Getting Stock Ideas From the Most Unlikely Places
Imagine you are travelling in a train to a remote part of South India and the rather rustic-looking man sitting next to you is busy on his smartphone. Over a curious conversation, you realize that the man is a farmer, selling his crop in the MCX futures market and getting live data from the ITC E-Choupal. This gives you insights about MCX, ITC and also the broadband of Jio which is making such access possible. The humble train ride left you with 3 invaluable stock insights.
What is the message? Some of the finest stock ideas need not come from brokers and analysts. They can come from the most unlikely sources like people rushing to a D-Mart store, long queues at PVR etc. There is no rulebook for insights, but some ideas can buttress the point about getting stock ideas from unlikely sources.
Best ideas are in the advance tax numbers
You must always respect that company's taxes and dividends because it shows the company has real funds in its books. There is a popular story that backs in the 1980s a highly acclaimed investor used to buy stocks purely based on the advance tax numbers. At one point, he was known to be making more profits trading in ACC than the company generated in all its plants put together. The moral of the story is that something as simple as advance tax numbers can give you solid stock-picking ideas.
There is a lot of wisdom in the local supermarket
Peter Lynch used to believe in this. Long before D-Mart was listed on the bourses, one could not miss out on the serpentine queues at suburban D-Mart stores. This was a classic giveaway. However, that is just about the store. What happens inside the store can give you amazing investing insights. When Nirma started taking on Hindustan Unilever in detergents, the first signals came from the Kirana shops. Just a few years back, brand-conscious homemakers were rushing to buy products from companies like La Opala, Prestige, Butterfly etc. The impact was visible in the stock price. Never underestimate the wisdom of the supermarket.
In your channel checks, dealers give the true story
If you want to understand Tata Motors attend the dealer’s conference. Back in 1997, Tata Motors had touched total sales of Rs10,000 crore for the first time and promised to scale Rs20,000 crore by year 2000. However, the dealer conference showed that dealers were struggling to push the stock. Eventually, Tata Motors took a few years to even recoup sales of Rs10,000 crore. So, don’t miss the wisdom of the dealers.
Heed advance warnings by auditors and rating agencies
We often complain that auditors and rating agencies are not proactive. However, we often miss out on the fine print of the audit report and the qualifications. That can serve as an advance warning system. Similarly, rating agencies may not downgrade a stock, but if you scan through the rating opinion, the concerns often come out quite clearly. These may not be investment ideas but can serve as an advance cautionary mechanism.
Futuristic publications and spicy grapevines
Many multi-bagger ideas may be futuristic. For example, EVs, green hydrogen, LI-ON batteries, and hyperloop are all futuristic ideas but can become a corporate reality; sooner than you expect. Futuristic magazines can give you long-term ideas in areas like genetic engineering, nanotechnology, artificial intelligence, 3D printing etc. To remain grounded, also keep your ears open for market grapevine. Often, you can pick up early signals here.
So go ahead and look for these unconventional ideas. You never know where you can strike gold.