Scuttlebutt techniques

[LC]

I figured it might be a good idea to list some scuttlebutt techniques to use to get an alternative perspective of a business.

 

I personally always take a look at the "careers" page of a company. I think it gives a glimpse of what business areas management wants to strengthen.

 

For example I am looking at Materials Science Corp (MASC). They provide acoustic materials for a variety of customers, and on their jobs page, they are looking for sales-relates positions. Taking that information in conjunction with their financials I can piece together that they are looking to improve their sagging top line.

 

This obviously works better with small/mid sized companies than a huge company like Exxon.

[stahleyp]

I picked this not too long ago, but haven't started to read it yet. Others have talked nicely about it though.

 

http://www.amazon.com/The-Sleuth-Investor-Uncover-Stocks/dp/0071481850

 

[oddballstocks]

Sleuth investor is great.  Here are a few easy scuttlebutt techniques:

 

1) Call and get a sales quote, pretend you're a customer, see how they serve you.

2) Order the product, if they sell little parts order a few and look at the build construction

3) Search out customers, talk to them about their experience

4) Look on LinkedIn and contact former employees, send them an email saying you're doing research and want their opinion.  With this expect to get emails trashing the company, probably 50% or more, but remember these are people that are gone.  What you're looking for is different, you want all positives or mostly, that's huge, or all negatives with similar stories.  People love to give advice and talk.

5) Check out the facilities.  I will alter my routes in Pittsburgh to drive past little public companies here, after seeing some of the headquarters I'd never invest.  One was in a rough area of town in a falling down apartment building, address checked out.

[Ross812]

A technique for retail. Go by the store at 7pm and count the number of cars in the parking lot. Note the brands of the parked and compare it to other parking lots. I used this method to determine that Petsmart and Wholefoods and Freshmarket have the same clientele. It is a pretty interesting scuttlebutt technique to compare retail and gives a pretty good estimation of a business's core demographic.

[augustabound]

A technique for retail. Go by the store at 7pm and count the number of cars in the parking lot. Note the brands of the parked and compare it to other parking lots. I used this method to determine that Petsmart and Wholefoods and Freshmarket have the same clientele. It is a pretty interesting scuttlebutt technique to compare retail and gives a pretty good estimation of a business's core demographic.

 

I used to work for HBC (Hudson's Bay Company) and I would always park where the Bay store was in the mall.

Partially to do a casual walk through of the store but mostly because there was always lots of available parking at Bay entrances. 

Obviously not a good sign.

[compoundinglife]

Here are some of things I have done WRT scuttlebutt.

 

- I owned IGOI when it was a net/net and they were coming out with new products that were supposed to fuel growth after the company lost its largest customer. I would go to the local Fry's electronics every so often and check out the product placement, try to get an idea if any of the product had moved off the shelf from the last time I was there. Also Fry's puts returns back on the shelf with a discount sticker indicating it was returned. I bought a couple of their products, in this case a universal laptop power adapter. I broke it unintentionally within the first 30 minutes of using it, noticed that there seem to be higher returned products on the shelf for their laptop power adapters vs targus (used to be their largest customer). They were also touting their direct sales model via their website and how it was gaining traction. So I checked out the online store quite a bit to see what the experience was like and also checked the Alexa rankings regularly to see if there was a trend of more traffic to their website after launching the online store. The stock had run up about 30% was no longer a cheap net-net and my research indicated their was a reasonable risk their strategy was not working. I missed some more upside on the stock but it eventually tanked as their strategies failed.

 

- For smaller companies sometimes I will look at the google street view to checkout their offices.

 

- As oddball mentioned LinkedIn can be good. I have never used it to contact anyone at the company but I have used to find out much revenue a certain department does. Managers love to boast on their profile how much revenue they were responsible for and that information may not be broken out in the statements.

 

- As I mentioned with IGOI, alexa or other traffic rating sites can be helpful in some cases for various reasons. If they launch a new product you can get an idea of much interest their might be based on increased traffic levels.

 

- Sometimes I will go to stores and chat up they employees. Ask them if they think management is steering the ship in the right direction, ask them if things have been picking up after trying a new strategy. As Oddball mentioned people love to talk, I just try to ask them a few questions and let them do the talking. When I owned SNS/BH I managed to visit a few Steak and Shakes in my work travels and would always ask the manager/supervisor how things were going with the new management.

 

- With SHLD I subscribe to updates on their job postings specifically in the tech section to see what kind of people they are hiring, what skill sets they are looking for.

 

- REED is currently launching a new Kombucha product line, so I often try and visit health food stores or whole foods to see if the product has arrived yet and also look at how much shelf space Kombucha has in comparison to other vendors. Currently GT's is the largest company is this space and REED is hoping to be the #2 or maybe even #1 in the market. GT's gets tons of shelf space at the local Whole Foods and when ever visit there are quite a few bottles missing from the shelf and I ask the employees if they have to constantly refill the shelf space. Once Reed's has their product at my local WF I will be keeping an eye on how they do in comparison to GT's with regards to shelf space and product coming off the shelf.

 

- With some smaller companies I have used google street view to check out their offices and facilities.

[ericd1]

I've never done this but heard about it somewhere.  Sounds like a pretty good way to gain insight into a small company.  Find the local bar or hangout where the workers (factory or office) buy a couple of beers ask questions and be a good listener.

[siddharth18]

Or...become a stripper and coax the executives into giving you insider info, as enunciated here http://www.hulu.com/watch/54129 !

 

*Kidding of course*

 

Nice thread guys.

 

I'll add Glassdoor.com and Indeed.com for employee reviews/sentiment and job sites for openings (to in which area is the company expanding, and how aggressive they intend to hire).