I’m in the ideas business. If we don’t give our readers and subscribers interesting, compelling, money-making ideas, we don’t have a business.
And though you may not know it, you’re probably in the ideas business too. Maybe you can get by doing what you’ve always done. But whether you’re a doctor, hawker centre vendor, retiree, driver, or lawyer, there’s always – and I mean, always – going to be a better (more efficient, more profitable, easier, faster) way of doing what you’re doing now.
And that takes ideas… lots of them.
I look at money and investing – so I’m going to tell you three ways that I look for new ideas about investing. But you can use the strategies below to come up with all kinds of ideas.
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Idea generator #1: What are people selling?
I’m talking about stocks… but this can be anything. What are people dismissing/getting rid of/talking about like it’s yesterday’s thing?
People sell a stock if they think their money can be put to better use. But if everyone thinks the same way, that opens the door to a contrarian opportunity. After all, everything has a price – and even a lousy company can be a great stock if it’s cheap enough.
And also… sometimes share prices fall simply because everything is falling. One of the best places to look for good investment opportunities is in lists of stocks that have fallen sharply – of companies that are fundamentally strong and growing.
That’s especially the case when entire markets are sold off (like China last year, and especially in December) because of concerns like a slowing economy and the U.S.-China trade war… even though lots of companies were not at all affected by those issues. Buy the baby when he’s tossed out with the bathwater.
Idea generator #2: Look at old ideas
Following a stock – or any asset, for that matter – is like following a real, live, evolving story. When you research a company (or, say, a piece of real estate… or even a used car), you’re looking back at past chapters to see how it got to where it is today… what went right and what went wrong… who owned it or managed it… and what made it what it is today.
Let’s say we buy the stock (or the house, or whatever asset we’re talking about). Then we become part of its story, and it becomes part of our story. And then, at some point, we sell it – maybe we need to raise cash, or a new shiny object caught our eye, or the price hit our price target (or stop loss). (Or maybe we don’t buy it… but we’ve still put a lot of time into it, and kind of understand it.)
So then, is that it? Out of your life forever? It shouldn’t be.
One of my favourite sources of new ideas is… old ideas. If I’m already familiar with a story – the story of an asset, the evolution of where it came to be where it is now, management, history, share price action – keeping up with it is pretty easy. And give it a cycle or two, and the price might become right again.
One guy who was very good at this was billionaire investor Kirk Kerkorian, who invested in casinos, car makers, aircraft manufacturers and movie studios. Kerkorian bought and sold movie studios MGM and United Artists three times over a 26-year period. He made hundreds of millions of dollars each time, as he bought unwanted assets, made them more attractive, found a buyer… rinse and repeat.
This is a lot easier with stocks. Over 30 years of investing, I’ve built up a big library of stocks that I’m familiar with – some more than others, but all of which I can get back up to speed on quickly if there’s possibly an opportunity. That’s one of the first lists I go to when I’m looking for new ideas.
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Idea generator #3: Question what you “know”
The way we understand the world is through models of how we experience what happens around us. We make decisions and behave according to how we’ve understood things to work in the past. We cross the street, make a hard-boiled egg, tell our kid to do his math homework, vote, buy a stock and do everything else based on these models.
But these models – which are really assumptions built on each other – aren’t always right. In fact, they often aren’t. (One of the best things about traveling is having those assumptions questioned… all the time.) That’s one of the ways that we learn.
What if you made a point of challenging those assumptions… all the time? What if Donald Trump actually has a point in his trade war with China? Or if there actually is something to this whole cryptocurrency thing? Or if a country in the midst of a slow-motion demographic crisis is actually thriving, busy and booming?
Assume the opposite of what you “know” and try it on for size. You might come up with a great idea.
Idea generator #4: Ask questions like there’s no one judging you
The best way to question what you “know”? Talk to people who “know” things that disagree with what you think you know.
And when you talk… don’t disagree. Instead, ask questions and listen. The worst thing is that you might learn something new.
The brother-in-law who’s a physicist and doesn’t know how to talk about anything else? Great. The guy who lives down the street but whose political beliefs sound like they’re from Mars? Talk to him. The stock analyst who focuses on the sector of the market that absolutely puts you to sleep in two seconds flat (my sleeping pill: industrials)? Have a double espresso and open your ears.
So… I’m off to come up with new ideas. Sometimes you should too.
Publisher, Stansberry Pacific Research