Much of what we write about on Stockopedia is about finding an analytical edge, such as using the Stock Report to get a quick initial assessment of a company, or a behavioural edge by using the Stock Ranks. Although it is much harder to do, investors can also get an informational edge by looking where others aren't.
Scuttlebutt & Sleuthing
Philip Fisher called the process of speaking with customers, employees, suppliers, and even competitors to gain a deeper understanding of a company, by a naval term: scuttlebutt. It typically involved gathering information about a company through informal conversations and direct interactions with stakeholders. In his 2007 book The Sleuth Investor, Avner Mandelman describes a similar approach, where he would hang out in popular lunch venues and strike up conversations with employees of the companies he was researching.
Famed short-seller Carson Block of Muddy Waters Research made his name shorting a number of fraudulent Chinese companies that had listed on foreign stock markets in the 2010s. His key advantage was going to the headquarters or factories of the companies (or paying a private detective to go) and seeing if they looked like somewhere that had the claimed scale of operations. In many cases, he found that the companies' buildings had very little activity, and he made money betting that investors would eventually find out that this was the case.
Sleuthing the easy way
Physically going to the company's offices or paying a private detective may be beyond the average individual investor unless they have a particular point to investigate and a significant position. However, the good news is that much of the research can be done remotely using freely available tools. Many investors forget to use these tools. Indeed, I often forget about them myself until I come to write a Stock Pitch article, or have to debate a stock as a panellist. Here are some of the ones I have found useful:
Glassdoor
Glassdoor is an independent employee review platform. Although it is freely available, gaining access can be a little convoluted. The site often asks for a review of an employer in return, which may be tricky for a full-time or retired investor. Still, it is worth persisting with, as the site gives investors an insight into how a key stakeholder, employees, view the business. The reviews employees leave can be enlightening. Glassdoor's summary gives an overview of the…
