As a beginning investor, it may seem daunting as you start to build a portfolio. You have some money that you want to invest but you don’t want to put all your eggs in one basket. So you decide to find a handful of companies and diversify.
Good companies are everywhere. Some you will see in the world daily – like Dominoes or the Banks. But many good companies can go unnoticed by those who are not looking. Equally, just because a company is large and well-known, does not automatically qualify them for an investment.
Here are some good ways to find good ideas for your personal portfolio that are easily accessible to everyone for free.
New announcements are made by ASX-listed companies every day to keep the market informed about their business. These are published on the ASX website in real time. Many of these won’t be relevant so keep an eye out for price sensitive announcements and companies you might have heard of.
Read anything that sounds of interest and add it to your watch list.
Peruse the Official List
Go through the official list of companies listed on the ASX. Download the Excel CSV file and sort by GICS Industry group, as you should have an idea of what sort of company you want to invest in. Click through and read the brief description. For any company that sounds interesting add them to your watchlist and look up any recent announcements and reports to see what their business is and what sort of money they make.
For help on what to be looking for in these companies, read this article here.
Google Stock Screener
Using a filter system is a great way to narrow down your stock selection if you know what you’re looking for. Using the investment ratios I just linked to will give you an idea of what to look for.
The Google Finance Stock Screener is a free option that allows you to narrow down the entire list of ASX-listed stocks using most of the common valuation, financial, and operating metrics. It doesn’t offer every investment ratio, but it is simple to use and can quickly help you find a few potential stocks to research.
News, blogs and media
There are many blogs and news websites that constantly report on the market. These often include commentaries on particular announcements, mergers, results and anything else pertinent to the daily gyrations of the ASX. Publications like the Australian Financial Review and Business Insider could be easy places to start.
Now it might be true that if you are reading it in the publicly available media then you are already too late. But what this will do is put it on your radar so you can come back in a few months and check in on it, as the market has a very short term memory.
Also remember that all of these publications will have a Twitter account so you can use Twitter to aggregate news from many sources.
And if you’re not already, you can follow Farnam’s Twitter account here.
Fund managers have been running successful portfolios for years, and many of the big funds must report publicly, regularly. In these reports they often will include their biggest holdings or biggest movers for the period. Again, you might be getting in late, but it can be useful in idea generation.
Some fund managers to get you started include PM Capital, Perpetual, Magellan, and WAM Capital, all of whom are listed and report their portfolio regularly. But there are many more, both listed and unlisted so the more you are across, the more you will notice trends, because many fund managers use similar approaches to investing.
Where not to find investment ideas
There are a great many places to find stock ideas – some will happen organically, others will be the result of a long search – but I don’t believe online forums are a good way to source ideas.
You don’t know who these people are behind the avatar, and you certainly don’t know what their credentials or experience are, nor their ulterior motive for pushinga stock.
If you do think you’ve come across an idea in a forum though, always do your own fundamental research and make sure you are confident in the stock as a business, as the worst reason for making an investment is the fear of missing out.
This document has been prepared by Farnam Investment Management Pty Ltd (Farnam) ABN 15 149 971 808 AFS Licence 430574. Australian Unity Funds Management Limited ABN 60 071 497 115 AFS Licence 234454 is the responsible entity of Farnam Managed Accounts. While every care has been taken in the preparation of this document it does not contain any recommendations to buy or sell any particular stock(s) noted. Farnam makes no representation or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. The information in this document is general information only and is not based on the objectives, financial situation and needs of any particular investor. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek their own professional advice. Past performance is not a reliable indicator of future performance. The information provided in the document is current as the time of publication.