the rest of us.   How important is it for the majority of investors to do something completely off the beaten path?  We know that stocks with greater investor recognition typically do better than those with less.  Do we really need to stick our investing necks out to try and find the next $GOOG or $AAPL?

In my own investing, I tried for years to come up with original stock picks — either ones that no one was looking at or ones that everyone hated on.  Now, I’ve automated much of my investment process leveraging the Tradestream and spend much of my time finding strategies that take me out of the investment selection process.

Where is the line between being an investing contrarian and not getting swept along with every fast-and-quick investment fad and just doing things according to “the book”?

More resources

Learn more about the book and Jim Valentine

0 comments on “Differentiating your view on a stock”

Events, Uncategorized

New speakers announced for Tearsheet’s Resilience Conference

  • The Resilience Conference will celebrate the people, teams and companies successfully navigating through this crisis.
  • 3 new speakers have just been announced.
Tearsheet Editors | June 25, 2020
The Customer Effect, Uncategorized

Inside Yielders, the UK’s first regulatory compliant Islamic crowdfunding platform

  • Yielders, an equity-based crowdfunding platform for real estate, is the first Shariah-compliant financial technology company to get regulatory approval in the U.K.
  • The platform's user base is 35 percent non-Muslim, some of whom may be attracted to the ethical investing principles.
Suman Bhattacharyya | May 18, 2017
Sponsored, Uncategorized

FinTech is changing your life, and you don’t even know it

Brandeis University | May 01, 2017
Uncategorized

FinTech Week: By the numbers

  • Empire Startups' inaugural FinTech Week begins today in New York
  • In preparation for 25 forthcoming events over four days, here's a breakdown by the numbers.
Tanaya Macheel | April 24, 2017
Uncategorized

Hi 5! The top five fintech stories we’re following today

  • Retailers may be looking into the future as opposed to implementing for today.
  • Banks are working to get more people comfortable using mobile apps.
Zack Miller | February 06, 2017
More Articles