Quick and Unconventional Methods for Identifying Good Stocks
While investors typically spend a significant amount of time sifting through thousands of companies listed on stock exchanges to identify the best stocks for their portfolios—such as screening stocks via valuations and technical indicators—we would like to introduce some quick yet unorthodox screening methods for identifying promising stocks to consider adding to their portfolios.
1) 13F Filings
13F filings remain one of the easiest ways to discover excellent investment ideas from the world's most successful investors.
What is 13F?
SEC Form 13F is a quarterly filing submitted by investment managers overseeing $100 million or more to the Securities and Exchange Commission, revealing details of their U.S. equity holdings.
Recommended investors’ 13F to follow for ideas:
Warren Buffett, Ray Dalio, Bill Ackman, Terry Smith, Mohnish Pabrai, George Soros, Carl Icahn, and Chuck Akre.
2) ETF/Unit Trust Holdings
Exchange-traded funds (ETFs) maintain a relatively consistent portfolio due to their passive management approach, which involves tracking a specific index. With rebalancing occurring on a quarterly, semiannual, or annual basis, the adjustments are minimal, contributing to the overall predictability of ETF holdings.
In addition, the top holdings in the ETF portfolio consistently receive larger inflows relatively when investors invest in the ETFs. Therefore, it is natural for these top holdings to continue garnering investors' interest.
Unit Trusts, on the other hand, are typically actively managed, giving fund managers the freedom to adjust holdings at their discretion. However, since the primary objective of Unit Trusts' fund managers is to actively identify the best stock opportunities to outperform their benchmark, it is beneficial to examine their convicted top holdings to find out what stocks they expect to beat the market.
Recommended ETF and Unit Trust holdings for ideas:
SPY ETF, QQQ ETF, SMH ETF, SKYY ETF, BGF World Technology "A2" (USD) ACC, and Franklin US Opportunities "A" (USD) ACC.
3) Companies with Largest Market Cap
The market cap is calculated by multiplying the current stock price by the total number of outstanding shares. Investors seek companies poised to grow their market cap over time, as an increasing market cap often correlates with a rising share price.
Naturally, the largest stocks by market cap represent some of the most successful companies globally. It is beneficial to examine these successful companies to understand why they thrive and evaluate their potential for future market cap growth before you include them in your portfolio.
4) Stock vs Indices Performance
ETFs offer a means for investors to capture general market returns. Investors typically seek a higher return when investing in individual stocks, given that individual stocks generally carry higher risk compared to investing in diversified index ETFs.
Investors should assess the long-term performance of stocks compared to their country index. A quick method involves comparing the 10-year annualised performance of a US stock with the S&P 500; stocks outperforming the S&P 500 may indicate strong fundamentals, a competitive advantage, and effective leadership.
In summary, investors could use these methods to uncover a pool of investment ideas and conduct further studies to determine their investment worthiness.
Modify on 2024-01-13 19:30
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
