Finding Great Stocks Starts With What You Know

People often ask where I find my investment ideas, assuming they’re some rare commodity. The truth is actually the opposite. After more than twenty-five years of hunting for good investments, my challenge isn’t finding ideas—it’s sorting through them. But I remember starting out and asking the same question you might be asking now: Where do I even begin?

I pictured a river of ideas flowing somewhere, and I just needed to find it and jump in. It turns out, that river is real. To help you find it, I’ll pass on the same advice Peter Lynch gave me through his books years ago: start with what’s right in front of you. Don't overlook your own experience; use it. This is the foundation of . Tapping into what you already know will give you at least one idea worth digging into. That single idea might not pan out, but it will lead you to others, and those will connect you to people with even more insights. Before you know it, you'll be in the flow.

Use Your Professional Experience as an Edge

It’s easy to take for granted, but your day job gives you a massive advantage. You understand your corner of the economy better than 99% of investors. Warren Buffett calls this your “circle of competence,” and it can be an incredibly rewarding place to source ideas. It’s a bit like a built on the knowledge you already have.

Most professional investors are outsiders looking in. They might visit an industry, but you live there. You know the good neighborhoods and the dangerous ones, the solid players and the shady characters. Peter Lynch pointed out that most people ignore this advantage. He figured doctors were more likely to own oil stocks than medical stocks, and aerospace engineers were probably dabbling in shoe companies. This is a mistake, especially today. With technology changing so rapidly, the knowledge gap between industry insiders and everyone else is wider than ever.

If you work in sales, you have a better read on Salesforce than most analysts. Is its competitive advantage growing, or is a smaller company starting to chip away at it? I don't have the answer, but you probably do. The same goes for specialized business-to-business (B2B) companies like Autodesk or Ansys. If you’re an industrial designer using simulation software, you’ll know firsthand whether Ansys has a real, defensible moat.

There’s a catch with B2B companies, though. Unlike consumer brands, their customers aren’t driven by loyalty or habit. The B2B world runs on price and performance, making it much harder for a company to maintain its edge. The key is to look for companies that are the low-cost producer of something essential. Even then, be cautious, because competitors are always trying to find a cheaper way. Your insider knowledge is only valuable if you can confirm the company’s competitive advantage is truly durable.

A poker buddy of mine, an auditor named Henryk, asked me about a company called Alteryx that makes tools for analyzing large datasets. I asked him a few simple questions. Is it the market leader? Yes. Could he do his job without it? Absolutely not. He explained that while cheaper alternatives exist, they are significantly worse. The productivity gains his firm gets from Alteryx are so huge that no competitor comes close. Only then did I tell him it sounded like an idea worth pursuing.

Look Deeper Into Your Consumer Experience

When it comes to consumer-facing tech companies, finding an edge is trickier. Billions of people use products from Apple and Alphabet, so basic familiarity isn’t unique. This is where requires you to look a level or two deeper.

Everyone knows Amazon dominates e-commerce. But fewer people realize that many small merchants on the platform resent its high fees. That frustration created an opening for Shopify, which provides software for small businesses to build their own online stores. It’s been called the “anti-Amazon,” and its stock has grown fortyfold since its IPO seven years ago.

Similarly, most people know Netflix is a streaming giant, but not as many have paid attention to Roku. Roku controls the hardware connecting streaming services to our TVs. It started as a simple device but has leveraged its market-leading position into a modern-day toll bridge, forcing channels to share subscription revenue to stay on its platform. The market noticed, and Roku’s stock has soared.

Sometimes, great opportunities hide in plain sight during a market meltdown. After the dot-com bust, I was able to buy Apple for the value of its assets alone. But even in normal markets, you can find value. Everyone knows Amazon is a dominant force, but not everyone understands that it can also be an attractively priced stock.

The Generational Divide in Investing

There's a “digital divide” that exists between generations of investors. Older investors were taught by people like Peter Lynch to trust the stock market, and it has served them well. But they often lack training in the new digital economy. Younger investors are the opposite. They grew up with technology and understand it intuitively, but they are often scarred by market crashes and distrust traditional .

To succeed, older investors need to understand technology, and younger investors need to understand markets. It’s about merging these two worlds.

Advice for Younger Investors

It’s understandable to be skeptical of the system, especially with things like student debt. But don’t let that push you into the irrational world of meme stocks and Dogecoin. The U.S. stock market has created more wealth over the last century than anything else in history. Since 1988, it has returned about 11% annually, despite several crashes. A $10,000 investment then would be worth nearly ten times more than the same amount put into real estate. Market downturns feel scary, but if you remember that the market is a place where value eventually wins, you’ll see them as opportunities to buy great businesses on sale.

Your tech knowledge is an edge, but only if you know how to use it. It's not enough to just be familiar with tech; you need to understand competitive moats, what makes a great management team, and basic valuation tools. This is how you find not just great businesses, but great businesses at a fair price. It's also critical to tune out the noise. The constant stream of information and the “gamification” of investing by apps like Robinhood can be major distractions. Investing isn’t roulette; it’s a long-term game that rewards skill, strategy, and patience. Trying to get rich quick often ends in disaster. Just look at the story of Jesse Livermore, a famous day trader from a century ago. He made and lost fortunes betting on short-term market moves and ultimately, after facing another financial crisis, shot himself in a hotel cloakroom. Don't be that guy. This isn't just one of many overnight; it's a disciplined practice.

Advice for Older Investors

The world has changed since Peter Lynch’s books came out. The internet, social media, and smartphones have created new industries and destroyed old ones. While investing in companies like Coca-Cola and Pfizer has worked in the past, we have to acknowledge the new economic reality. It’s easy to be put off by the culture of tech—the hoodies, the nose rings—but the companies run by these “kids” are the most powerful economic engines ever created. Alphabet earns more than four times what Coca-Cola ever has in a single year. If Warren Buffett (in his 90s) and Charlie Munger (nearing 100) can study the digital ecosystem, so can we.

We need help from younger people to understand this new world. It can feel humbling, even make us feel old, but we have to get past that. Buffett said he finally understood Apple’s brand power after watching his great-grandchildren glued to their iPhones at a Dairy Queen. That initial insight led to an investment that has made Berkshire Hathaway over $100 billion. I learned about Chegg, the online textbook provider, from my son’s friend. He explained how Chegg has become a platform for all student needs, from renting digital textbooks to finding tutors. Its revenue has tripled in five years while legacy competitors have declined. The digital world is different, but it’s understandable. You just need to let those you once taught become your teachers. Turning your knowledge from your into a real investment strategy requires this modern perspective. is one thing, but making it a successful requires you to adapt.