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If your trying to pick good shares to buy where do you do most of your market research? Via Technical Analysis or via a study of company fundamentals? How about a simple walk through the mall?
While there might not be to many people that are bullish on retail stocks at the moment that fact may just make it a great time to look for value and future opportunity.
Choosing the next big thing to hit the stock market from the retail sector could be as easy as a walk in the mall. Yes, there is actually a real world market research center open at reasonable hours to everyone.
On this stroll through the mall, or if you like - free stock research center, you should be looking for a business with good prospects, which you can understand, which is run by people you like and trust and which has a sustainable competitive advantage. It is your ability to understand a retail or service business that is called upon in the mall.
It only requires keen powers of observation and the effort to apply them. You may well have specialist knowledge in food services or electronics. You are to be envied this knowledge, so use it. Most of us do not have such an advantage, but we are all customers, and thus we all have a tremendous advantage in knowing what a customer wants. It is just that we may have never thought of turning this knowledge around and taking the next two steps which are trying to imagine how those wants are best provided for and identifying the shop that is doing it best.
Look for a shop which sells things people actually want or need, presents them attractively, prices them competitively and actually seems to be selling them all day long.
Talk to staff, shop managers and franchisees. There is pretty much no limit to what you can learn about a business by talking to the people involved in it. You learn right away how enthusiastic they are and they usually need little prompting to tell you why. In no time at all you learn why customers come in the door, why they buy there and why they come back. You also learn which businesses have a high level of share ownership among their staff, a simple measure of inestimable value.
You and I can learn these things but it seems that incumbent competitors in the field cannot. The most remarkable thing about companies that have cracked the successful chain formula is that often their competitors don't seem to wake up to what is happening. It seems they never take a pause and ask themselves what it is the newcomer is doing which works for them. They do not have the advantages that we investors have; the detachment, for example, being able to stand back and survey the field and ask themselves what it is that makes one company or other stand out year after year.
To pick the next giant of its industry when it is still in its youth is the name of the game. Finding the first mover in a new sector or the new entrant doing all the right things and gaining momentum could lead you towards picking future hot stocks.
A first mover is very hard to catch. Even the best of category killers has a sustainable competitive advantage for only a limited time. Good ideas always attract imitators and all will run out of room to grow eventually. This happens when there is no place left they can open a new branch without cannibalizing; taking some business away from their existing outlets. The early bird continues to catch the worm.
Originally submitted by: Jack Sampson
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