Different investors have different methods of deciding which companies to get into. Raj Rajaratnam, the founder of Galleon Group, had two: insider trading, and good old-fashioned market research.
For instance, check out this little anecdote from The Wall Street Journal:
Last summer, Mr. Rajaratnam asked a junior female analyst to buy a black spandex outfit from retailer Lululemon Athletica Inc. as part of a research project into the company, a hotly traded stock.
He then asked the analyst to wear the outfit at the firm’s morning meeting, said people who were there. As employees giggled, Mr. Rajaratnam made the point that few consumers would pay so much money for the expensive outfit in a recession, these people said.
What? It was research. Sure, the lady on the table may have felt a little bit uncomfortable being ogled by all of the dudes at the company, but it paid off because clearly that the stock was a buy. Anyway, we’re sure Raj made up for it by agreeing to model the mirdle the following month (and they passed on that one).