Chapter-10: Value Investing Course

How to generate Stock Investment Ideas?

With more than 6000 companies listed in India, it’s tough for an individual investor to conduct in-depth analysis like industry analysis, moat analysis, management analysis, valuation, etc. and decide the stock in which he can invest.

In 1993 Adam Smith, author of Supermoney asked Warren Buffett in an interview that how small investors can find good investment ideas.

Everyone knows that Warren Buffett generates most of his investment ideas from Annual reports.

It was a different story 60 years back, but now we can gather any data or information just with the click of a button.

When Warren Buffett started his career he didn’t have an advantage that we have today, i.e., Technology.

Most investors in the stock market wonder in which stock they should invest because remember we have almost 6000 stocks to select from.

Let’s make this process simple for you:

Step-1: Start with NIFTY 200 list of companies

Step-2: Kick out stocks that are out of your circle of competence. Don’t worry if you have to kick out a lot of stocks in the process.

Step-3: With the remaining stocks, start reading the annual reports of the companies begin with A, advised by Warren Buffett.

If you think that this process is very difficult to execute, here are some other ways in which you can generate stock investment ideas.


1. Stock Screeners

You can use and you can apply your own list of criteria for screening. If you want to use mine, here is my list of criteria in choosing winner stocks.

A glimpse of my result:

2. Disgraced Stock (52-Week Low List)

Most investors avoid these disgraced stocks but contrarian investors always look for beaten-down stocks because this is where you will find stocks at attractive valuations.

Look for the high quality businesses which have corrected from its previous highs. But before investing in such stocks always question whether the fall in share price is cyclical or structural, i.e., whether the fall is temporary or permanent?

A glimpse of the 52-week low list:

3. General Observations

Search for ideas from the products or services you will use in your daily life. Investing in stock market is not that difficult if you keep your eyes and ears open to find solid business ideas from the things around you.

4. Business Media

Most of the news is just noise, so avoid reading business newspapers and watching news channels. Instead, read magazines like Forbes and look for solid business ideas.

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