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The Art And Internet Science Of Stock Comparisons
Years ago, as COO of a company in the quick service restaurant industry, I was charged with the responsibility of making that company grow—quickly but within reason. The fastest way to do that was by acquisition. The acquisition analysis entailed conducting comparisons between the subject acquisition and others available in the general area. Today, researching stocks in a company can go much faster. Here's how...
Years ago, I found myself the COO of a company in the quick service restaurant industry. The board of directors charged me with the responsibility to make that company grow—quickly but within reason. We knew that the quickest and best way to do that was by making competitive, but sensible acquisitions; so I researched, negotiated and bought as many other similarly franchised outlets as I could; until the board said “stop....now work on assimilating them.”
Approaching these acquisitions I learned a few things about buying other companies. The first key success variable was how to value a prospective acquisition. This involved everything from observations, discussions with others, obtaining objective advice and research, to the direct, face-to-face negotiation with the seller. A most important facet of the analyses involved conducting comparisons between the subject acquisition and others available regionally. This meant conducting endless, time-consuming comparisons, analyses and research of competition, other options, financial projections and so on.
I was thinking about this gigantic data hassle in relation to managing my own financial portfolio. If you are going to buy stock in one firm versus another, is this not similar to me making those decisions in the past...as if you were buying the company? How do you make those decisions? Do you figure out what to do by yourself, or rely on the advice of others? Or do you just wallow around not really knowing what to do?
If you rely strictly on the advice of others, isn’t that the same as me not visiting those restaurant outlets, or having them ‘mystery shopped’, or visiting there anonymously? How do you really know for sure if you’re getting accurate, truly objective advice? If you are being given specific advice, aren’t others being given the same? If this is so, won’t that help force the stock’s price up by way of demand? Do you lose your edge?
But if you’re doing your own research and you have some ‘secret weapons’ or tools to help you, won’t that allow you to find the best opportunities that others don’t have or yet even know about?
One such investor, Ian Campbell liked to manage his own stock portfolio. But he found it painfully time-consuming to do the analyses, pouring over piles of charts, other web sites, trying to make sense of all the inputs for so many different companies. Additionally, often the information he heeded and wanted most, simply was not there. He reasoned that there must be thousands of investment advisers and other investors who like him desired a solution. Campbell has developed a website (stock researchdd.com) focused on Small Cap Canadian Mining and Oil & Gas stocks. Among many other things you can do at this site is the detailed comparison of the 250+ companies embedded there. For instance, users can compare companies in more than 40 different ways: on a daily basis, everything from ‘Trailing 90 day Volatility; to ‘Interest Bearing Debt/TTM After-tax Cash Flow’; on a trailing 12 month’s basis. Each comparison table is automatically generated when selected by a subscriber. Companies are ranked in the comparison table in either ascending or descending order depending on the characteristic the subscriber selected.
You can generate company comparisons for any segregation level you wish, simply by using the main navigation bar and the drop-down menu there. For example, selecting Company Research -> Mining -> Gold -> Producer -> Mexico from the drop-down menus will result in all companies who produce gold as their main output, and who operate principally in Mexico, being compared by whichever characteristics the member-subscriber then selects. The significance of each comparator is stated, along with how it has been calculated originally.
This is amazing stuff. I sure wish I had a web site like this when I was figuring out which companies to buy back in the day. If you want to feel comfortable and secure that you have the very best information available to make your own buy or sell decisions, this should probably be a part of your own stock research tool kit.
© Roy MacNaughton, 2008