Note Taking System for Researching Companies

To bold, underline, and highlight, or not to bold, underline, and highlight

I read an interesting tweet from @sashachapin today:

“I am the enemy of note-taking/knowledge management systems in general, I believe that they stunt creativity, serve as a convenient disguise for anxiety, and just generally waste a lot of fucking time” (link)

Getting the most out of note taking systems and habits is something that I have thought a lot about, and something close to what Sasha said is always popping up in the back of my mind.

While on the one hand, taking notes seems important because it allows you to efficiently go back and review information when it is time to make a decision, create a deliverable, or refresh on lessons learned, the downside to note taking is that it makes the whole knowledge acquisition process go a heck of a lot slower than it otherwise would.

For an investor, this can be costly. We play a competitive game and, all else equal, it’s better to be able to cover more information in a similar amount of time and at a similar amount of comprehension/retention.

I’d like to broadly detail my note taking system, and I’m curious to hear from anyone who has tried to reduce their time spent on note taking. What worked for you? What didn’t?

Quick Overview of My Current Company Research Note Taking System

I have a folder for each company I research. Within that folder, I have a Reading Notes document. The length of this document varies substantially depending on how long I have followed the company for, ranging from a few pages if I just read someone else’s writeup, to hundreds of pages for companies that I have followed for a long time.

To be clear, it’s not just a 200 page block of text. There are lots of pictures and it is primarily structured in the form of bullets, and often sub-bullets as well. For example, with Tegus calls my notes often follow a rough format of:

• Here’s the question that the Tegus client asked

  • Here’s point 1 of the expert’s answer

  • Point 2

  • Point 3

• Next question

  • Etc.

So the pages can pile up pretty quickly.

The general structure of the Reading Notes document is as follows:

At the top, there is a “Notes, Questions, etc.” section. This basically serves as a catch-all for anything important that comes up as I’m doing the research.

Next is a To Do/Action Items section, which just lists the tasks that are next in line for the research process.

After this, I have the rest of the document which is basically a long string of (roughly) chronological readings, call notes, etc. So one of these headings might be “2022 02 15 4Q21 Results”, another might be “2022 01 15. Tegus. Former SVP Marketing”. These are all in the same document.

To bold, underline, and highlight, or not to bold, underline, and highlight

Now, within each of those headings (earnings call, Tegus call, PR, etc.) is where things get more interesting and I have more doubts about the way I am currently doing things.

Right now, my general philosophy is to err on the side of including too much rather than too little. The reasoning behind this is, quite simply, the existence of Ctrl+f. I want to easily be able to go to any Company XYZ Reading Notes document and within there, Ctrl+f for “competitor A” or “Product X”. While this comes in handy at times, it also means the process of reading any one item (earnings call, etc.) takes a lot longer than it would otherwise take. Another potential benefit, though difficult to verify, is that I tend to believe I probably remember things better if I am taking the time to copy and paste them over into my notes.

Once copy and pasted, the majority is usually left as is. But for important points, I may bold and underline. And for the MOST important points, I may bold, underline, and highlight in yellow. The purpose of this is so that if I want to go back and review something, I can quickly see what the most important points were. The common reasons for doing this might be to refresh my memory on something, fill someone else in, or write up a summary.

Depending on the document/event in question, I also have a separate “Company XZY Summary Log” document that I may transfer an even more condensed set of notes to. This has a similar purpose to the bolding and underlining described above. This Summary Log also includes notes from discussions I have had with people regarding the company. I find that including these is often a good way to capture my overall thoughts on the situation, which can be good for reflections and post-mortems.

Brainstorming on Other Ideas and Approaches

I’ve heard of and thought about a number of different approaches.

One thing that I have seen people do is sorting notes by topic instead of chronologically by event/document. While this idea appeals to me on the surface, when I have actually tried to put it into practice it feels very clunky and time consuming. It would mean either adding a step to my existing process or having to jump around within my document and put the notes in their appropriate place. One place where I do apply this is in the Summary Log, but I am still ultimately doing it on the event/document level and in chronological order. So, for example, any item within the Reading Notes document will basically just be ordered however I consumed the information- PR, slides, prepared remarks, Q&A. With summary log, it’s usually more organized in the form of topics such as financial highlights, competition, management, certain products, etc. but still falls under the broader header of that one specific event.

Another idea I have had is to just try cutting down dramatically on the notes taken and see what happens. Unfortunately, for me at least, major FOMO comes into play here. I think this is what Sasha refers to when he says it can serve as a “disguise for anxiety”. I think I have a similar issue when it comes to non-fiction books. I find myself highlighting everything. Sometimes I might pick up an old book that I read years ago, and it is so heavily highlighted and annotated that it just doesn’t make for a good reader experience. Similarly, I might revisit my notes from a Tegus call and find myself thinking I might as well have just gone back and read the whole thing.

If I were to try to combat this, one approach would essentially consist of me reading through the entire earnings call without taking notes and then going back and just capturing the points I thought were the most important. I know that a lot of people do something similar with books, where they just read through one chapter and then jot down a couple of bullets at the end of that chapter and then move on.

I can’t help but feel a bit irresponsible when doing this with work related items, but I have experimented with it on personal reading. Frankly, I’m still not sure what sort of impact it has had on my retention, so I probably need to try it some more.

Another idea is continuing to take notes while I read, but raising my bar for what deserves a note. I often find myself highlighting something just because it’s interesting or I agree with it. I think it probably makes more sense to highlight what is new and important.

Another option to consider is to mark the header with what sort of notes you took. This can also apply for reading speed. So for example, my “2022 Tegus SVP Marketing” might change to “2022 Tegus SVP Marketing, Skimmed” or “2022 Tegus SVP Marketing, Read Carefully and Took [Detailed or Light] Notes”. Or something along those lines.

Why Does All This Matter?

Why spend so much time thinking about these things? Like I said earlier, the more information you can consume as an investor (assuming retention is maintained and you’re always consuming the highest ROI info available), the better off you will be. Frankly, this approach to note taking makes me a slow reader. As a result, I often don’t read things that I maybe should have. On the one hand, this is an obvious issue due to missed opportunities, facts, and knowledge. On the other, I’m always at least doing a brief scan of these documents to see if there is anything that makes it worth moving to the top of my priority list. But still, there is always going to be some FOMO in play when I choose to pass on something. E.g. If I skip out on reading a hedge fund letter (or if I skim it instead of carefully taking notes), it’s quite possible that I missed a small comment that indicates a change in strategy or philosophy, or something I could’ve learned about how to think about evaluating management, or how to conduct primary research, or a number of other things.

Conclusion

Right now, I tend to think my note taking system is probably a little overkill, and I’m looking for ways to cut down on it. I’d love to hear your own experience and how you approach these issues! I welcome any comments, whether it is specifically for company investment research or just for broader learning and reading.