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Has anything positive ever come from a message board, and are these tools that we should even consider using in our investment research? -- R.
Online message boards are often one of the first places that beginners visit as they begin to learn about individual stocks and investments. These boards are often filled with strong opinions and interesting commentary, but they are not useful to serious investors because of the anonymity of the writers and the extremely small amount of constructive information.
This isn't to say that you won't find the occasional insightful post on a message board. There are
intelligent and insightful people who post messages that you can learn from or get ideas.
The problem is that the vast majority of posts are completely useless. You may find one poster who offers an analysis of a company's P/E ratio vs. those of its competitors, or even offers some lesser-known information about how a company has an advantage that will help its stock price go up over the next year. But you will end up sifting through dozens or even hundreds of other posts that can range from simple bickering over whether or not a stock is going up or down, to others that offer false information and/or shoddy reasoning.
My take on message boards is this: It's good that investors have a public forum where they can offer their take on a stock or engage in an intelligent discussion about a company. However, their value as a tool for investors to get "investable" ideas from is almost zero because of the tendency for the boards to be filled with messages that read (for example) "Shortz about 2 get Squeeeezed! (eom)" or attention-seekers who love to announce "This stock is going below $1" for no other reason than to generate angry responses. In the end you'll waste a lot of time reading a lot of nonsense, when you could be spending your time more constructively.
With the vast amount of information available on the Internet, there's no reason for serious investors to spend significant time on message boards. Anyone looking for information on a specific stock should look at the following:
- The company's Web site and investor relations page, where myriad information can be had, from annual reports and quarterly financial statements to special investor presentations and detailed information about the company's products.
- Sites that offer basic information about a stock, from market capitalization and earnings expectations to charts showing how the stock's shareholders have fared recently. Many sites offer this basic information, including TheStreet.com and Yahoo! Finance.
- Lastly, and perhaps most importantly, investors should read the specific articles and opinions offered by sites like TheStreet.com. The most important part of "doing the homework" before investing is your understanding of exactly why a stock will go up or down. Part of this understanding comes from seeing what kind of thesis other investors are using to explain their position on a stock.
Hunting for Ideas
For investors who are looking for idea-generation, other online tools can be used, including:
- Any reputable site focused on investing will have articles about recent developments in companies. There could be a story about a pharmaceutical company with a number of potentially important new drugs in its pipeline, or news on a particular industry that could help a particular group of stocks outperform the market over the next year. Investors can read any number of these stories and find a few ideas that stand out.
- Stock screens are a popular way to reduce the universe of publicly traded stocks into a shorter list of ideas. Typing "stock screens" into Google will produce dozens of choices. Different screens offer different criteria, from simple market-cap and industry choices to more advanced choices that focus on everything from valuation to number of employees. My personal favorite, though it's not free, is the screen offered by Capital IQ.
Good luck, and happy investing!
In keeping with TSC's editorial policy, Larsen Kusick doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Kusick is a research associate at TheStreet.com, where he works closely with Jim Cramer and works on TheStreet.com Stocks Under $10. Prior to joining TheStreet.com, he worked in options trading and management consulting. He appreciates your feedback;
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