It didn’t take me long to realise that brokers were the worst source of ideas as their only interest is to increase your trading turnover and thus their commissions.
I also tried technical analysis, mostly on gold shares in South Africa, also without success.
Having discovered that does not work however did not solve my problem, I had to look elsewhere.
After having read a few more books and speaking to a few long term successful investors I came to the realisation that there are basically just a few ways of getting profitable investment ideas.
You can read a lot, maybe stumble onto interesting companies that may be trading at attractive prices, not very productive.
Or you can use screening tools. This is one of my favourite ways of identifying undervalued companies to research.
I explain exactly how to do this in the following two articles:
Another good source is to look at what other successful fund managers are buying, look at their reasoning for buying, do your own research and perhaps buy the same companies.
This is a very attractive way of finding investment ideas because, by carefully selecting the fund managers you follow, you can find investment ideas that closely match your own investment style.
However always look for a fund manager whose investment style is similar to yours with a good long term track record.
First a word of warning…
Following fund managers with the current (last one to three years) highest returns is a recipe for disappointment, as numerous studies have shown. One study is summarised here: Study shows (again) that mutual fund hot hands quickly cool
In the remainder of the newsletter I want to show you a tool you can use to quickly and easily keep track of what your favourite fund manager is up to.
The tool applies to USA registered funds but that should not be a problem as there are so many excellent US based international value fund managers.
To date I have unfortunately not found a similar tool for European funds. Should you know of one please let me know.
To set up your tracking system go to www.morningstar.com
You have to register but it is free and painless.
Here are the steps:
1. Click on Register and then on Free Membership and fill in the necessary details.
2. To avoid too many future e-mails be sure not to click on all the other offers that Morningstar wants to send you.
2. Make a note of your username and password as you will need them in future
3. Once you have registered you will automatically be logged in
You can now begin adding funds to your watchlist.
To do this you can use the search function at the top to search for funds you know and want to follow.
I will use one of the funds I follow to show you how to set up the e-mail alert.
Type the fund code ABIAX (you can also search by name) in the Quote search box.
Click on AllianceBern Intl Val A when it appears.
You are interested in the fund portfolio, thus click on the Portfolio tab
To see the current positions in the fund click on the Holdings tab
Next we want to set up an email alert so that we will automatically receive an email when an updated portfolio is available.
To do that click on Get E-mail Alerts.
On the next screen, if you scroll down a bit, you will see a whole laundry list of things you can be alerted to. I only select Manager Changes and Updated Fund Portfolio.
Select what you would like to track, and once you have done so click Submit.
That is all there is to it.
You have now set up an e-mail alert that will notify you of any manager and portfolio changes of the fund you have selected.
Other excellent value funds you may want to consider following are:
- Brandes Instl International Equity I – BIIEX
- Longleaf Partners International – LLINX
- Oakmark International Small Cap I – OAKEX
- Oakmark International I – OAKIX
- Polaris Global Value – PGVFX
- Forward International Small Co Inv – PISRX
- Third Avenue International Val Insti Cl – TAVIX
- Tweedy Browne Global Value – TBGVX
- Thornburg International Value A – TGVAX
- Tocqueville International Value – TIVFX
Once you have looked at the funds portfolio and identified a company that you are interested in you can most likely find more information on why the fund manager bought the particular position by going to the funds website and searching in one of the most recent monthly or quarterly letters.
What is very important to remember is that identifying companies a good fund manager has bought should just be the start of your research process. Once you have identified a company you should work through your normal research process.