Hi everyone - big shoutout to Brian Feroldi for sharing this thread on Twitter and inspiring this post.
The purpose of this post is to extrapolate on each of his quick points as well as provide additional resources to make sure all of you are well-equipped to begin your stock picking journey.
In this post, I’ll be covering:
Several ways for anyone to begin finding their next big winner
Resource 1: ETFs
As you all might know, ETF stands for “exchange traded fund” - something that can be compared to a basket of stocks.
Imagine there’s a basket - and inside this basket are 50 stocks.
The value of the basket increases and decreases over time as the 50 stocks inside the basket increase and decrease in value. These baskets can be created by anyone - they usually cost a few hundred thousand a year to upkeep, but can be very profitable if investors (like ourselves) buy them.
For example, I’ve worked closely with an ETF company in the past (Defiance ETFs) - their entire business derives on building “thematic ETFs” which are baskets that follow underlying themes.
These themes range from 5G, Psychedelic, Travel and Reopening, or Big Data.
If you’re looking to leverage ETFs to find stock ideas, simply head to the company who created the ETF’s website - we’ll use Defiance ETFs in this example - then select the ETF you’re looking for.
Once there, head to the section that discloses the holdings.
Why is looking through ETF (basket) stock holdings a good idea when finding new stocks?
Well, these ETFs are usually created by very smart people - people who have an interest in the underlying stocks to perform exceptionally well over time. Not to mention, they’ve likely done more due diligence and research on these stocks than you have the time to do! Begin digging around and looking for companies who might have a heavier weighting than others - this is usually a sign that the creator of the ETF is more confident in that company’s performance when compared to others.
Resource 2: Fund Managers
This is a fun one!
These are people who make a living out of picking successful stock ideas and properly weighting that stock in their portfolio - making sure it pays off over time.
Brian was right - when looking for which stocks specific funds hold, head on over to Whale Wisdom, type in the name of a fund, and start digging.
A few funds he mentioned worth checking out are:
Look for big positions as a percent of the fund’s total portfolio or recent big bets they’ve made - it’s usually a positive sign. But never put too much emphasis on what other people are doing with their money.
Resource 3: Newly Public Companies
This one is something I try and share with you all every week! My friends at Unhedged do a fantastic job highlighting the biggest IPOs expected that week - published every Monday.
I try and take this list and provide my hot takes - as published here.
Generally speaking, dollar cost averaging is the best way to begin investing into newly IPO’d companies - something I practice myself.
Resource 4: Screeners
This one is super simple and sort of fun!
There are websites like Finviz.com that exist entirely for you hunt for specific stocks that fit into pre-set parameters.
For example, you can head to their website and begin playing around with the below shown filters to find that perfect stock.
For fun, I’m going to build a screen.
Let’s find a stock that’s traded on any exchange, is in the S&P 500, categorized as being within the healthcare sector, based in the USA, and has a market cap above $10 billion.
Boom! Here we are.
Super simple to begin playing around with some general filters if you know exactly the type of company you’re looking for - just not sure exactly what it is yet.
Resource 5: Family, Friends & Social
This one is my favorite.
It’s literally looking around, talking to people, observing trends, and investing into companies who will profit from those trends before Wall Street gets wind of it.
My close friend Chris Camillo turned tens of thousands into tens of millions throughout his investing career (2006 - 2020) by leveraging a technique he coins “social arbitrage.”
Here’s a blurb from his recent interview with Business Insider about his strategy.
He uses an investing technique he named social arbitrage. It involves identifying investment opportunities by observing platforms like TikTok, Twitter, Facebook, and Instagram and buying in early. It also includes learning to observe the everyday world.
His gains are also unusual, averaging a 77% annual compounded return over his nearly 15-year track record from 2006 to 2020, according to Jack D. Schwager, a trading expert who audited and wrote about Camillo and others in his book "Unknown Market Wizards: The Best Traders You've Never Heard Of." The S&P 500 compounded at an average annual rate of 7.6% from 2006 to 2020.
Schwager said he reviewed Camillo's monthly brokerage statements beginning in August 2006, copies of which were also provided to Insider. His starting balance was $84,000. By May 2020, it was over $21 million, including cumulative net profits he had withdrawn from the account. Schwager updated his audit for this article and found that Camillo had doubled his cumulative profits, to $42 million, by May 2021.
Social arbitrage investing is fun and easy - but it’s not for everyone.
Instead of trying to one up Wall Street, consider just investing into the companies you know and love - if that’s where you shop (Target - TGT), the type of phone you use (Apple - AAPL), the way you watch TV (Amazon - AMZN), or maybe the deodorant you use (Proctor and Gamble - PG).
Investing into companies you consume and understand is an easy way anyone can begin their investing journey.
Resource 6: Podcasts
Honestly, I haven’t spent an incredible amount of time digging through podcasts - so I’m going to take Brian’s lead on this one. Here are the names of the podcasts he recommends listening to and where you can find them:
Alright so turns out a lot of those podcast recommendations are for the Motley Fool’s network of podcasts - so not sure if they paid the guy to mention literally all of them in his tweet thread or not, but just heads up. Either way, maybe you’ll like them!
Also - not exactly a podcast, but my friend Chris and I post a video every week to YouTube explaining an interesting stock idea we’ve come up with! For example, here was last week’s video on Olaplex (OLPX):
We just filmed one this week on Amplitude (AMPL)!
If you weren’t aware, Chris is the CEO of Unhedged - as well as former hedge fund manager.
Resource 7: Substacks / Articles
This is exactly what I do!
There’s a lot of people like myself - just sharing our stock ideas with the world.
Here’s a list of a few great people I personally follow:
And there you have it!
7 ways to find great new stock ideas - if you find any, be sure to share it with me! Happy to publish my research on the company if I end up liking it.