Seeking Alpha is an amazing place to discover the answers to a lot of questions we need to be able to answer before we make ANY investment. It’s almost the inevitable next step. It’s where the actual research on the company we’re digging in really begins... Here’s a recap of what we need to do...
The Eight Simple Steps To Becoming A
Truly Great Investor
Gather Great Ideas - Leverage What You ALREADY know
All About the Analysis - Digging deep into learning about the company.
Minding the Moat - Uncovering and labeling the durability of the company (this one is HUGE).
Meet the Management - The person steering the ship dictates the speed at which the company grows, which ultimately dictates our potential for growth! (Sailing into the sunset? Or crashing into an iceberg…).
Where’s the Event? - We are bargain hunters. There is no bargain without some sort of event. We want a sales event, not a “going out of business sale”
Reverse and Reduce - Flip the script, and focus on the downside. This is Charlie Mungers “Invert, always invert!”.
Sale Price - This is our biggest advantage. We know the value. We know what we’re buying. We know the price we should pay. We are patient. Patience pays.
Repeat until very wealthy.
As you know, I’m always on the lookout for the best, fastest, easiest, and most powerful tools that we as individual investors can use to level-up our investing process. Seeking Alpha has become one of my favorites, for exactly this reason. When we put in the work, we inch our way closer to becoming a true Next Level Investor. And that is always a big win.
Remember, the three things we need before we make ANY investment:
Knowledge
Confidence
Conviction.
This is why we MUST put in the work.
That’s really what this next step is all about. Building our confidence so we can act when the time is right. If we do this, we won’t miss out on the opportunities the market will (always) present to us.
Sometimes to move forward, you must first go back…
This is Part 4 of the 5-part series, and if you somehow started here, first of all, Hi, thanks for reading! Second, please read the intro, and the other three posts that came before this one. They really are amazing resources, and you don’t want to miss them (I even threw in some bonus resources in Part 2 for good measure…)
Here they are:
Part 3: Corner of Berkshire and Fairfax
Part 5: Seeking Alpha (That’s this one…)
What we’ll go over today
1. What Seeking Alpha is, and how it works.
2. The Power Seeking Alpha has and why.
3. The best way to use it. In just 7 steps.
4. Follow Charlie Munger's advice!
What is Seeking Alpha?
Well, it's both a website and phone app, that hosts thousands of investment research writers and articles in one convenient location.
Seeking Alpha offers market insights, financial analysis, free earnings call transcripts (which is my favourite). It also offers us a huge amount of investment ideas and research around the company’s you are interested in.
Odds are, if you found a company you want to know more about, someone on Seeking Alpha has already written an article about the company. It’s really cool, and all of these features are absolutely free.
It’s also a meeting place for a large number of individual investors, since the website encourages comments after each article is posted.
Side Note: Sometimes the Comment section is more interesting than the article… This is really where you see people arguing both sides of the company in one place. It’s pretty fun.
The Power of Seeking Alpha
This website is ridiculously popular, and therefore, has a lot of potential for us to find research without having to do our own.
This is a Value Hackers rule;
“If the information we need already exists, all we have to do is find it.
We don’t have to create it…”
Just one popular article on Seeking Alpha can have a sometimes dramatic effect on the stock price. This is possible because seeking Alpha:
Covers a huge amount of stocks (4000 small and midcap stocks in the last year).
Has a huge writing force of over 10,000.
Has a very active and educated readership, with over 280,000 commenters.
Money managers, journalists, and business leaders, all read Seeking Alpha.
The site sees a huge amount of traffic; 85 Million average monthly page views.
In 2013, an Academic study by Universities of Hong Kong, Purdue, Cornell, and Georgia Institute of Technology researched 7 years of stock analysis on Seeking Alpha.
They found that the Opinion expressed in the Articles, and the comments were in fact, predictive of future stock returns and surprises over all the time frames they looked at (one month, three months, six months, one year, and three years respectively). Convinced this is a good resource yet?
Here are a couple of the more notable quotes from the study:
“The Views expressed in SA Articles and SA Commentaries contain pieces of value-relevant information, which, as of the article publication date, are not fully factored into the price. As investors adopt the SA view – prices gradually adjust. As a result, SA views predict future stock market performance.”
“In the end, all of the findings presented in this study point to this usefulness and value relevance of peer-based advice in the investment domain, and they hint at the possibility that social-media outlets specializing in financial markets may eventually mirror the development of other “bottom-up knowledge generators” such as Wikipedia and the way they have changed how information is produced, evaluated, and disseminated.”
You can find more information about the site, and all their ridiculously impressive stats on their about us page.
Now that we understand just how influential Seeking Alpha is, we need to know how to use it. I’ll show you how I do, and you can adjust the method however you like…
How to use Seeking Alpha
(In 7 simple steps!)
Step One: Sign up!
Sign-up for a free account 
(you’ll find this in the top right of the page) and follow the prompts. You’ll need to have Five different companies to follow with their ticker symbols. Be sure to sign up for the ‘Wall Street Breakfast’ on the
page. They are great daily emails that help you keep in touch with the investing world around you and with daily market news.
Step Two: Search.
Once you have an account, Enter the ticker symbol of the company you’re looking to do more research on in this box, 
then hit enter. (We’ll continue with our CMG example from the last resource)
This should bring you to this page:
(Source: Seeking Alpha)
Step Three: Earnings overview
Click on the 
tab in the middle of the screen.
(Source: Seeking Alpha)
Here you can see a snapshot of the most recent quarter for CMG as well as some news articles that were released around earnings. You can see here that in Q3 CMG missed earnings per share by a large margin, as well as revenue (ouch). If you click the 
arrow, you’ll close that tab, and get a good view of how Chipotle performed in previous quarters.
This gives you an excellent snapshot of the past earnings of the company. (Note: the % points are compared to the quarter in the previous year. You’ll notice that CMG did not have a great 2016).
Step Four: It’s Transcript Time
This is the most important step and the most time consuming. This is where you put in the time to understand the company well enough to invest in the company or to move on. It’s where you gain a better understanding for the business, the CEO, and the future prospects. If you want to better understand this step, read this post here.
This is one of my favourite features for Seeking Alpha. They write out the quarterly earning calls for you, in an easy to read and convenient way. Awesome.
Focus on the language the CEO uses, if they admit to the shortfalls/struggles, and how they are going to fix them. (again, read here in the management section, for more advice on how a CEO should talk to their shareholders).
Click the 
tab to see a list of all the recent earnings calls.
(Source: SeekingAlpha)
I usually start with the most recent earnings call and work my way backwards a few years. This is why it’s so important to actually be interested in the company you’re looking to invest in…
If you don’t care about the business, you’ll quickly give up on this crucial piece of research.
The fix? Only ever invest your time and your money in the company’s that interest you! I promise this makes the whole game easier, and you’ll be happier (and wealthier) for it!
Sidenote: Click the 
button below the first page to make it easier to go through the entire transcript. (Your welcome).
I usually focus on the Q & A portion at the bottom of the transcript. This is where they open the floor for all the investors, mutual funds, and hedge funds to ask them the really tough questions. It’s important to read this because they may bring up an important question that you never thought of, or wasn’t mentioned in the earnings call. Note: You have the right as a shareholder to be a part of the call. This means you can get in the call yourselves, and potentially ask them a question you’ve been curious about.
Here’s an excerpt from CMG’s Q&A in a past quarter, and the very first question they ask:
(Source: Seeking Alpha)
Pretty awesome right!?
Step Five: Write it down!
It’s always good to keep notes on what the company has planned, and if they are making good on those plans. The best way to do this is to write them down, either on a physical notepad, or in a document of your choosing. Usually I’ll just copy and paste an excerpt from the transcript, if I think is important information to know for future reference
Note: if you notice the CEO talking about potential goals, or plans for the next year or years, write them down and see if they keep talking about them, and following through. If they don’t reach their goals, they should be telling you why they didn’t, otherwise, we may not have an honest CEO running this company, and we should RUN.
Step Six: Make a decision
Now that you’ve put in all that time and effort, getting to know the ins and outs of the business, it’s time to decide. Is this a company you still want to own?
(I‘m making the assumption that you’ve used my Four other resources, and are therefore at the final inflection point).
If you decide to buy, write down why you want to own the company and your reasoning behind it. It’s always good to know why you owned a specific company. Our minds tend to sugar-coat the past, so if we have it written down, there will be no sugar coating. This is especially useful if you make a mistake on the investment. When it’s written down, you can go back and figure out what you were thinking, without hindsight bias, and discover where you made the mistake. The same is true for the investment winners. You can review your reasoning and try and replicate the process on your next investment to give yourself a greater edge.
Step Seven: Keep up…
Lastly, now that you’ve made up your mind (and potential now own the investment, if it was on sale that is…) it’s important to keep up with the company. This can be as simple as reading the new Quarterly earnings as they are released. And that’s honestly probably the best thing to do. Make sure you add the company to your ‘Portfolio’ be notified when the company releases its earnings calls. (which I’ll show you how to do… right now).
Follow Munger's advice
If you really enjoy reading about the business, then you can see what others say on the subject…
Charlie Munger (Warren Buffett's partner in crime) says to ‘Invert! always Invert’ your investment thesis. This means to flip the positive narrative on its head.
In other words, instead of focusing on the potential upside the company could achieve, we need to focus on the downside.
Remember the #1 Rule of investing...
Many articles on the site will be written with a negative view on the company, this is the area I like to pay particular attention to. Humans (Me for example...), tend to only focus on the potential upside in an investment (greedy buggers). However, it’s important for us to see if we can destroy our original thesis, by paying special attention to what could go wrong. It’s not easy, but it’s one of the more important steps to take.
You can do this by reading the articles and writing down the potential pitfalls the company could face. You will especially see negative information in the 
section at the bottom of each post. Lots of the commenters have a lot of investing experience, and I think it’s easy to tell the ‘trolls’ from the people with the actual negative information.
Even before making your investment decision, you should figure out different ways the company could fail, and how likely they are to occur. Some of them may happen over time, and I guarantee, something you’ve never even thought of will happen to a business you own. It’s happened to me, and it was not fun. That’s why it’s important to consider all the downside possibilities. The more you do, the less likely you’ll be blind-sided when something occurs.
Summary
That’s how I use Seeking Alpha. Create your own profile and keep up with all the new information that’s released on any investment idea you’re pursuing.
Lots of the authors on this site are thoughtful and extremely knowledgeable, so get involved and add your own worries or comments to the bottom of the post and see what the other investors and authors have to say on the subject.
If there was just one takeaway from this resource it would be to Read the Transcripts & keep up with them. That’s one of the main differences between an actual Investor, and someone who is just a speculator owning stocks.
Investors put the time in to do the research, and are buying an actual piece of the business with the view and the knowledge that the investment in that business will increase in value over time.
Speculators are buying the stock in hopes that it will rise to some analysts target price in the near future.
We as Investors are the ones who will win out over time. This is why we put in the work. The saying goes;
“You don’t get the return you want, you get the return you deserve”
We put in the effort, and deserve the rewards that go with it.
Thanks for reading!
~Ryan Chudyk~
Ps.
And don’t forget,
You’re just one investment away...
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