How to Find Value Stocks and Ideas

To find the best value stock ideas, you need a competitive advantage over the next person when it comes to stock picking.

I’ve been asked many times how I’m able to come up with the obscure totally ignored, low risk high return stocks. It isn’t difficult, and I’m hear to let you in on how I do it.

Considering that value investing has been in existence for decades with the likes of Benjamin Graham and Warren Buffett introducing the world to value investing, the value investment technique still remains effective because a majority of investors shy away from the hard work involved.

I previously wrote about how to find stock ideas, but I hope these additional few techniques will make it easier and give you an added advantage.

How to Find Special Situation Stocks

The SEC is a great place to find mergers, stock tenders and going private transactions.

In addition to the standard search, the SEC has an “advanced” search engine. Let me go through how to find special situations with it.

When companies file documents to the SEC, they do so in a document called a Schedule 13E-3 and formatted to support XML (you don’t need to understand what XML is in order to know how it works).

There are several tags within the XML header which you can use to narrow down your search. If you look a snippet of the code below, you will see you can make highly targetted search queries using tags such as “COMPANY-NAME”, “FORM-TYPE”, “FILING-DATE” etc.

<SEC-HEADER>
<COMPANY-NAME>Company Name
<company-CIK>CIK
<PUBLIC-DOCUMENT-COUNT>Public Document Count
<ACCESSION-NUMBER>Accession Number
<TYPE>Form Type
<PERIOD>Period
<FILING-DATE>Filing Date
<FILER>

(More information from http://www.sec.gov/edgar/searchedgar/edgarzones.htm )

e.g. I have a shortcut button on my toolbar that links to the query
“FORM-TYPE=13e3 FILING-DATE=200908*”

This query returns the results of all Schedule 13 filings, which includes merger, tender and going private transaction notices from August 2009. Change the date from 200908* to 200909* to display the results of September 2009 and update each month.

Get a Twitter Account!

Twitter has already become a hub of spam and useless information, but it is still incredibly useful for investors. Particulary for stocks you follow or finding special situations.

Type “reverse split” in the search box and see a list of updates on reverse split stocks that people are talking about.

The reason Twitter is useful for this is because most of the results are close to real time or a couple of days old at most. You won’t be getting outdated results from months back.

A Decent Search Aggregator

I use to spend more time than I wanted searching for information my companies through various forums and websites.

The Lion is a website that lists all twitter updates, press release, blog posts and forum updates on your stocks from many different sources.

A great way to see what others are saying.

Increasing Your Competitive Advantage

Create a bookmark on your toolbar to point directly to the SEC company search page.
http://sec.gov/edgar/searchedgar/companysearch.html

The SEC website isn’t the user friendliest place on the internet but make sure you visit the SEC pages as your main source of official company related news and numbers.

Other than a couple of 3rd party sources I use in my valuation spreadsheets, I rarely ever look at the financial numbers from Google, Yahoo or other places. I get my numbers directly from the source.

There are times when numbers are misquoted which leads to lofty valuations or missed opportunities, but the SEC provides it all in clear black and white.

This may only happen 1 in 50 times but that 1 time could cost you dearly.

Stick with the source to get an advantage and to find information on your companies.

Get to Work

Time to get to work and flip over those rocks people just pass by. Half dollars still exist if you look carefully.

Reader Shane, was able to capitalize on a FELI reverse split situation after reading my previous post and instructions on how to search special situations from the comments which resulted in a 200% gain in 1 day.

Powerful stuff yet incredibly low risk if you do your homework.