Many people assume that stock investing, especially value investing, is complicated and intimidating. However, that is not the case. Value investing does not start with analyzing financial statements but rather by identifying investment ideas from our everyday surroundings.
An investment idea is the initial thought that sparks company discovery—asking yourself, “Would this company be a good investment?” It serves as the first step toward finding successful investment opportunities.
If we look around, we realize that we interact with countless companies every day. From the alarm clock that wakes us up, the bread we eat for breakfast, and the car we drive to work, to the copier in the office, the ice cream we enjoy as dessert, the soap we use when washing our face, and even the bed we sleep on—every product is created by a company. As consumers, we purchase and use these products, generating revenue for the companies behind them.
Naturally, companies that sell high-quality and widely popular products tend to be profitable, while those that fail to attract customers struggle. If you pay close attention, you can spot thriving companies versus those on the decline, and this foresight will inevitably be reflected in stock prices. The correlation between strong product sales, rising net income, and increasing stock prices is as undeniable as a mathematical truth.
How to Turn Ideas into Investments
The key challenge is how to translate these ideas into investments and, more importantly, how to act on them. There’s an old saying: “A string of pearls is worthless unless strung together.” If you simply ignore everyday insights, you will never uncover valuable investment ideas.
By training yourself to connect daily experiences with investment opportunities, you will develop a keen eye for recognizing valuable companies. For example:
- When shopping, check the company name on the tag of a best-selling clothing item.
- When your child enjoys a particular brand of ice cream, take note of the manufacturer.
- Observe which car models dominate the streets.
If a particular product or trend catches your attention, validate your idea by researching the company’s financial statements, competitive position, and long-term potential. The small spark of an investment idea, when nurtured, can become the foundation of a successful investment strategy.
Identifying Investment Ideas Through Hit Products & Brands
One of the most effective ways to spot great investments is by analyzing a company’s hit products and strong brands.
1. Hit Products
A hit product is one that is widely popular, frequently purchased, and has strong consumer demand. Such a product can significantly impact a company’s revenue and profitability, acting as a key driver of financial success.
However, when evaluating a hit product, it is crucial to consider its revenue contribution to the overall company. For instance, although Hetbahn (instant rice) is a popular product, if it represents only a small portion of CJ CheilJedang’s total revenue, investing solely based on this product could lead to misjudgments.
2. Strong Brands
Brand power is one of the most important factors for value investors when evaluating companies. A strong brand provides a company with:
- Pricing power (the ability to set higher prices without losing customers)
- Consumer loyalty and market dominance
When a company has a dominant brand, it can raise prices while maintaining sales volume, leading to higher revenue, net income, and increased company value.
Conversely, companies without strong brands struggle during inflationary periods. If raw material costs rise but a company lacks brand differentiation, it cannot raise product prices due to competition, resulting in lower profits. Examples include plywood manufacturers or paper companies that face difficulties adjusting prices despite rising lumber costs.
Investment is About Real-Life Insights, Not Just Numbers
Former Federal Reserve Chairman Alan Greenspan reportedly analyzed the volume of garbage in New York’s back alleys to gauge economic conditions. He understood that the economy is not just found in textbooks but reflected in daily life.
The same principle applies to investing. Investing is not just about numbers and financial statements—it is deeply rooted in our everyday experiences. By observing the world around you, you can uncover investment opportunities that others might overlook, setting yourself on the path to long-term success.
