"Scuttlebutt" is the name given to the art of digging up investment information by the investor grape vine. The word comes up all the time in writings to do with Buffett and sometimes Lynch, but as far as I know the term was coined by Philip Fisher in his classic book Common Stocks and Uncommon Profits and Other Writings.

Scuttlebutt is the process of finding information about a stock. The process is simply a matter of asking the right people the right questions until you believe you have enough information to make a judgement about a company's intrinsic value.

The first people you want to talk to are management. Sometimes investors can get to talk to someone as high ranking as a CEO, this is more likely in a small company but for larger companies there should be someone who is the designated investor relations guy, who sends out annual reports and is available for questions. Peter Lynch could usually get someone really big on the line, but for the average investor even talking to some lowly employee can reveal valuable information about this company.

Suppliers and customers can be a very valuable source of information, if you want to invest in a drinks company, ask a Deli owner if the product is moving well, and have there been any problems with accounts. Delivery guys, like milkmen and other drivers can be particularly useful, as they can usually give an accurate picture of the organisation's reliability. It is not uncommon for management to live in complete denial that a company has any problems, but the delivery guy knows fully well that certain products have been out of stock for weeks on end. (I was a milkman during my uni days, I had many frustrating conversations with higher management of my various suppliers who insisted all was well, and called me a liar when I stated plainly that 100% orange juice or something was out of stock for the 3rd week in a row. Some managers were so arrogant that they refused to believe such reports, insisting that all was well with supply. This was not a small company, they are a major listed "blue chip" food producer!)

University or government researchers, scientists and academics. In particular when dealing with technology issues it might be a good idea to bounce some ideas off the local engineering professor, they can either help you understand something or put you in touch with someone else. There have been many technology companies that have been blazingly obvious failures for many months (to a technically minded person), before the market caught on. A few minutes talking to a nuclear physicist would have stopped people chucking all that money at cold fusion in the 80s for example.

Trade association executives can be a very good source of data.

Do not underestimate the value of asking competitors for information as well. The info might be biased but generally people are more professional than that, Lynch's favourite tactic is to ask a manager which of his competitors he most admires, high praise of a rival is a very good reason to go looking at that stock as soon as you've finished looking at this one.

And of course former employees, if you can find them, can provide a good inside scoop, but be sure to check why they left!

For truly great companies there might be very little difference in the opinions you hear, interesting companies will raise their heads as well.

On the subject of "scuttlebutt", but moving away from Phil Fisher, Sir John Templeton used a similar sort of approach. He asked the following questions of managers.

1. Do you have a long range plan?

2. What will be your average annual growth rate?

3. Why should the future be different from the past? What are your problems?

4. Who are your ablest competitor? Why?

5. If you couldn’t own stock in your company, which of your competitors would you want to invest in... and why?

As the rest of us do not usually get a CEO on the line, these are the sort of questions you should be asking yourself and trying to find the answers for by reading annual reports and the text of speeches given by company bigwigs at annual general meetings or other media releases.