Finding stock ideas

The first stock I purchased was Parkway Life REIT and it took me nearly 3 months of researching before I decided to pull the trigger on it. The reason I spent that much time was because:

  1. There were too many stocks out there which was overwhelming for the newbie investor (me) to choose from
  2. I was afraid to make the wrong decision

To help you out, I penned three tips on how you can get inspired and get stock ideas. 

#1: Look around you

I decided to shop around the SGX instead of other markets as it is home base and hence more “relatable”. From there, I looked up companies that I have heard of. When nothing interested me, I became more cognitive of the brands, products, and services I encountered in my daily life and researched on the companies behind them for more ideas.

It could be the company that distributes the bread that you eat (QAF Holdings), the company that produces the tyres of your car (Stanford Tyres), the company that manufactures the paint on your walls (Dynamic Colour), or the service provider for your home wifi (Singtel).

You don’t have to discover the next tech unicorn, ideas can come from places that you encounter everyday. Inspiration is everywhere! 

#2: Find your preference

There are things in life that we love and things that we don’t, and this can translate into what we invest in too! It could range from automobiles to gold to games. The possibilities are ENDLESS.

My fiance loves FMCG and has positions in companies like ThaiBev and Dairy Farm. As for me, I am boring and prefer defensive businesses that we cannot do without like wifi, throwing trash, or funeral services. Businesses I don’t like such as F&B or cyclical hospitality are axed out from my list for the very reason that I don’t like their business model.

So narrow down the stocks pile (ha ha) out there by eliminating those you don’t like and start somewhere you do.

#3: Only buy what you can understand

I have a simple mantra as part of my stock selection process: buy it if you understand it, don’t buy it if you don’t. On my investing journey, I have met people who buy stocks because their broker recommended it/it was a hot stock/it was a big and reputable name. But when I asked them what the business model is and how it works, they can’t answer.

To me, not understanding the company you’re buying into is potentially the gravest mistake any investor can make that can only have a good outcome if luck is on their side. I’m not one to rely on lady luck, so I just choose to focus on those within my circle of competence.

Create a watchlist and do your research

After you have picked out a few stocks that you’re interested in, add them to a watchlist of sorts and research the hell out of them before you purchase anything. I read up like crazy on Parkway Life REIT as it was the first stock I was going to buy and I wanted to make sure it was the right decision.

I love making lists so I made one and wrote down the reasons for and against them, and did the same for their competitors too. I also listed my reasons for wanting to purchase the stock and from time to time review them and see if it still holds true after time has passed. 

Here’s a truncated version of what I did for Parkway Life REIT. 

As you can see, this was my way of rationalising my decisions (read: allaying my fears) when I was a wee investor. I was actually quite proud of myself and till today am still holding onto Parkway Life REIT. Whenever I doubt a stock purchase, I always go back to the initial reasons why I bought it in the first place and see if those justifications still stand.

I encourage you to do the same or find something that can help you make informed investing decisions not just for your first purchase but for subsequent ones too. Good luck and have fun!

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