In this amazing post, you will learn all about Scuttlebutt Investing.
When was the last time you tried something new?
When it comes to Value Investing do you ask enough questions or do you settle for what you know?
As an Investor very often we hold to stocks that are not performing and keep staying positive, holding on to the stock and waiting for it to do wonders. Day after day the price of the stock keeps going down but we are so emotionally attached to the stock or we cannot accept that our decision has gone wrong. You are not the only one, even I started the same way. Most people do.
Are you holding onto something that you need to let go of?
This article is for those who are not able to decide which stock to hold to and which stocks to let go. If you are looking for a method or a process or concept that tell you should you hold on to this stock or not? The Scuttlebutt Investing Method was coined by Phil Fisher (a legend of the investing world) in his book “Common Stocks and Uncommon Profits”
In True Essence, it refers to a method of learning and understanding about a company and its investment & future growth merits by talking to all the people in the company such as white and blue collar workers, delivery people, suppliers, customers, and industry expert (even competitors) that you can to educate yourself thoroughly before making an investment.
What is required to use Philip Fisher’s Scuttlebutt Investing approach as an individual investor?
Phillip Fisher writes about the business grapevine being a wonderful thing.
This brings you much closer to the company and know more about the company,”Company exact picture and supports your research, it’s the opinion that matters the most from people who are closely associated with the company.
Now, importantly you have to give assurance and confidence that the person talking about the company would not be quoted to anyone, this is a tough task, only then they would give you important information pertaining to the company”
- The company should have certain products and services which can be spoken about or discussed with individuals. Fad and products which get outdated very soon or invisible business operations does not give the required results.
- The products and service are the management going to continue. Scuttlebutt is time-consuming and if such is a scenario then it’s only to realise that the product is going to be closed soon.
- Are you ready to spend time with the company for a few months and then you come to know that the company is not worthwhile investing. Narrowing down to stock opportunities is not an easy task but this can be done with Intense Research Service from top rated stock market services.
- You have to be outspoken and extrovert. To talk to people of different states, style, and category.
- Groundwork should have been done about their Locations, Suppliers, Customer & Competitors, which is time-consuming.
- Either way Top Down Approach or Bottom Up approach you should have finalised the target company which cannot be changed at a later stage.
Advantages of SCUTTLEBUTT Investing
- Valuation & Margin of Safety is one of the Most Important aspects of the Three Most Important Pillars of Value Investing. To validate its valuation and Margin of Safety there is no better way than getting your hands dirty and reaching to the conclusion. The grapevine which is otherwise known as a negative thing, in our case you are using it for your benefit.
- Talking to the competitors not only do you know if it’s a good decision to invest in this company but also other companies in the same sector which you can put to use in the future. Nevertheless, even if you decide not to invest in this company you have already analysed the competitors hence you know which other companies are a good opportunity.
- The quote, “Never judge a book by its cover”, suits here; on the outlook, the company may be amazing but getting closer to the company you realise how really things are.
- It covers things which otherwise balance sheet or research reports do not cover.
- Talking to the Management you can confirm the growth plans and future opportunities which can then be validated by competitors and suppliers.
- Higher opportunities and probability of finding a multi-bagger which would otherwise have been difficult.
- New stock ideas for fresh Investments is possible by analysis emerging trends and scuttlebutt is a very good method getting closer to ground reality.
- Cutting the noise around the stock opportunity. Conviction is one thing which you cannot get from others research, “One has to earn a conviction.”
There are very few successful advisors offering research service based on Scuttlebutt and one of them is Stalwart Advisors his Interview was featured in Wizards Of Dalal Street in which Ramesh Damani discusses the scuttlebutt strategy with Jatin Khemani of Stalwart Advisors and hear him explain why he is bullish on Tasty Bite Eatables.
Conclusion: Scuttlebutt Investing
Do let us know if you have found any stocks using this method and strategy, Share your experience & learnings in the comments section below.
Come back here and tell us about the before-and-after. I bet you’ll have something to say!
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About the Author
Chintan Chheda is the owner, brand strategist, and Head Trader at AlphaTrading. Chintan Chheda is an entrepreneur, marketer, and writer. He authors in-depth guides, hacks, tutorials that teach about Investing, Trading, Personal Finance & Passive Income. He also authors on long/short equity, Deep Value, special situations, Growth.