The idea generation part of an investment process is something that get's a lot less attention than it deserves. At Forager, we have a clearly defined process for researching an idea and working out whether the idea is a good one or not. But how do you come up with that idea to start with? While many fund managers have a scientific-looking slide that explains the process, I think idea generation is the creative part of investing. And it doesn't lend itself as well to the mathematical brain. Sure, you can run filters, you can find all of the stocks with low PEs, high asset backing or low PEG ratios, but you are going to find the same answers as everyone else. In normally functioning markets, investors don't leave obviously cheap companies for us to pick up at bargain prices. It's my view that you need a unique insight into a business, industry, person or strategy. This blog posts explains where those insights come from. (VIEW LINK)
Starting Forager Funds in 2009, Steve has grown the business to over $370m of funds under management. Offering an Australia and Global equity Fund, Steve focuses on long-term value investing of unloved and undervalued companies.
The irony about your third point is that the harder you force yourself to look for new ideas the more difficult it can become to generate them.
This is definitely one of the areas of investing I find most challenging. Thanks for sharing your thoughts Steve.