At the last regular CMC meeting, we reviewed the attached slides for identifying ideas. There are many approaches, but often the starting position reflects an investor’s philosophy about how opportunities are created and can be exploited. That philosophy can be related to investment style, i.e. some investors tend toward “value” ideas and others toward “growth” ideas. Academics define value and growth in precise terms, but it is better to think of them more conceptually and reasonable to associate them with behavioral biases. A value investor generally believes the market/investors overreacted to something causing the stocks’ price to deviate from its true intrinsic value. There is an opportunity to buy when research suggests the stock will revert to that intrinsic value as whatever caused the deviation recedes into the past or improves. A growth investor generally believes the market/investors are underreacting to a company’s favorable trends (growth). They believe there is an opportunity to buy and benefit when research suggests the growth will continue.
One way investors look for ideas is by screening for stocks with characteristics associated with growth or value. We briefly discussed the Factset Universal Screening tool. As with many of its applications, Factset includes short tutorials with its Online Assistant and eLearning resource describing how to use its Universal Screening application. You access these resources at the ? in the upper right corner of your menu if you are in the FAL or on the bottom of the left side menu on the web version of Factset. We also created the video Screening for Ideas with Factset to demonstrate how to access a CMC folder with the screens highlighted in the attached slides and to describe how Universal Screening works by walking an example. Let us know what you think.