Idea Funnel, Tracking Position & Equity Research!

Each and every great investment needs research! Sincere research!

What is the problem?

We are so busy tracking hundreds of companies we hardly get serious about it. We have some basic content to talk about companies with clients or colleague but we often lack seriousness in research.[At least I am feeling so in my case!]

This hollowness comes forward as subjective questions arises and then we try to change the topic.

Often, our friends, colleague or network suggest us a stock, we have glance at it and we ignore it for one or another reason without sincerely looking into it. Than we say, It was lapsed from my hand when this was 1/10th of the price.

The point is, we are so much involved in noise we barely get time to go deeper  in it.

I see a problem there.  Psychologically something is resisting me from looking into it.

What’s the solution to it?

The solution is to develop a process through which you will be able to determine which companies to look into and which are to ignore, as per your investment philosophy or interest.

How can we develop  such process? 

I am not very sure! But I have some earlier experience into digital marketing, where we used to create a “Sales Funnel” which converts a visitors into buyers.

Here, We need to something of that kind. We need to make an Idea Funnel which will help us to gather ideas from various sources and then we can boil it down to few worthy companies to dig deeper into.

How to use “Idea Funnel”?

Idea Funnel
Idea Funnel

Ideas from All Sources

You collect the stocks you are getting from your credible sources and note it down somewhere. We hear about lot of stocks which are being bought by famous investors, credible portfolio managers or institutions. Some ideas might be generated through a colleague, friend or your network. Just Note them down! And put a simple note of your sources and why they bought it or recommended it.

Screening Filter

This is a filter I use inspired by a quote from Jacobi.

“Invert Always Invert”

There are some industries and businesses we don’t know about. There are some type of businesses we know are crappy. I have few of my own criteria, you may have your own. But you should know it. You shall avoid those kind of ideas right away. This will reduce lot of hassle and time. Basic filters can be sources from your past mistakes. 🙂

Tracking Position

If a stock seems interesting and it fits your basic investment philosophy criteria than you shall take a tracking position. This is utmost important.

It’s my personal experience that I don’t get serious about research until I have my skin in. It’s just a 1 or 5 stocks. But once it enters into your portfolio, you get serious about it.

Otherwise, however I try to research. It’s not as sincere as it gets after having a tracking position. You may call it psychology or mental block but it’s there with me.

So getting tracking position is of utmost important. This fact will be backed by few of the prudent investors as well. I have heard Ayush Mittal and Kalparaj Dharamshi talking about the same.

Deep Research

It will take sometime to get familiar with a company for deep research. It’s not a one day to-do job. After getting tracking position, you get annual reports, industry reads and much more. I prefer to give 2-3 months time researching a company for real feel.

Once you get conviction through Management Meet, Concalls, AGM QnA or Quarterly Results you start building a position in a stock. As and when conviction grows you bet bigger and bigger on the basis of your latest review.

Once it all done.

It’s time to bet big. 😀

I hope, this might help you. I have wasted lot of time hovering around companies and not researching any of them. So to avoid that mistake I have created this idea funnel.

I believe we get better by tweaking little things and creating good habits. So for me, this is a wonderful tool in the wholesome process of my equity research.

It’s a common sense and no fancy.

Please share your suggestions and experience if any. I will try to incorporate the same in my processes.

Thank you so much.

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