The opening scene has Holmes observing the walking stick left by Dr. Mortimer, whom he has not yet met. Observing it, he tells Watson in his usual nonchalent manner, "Let me hear you reconstruct him from his walking stick — by our usual methods of elementary observation."
Watson proceeds, noting the quality of the stick and its evident wear. He supposes it belongs to an elderly revered gentleman, possibly a country doctor.
Holmes is delighted with Watson's progress but then attempts to decipher the engraving on the handle, proposing 'C.C.H.' stands for 'Charing Cross Hospital.' He also notices the scratches in the middle of the stick and presumes they are the bite marks of a small hunting dog accompanying the owner:
“Has been in the habit of carrying this stick behind his master. Being a heavy stick the dog has held it tightly by the middle, and the marks of his teeth are very plainly visible. The dog's jaw, as shown in the space between these marks, is too broad in my opinion for a terrier and not broad enough for a mastiff. It may have been—yes, by Jove, it is a curly-haired spaniel.”
Exploring possibilities and then narrowing scope is as important as any information gleaned by simple observation.