We’ve been documenting a broad range of sources and services we have adopted to perform our regular research tasks.Â In the process we have hit upon what we think is an important question for us and anyone else who is actively investing capital in the public markets.
Years ago the hedge funds helped cement the concept of the "mosaic" for a particular stock idea or market condition.Â When looking at buying or selling a name these portfolio managers consulted a few sources that created a picture for them from a set of well defined aspects.Â The classic case was a set of inputs that suggested near-term business was tracking better than consensus expectations, insiders are buying, new analysts have been visiting the company implying that new coverage is coming, and the valuation is attractive.Â A set of consistent positive inputs means an informational mosaic that says "buy." As we have said many times before a successful analysis includes fundamentals (business trends), expectations (consensus thinking) and valuation.
There’s been a huge proliferation of information sources, sources that vary by type, scope and quality.Â There’s also been a continuing trend of increased specialization.Â Now institutions regularly consult firms like Gerson Lehrman for internal morale or insight on a potential investment, use another to do channel checks, get models and consensus thinking from brokers, bring in raw data from services like NPD, or Majestic, commission a custom survey, use a too like Bloomberg, or Reuters for insider transactions, lock-up expirations and so on.Â Â Some are using consumer services like Google and Yahoo more to get a retail view of stocks and the market.Â Add to that the growing number of interesting alternative sources of information like Monitor110, Covestor, Stockpickr and other ways to glean changes in sentiment or market adoption.Â The full range of sources often also shifts based on whether an institution is in "idea generation" or "due diligence" mode.Â
As we begin to document and semi-automate aspects of our own investment process we are forced to consider some architecture to pull these diverse and changing elements into our universe of knowledge and analysis so we can further optimize our portfolio and the quality of our decisions.
Every week we find and try to incorporate more good information sources, additional industry experts and smart people, different methods of getting and sharing information (first email then Skype now Twitter?)
We’re trying to incorporate a few overlapping layers and a fairly comprehensive view but even doing the basics begs for a simpler way to match fundamentals with consensus and valuation.Â Why aren’t the online tools better?Â Who has a simple and flexible architecture to put all these research elements in a context for decision making?
Better tools are needed.Â Right now it looks like we need to develop most of what we want ourselves.Â If nothing better appears we’ll produce them for the rest of the world when we are done.Â Meanwhile, we welcome any good ideas.
— Kris Tuttle