My Investment Research Process (Part 1)

The reason why I started this blog is to allow an explicit archiving of my thinking process and certain investment lessons/mistakes which will be essential to remember. And this goes the same for our investment research process as well. Having a proper and structured research process over a particular stock ensures that every possible perspective point has been adequately covered. It is not that it looks professional but for someone who is a beginner like me, it actually brings about several advantages:

1. It reinforces our conviction of the investment thesis. This is why we have to do our due diligence and not leave it to analyst report. Leaving our research to analyst’s target price will only result in weak emotional discipline when the stock price plunges.
2. It minimises the risk of “anchoring bias-ness”. It’s human psychology to anchor on a single reason unknowingly. For instance, you find a stock cheap because it was trading at a low P/E but totally neglected the other 50 bad pointers about the company. In other words, doing your own extensive research gives you a more holistic picture of the stock.
3. It will bring up more questions. Which is in fact a good ‘bad’. Though it means more time to seek for the answers, it will better convict yourself of the investment thesis. Or an opportunity to meet the management during AGM/EGM.
4. And lastly, it is the perfect tool to compound knowledge – which will be very helpful in the future. Doing research helps to build up our knowledge base. We get to learn about industry standards, peers performance and so much more. No doubt this will take a lot of time but in the future, with all these knowledge compounded, your approach to analysing a company will have a better edge against others. You get to understand a company’s history and eventually this will comes into handy when you are analysing other peers.

Of course, the list of benefits isn’t exhaustive and there are simply many more but basically, these are the 5 main reasons why I will push myself to research extensively no matter how busy I am.

Next Post: I will discuss on my own personal investment research procedure, perhaps with elaborations on each phase of the research