In-depth research

I must admit, I love doing research.  I have an innate curiosity about almost everything, so when I get to dig into a company and its industry, I’m in hog heaven.

Recently, I’ve been digging into the technology field and it’s amazing how many nooks and crannies there are to understand. 

Just in computers, you have two major sides: hardware and software.  Both of those can be divided into customer sectors: consumer, small and medium business, public, and enterprise.

Just in the enterprise part, you have storage, servers, mainframe/virtualization/cloud software, networking equipment, database software, operating systems software, middleware, and applications.

Some businesses compete across all categories, like IBM, HP and Oracle.  Others pick niches that allow them to work with competitors in one market and against them in another.

The hardware side also has a long chain of providers.  If you buy a disk drive, the company you buy from probably out-sources assembly and buys parts from others instead of manufacturing itself.  In the case of enterprise storage companies like EMC and NetApp, they are more software than hardware companies!

And then there are services.  Some businesses are pure consulting with no products to sell, others provide services in one particular niche, like storage, and still others do everything from top to bottom, like HP.

Is it better to be a niche company, or cover the whole field?  Which companies have sticky products that are hard to dump, and whose products or services are easy to quit?  How is the landscape changing?

Technology seems to be more rapidly changing now than five years ago, and a lot of that is a culmination of widely available and cheap high speed broadband, both wireline and wireless. 

Will old businesses that were once dominant be toppled, or can they adapt to the new landscape?  Or, will customers be the ones to benefit because stiff competition reduces profitability?

To truly understand all these nuts and bolts, and to be honest enough with yourself to know what you don’t know, you need to do a lot of homework.  Sometimes that homework pays off in insights that generate better than average returns.  Sometimes it’s just a dead end.

Either way, in-depth research is the best way to go when it comes to investing.  I believe that is one of the reasons it’s so hard for part-time investors to generate above average results–they are competing with people who are digging deep in areas and ways that no part-timer can match.

But, it’s not enough just to understand the companies, the technologies and the competitive landscape.  You also need to understand the financials and be able to value individual securities. 

In many ways, I think I’m one lucky duck, because I get to do what I love, what interests me, what I’m good at, and what the market needs all at once. 

For me, in-depth research isn’t just a means to other ends, it’s a very enjoyable end in itself.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

In-depth research