Investment Basics - Course 106 - Gathering Relevant Information

By: Steve Bauer | Wed, Oct 6, 2010
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This is the sixth Course in a series of 38 called "Investment Basics" - created by Professor Steven Bauer, a retired university professor and still active asset manager and consultant / mentor.


Course 106 - Gathering Relevant Information


Now that you know the definition of a stock and the purpose of a company, how do you go about finding more information about a firm you may be interested in? Because knowledge truly is power when it comes to investing, your success as a stock investor depends on your ability to locate information and determine its importance. In this Course, I'll point you in the right direction and tell you where to concentrate your efforts. After grinding through this stuff, you will quickly sort the wheat from the chaff and be on your way to success.

Sorting Out the Public Filings

At first, public filings may look like alphabet soup, but when researching a company, they are some of the most important documents you will read.

If a company has a stock on a major exchange like the New York Stock Exchange (NYSE), it is required to file certain documents for public consumption with the Securities and Exchange Commission (SEC). The SEC imposes guidelines on what information gets published in these filings, so they are somewhat uniform. Finally, companies are required to file documents in a timely fashion.

Among the public filings available, the most comprehensive and useful document is the 10-K. The 10-K is an annual report that outlines a wealth of general information about a company, including number of employees, business risks, description of properties, and strategies. The 10-K also contains the company's audited year-end financial statements. In addition to possessing crucial facts and figures, the 10-K also includes management's discussion and analysis of the past business year and compares it with preceding years.

Prof's. Guidance: Initially, I suggest making the 10-K the first stop in your journey to researching a company. Later on in your research growth, maybe not! It's no fun, but a necessary exercise for every investor.

How to Find

How do you find a firm's 10-K? Just visit the SEC Web site, click on "Filings & Forms," and then "Search for Company Filings." After plugging your company's name into the "Companies & Other Filers" search, you can pick the 10-K out of the list of forms. also has links directly to the SEC Web site. Just enter a company's name or ticker into the search box, and choose the "SEC Filings" link on the left.

What about all those other forms? Some of them are worth a read. For instance, the 10-Q contains some of the same data that you'll find in the 10-K, except that it is published on a quarterly basis. Although it's a little less comprehensive and the financial statements are typically un-audited, the 10-Q is a good way to keep tabs on a company throughout the year.

Another important document is the annual proxy statement, also called DEF 14a. In the proxy, you will find detailed information about executive compensation, the board of directors, and the shareholder voting process. The proxy is a must read for gaining better insight into the corporate governance of the company you're researching and determining your rights as a potential shareholder.

If you're interested in a recent event, typically associated with an earnings release or major company announcement, you can find the details in the most recent 8-K. Also, you may want to occasionally peruse the Form 4's to see if insiders have been trading company stock. Every time company insiders make a transaction in company stock, they are required to file the Form 4, allowing you a peek into whether they are buying or selling shares. While an insider's trading activity may be no smarter than your own, it can at least reveal if management's investment behavior is consistent with its tone.

Prof's. Guidance: So with all this information, how come there is still fraud, stealing, and misconduct in the financial industry? That's a full three hours (or maybe 300 hours) of lecture and debate.

Making the Most of a Company Web Site

Another source of information is the company itself. Just plug the name of the company you want to research into Google. You should find the company Web site near the top of your results.

The investor section of a company's Web site can offer a variety of information. Copies of the public filings are usually available in more flexible, downloadable formats -- such as PDF, Microsoft Excel, or Microsoft Word. Also, you can sort through the firm's press releases and examine the latest investor presentations (typically in PDF or Microsoft Power Point formats).

It's definitely worth a visit to the company Web site. It doesn't take long, and reading the press releases will give you some of the most up-to-date information available. Also, it may be useful to see how a company does business on the Web.

Setting Up a Watch List

After you've researched your first batch of companies (read the public filings and visited company Web sites), it's time to set up a watch list. How do you do this? Fortunately, Morningstar and Yahoo offers these services for free.

By creating a watch list, you'll be able to keep tabs on company news and easily find stock price information. Among other things, you can set alerts to notify you when a stock price has met or exceeded a particular threshold. Thus, your watch list will eventually become an integral tool in helping you make buy and sell decisions, stay organized, and keep informed.

Seeking Out Expert Opinions

After you've become a bit of an expert yourself by sifting through the information we've already discussed, you may want to read what other analysts and investors have to say about a particular company. While your investing decisions are yours to make, you might be able to gain a new insight or angle by reading others' research.

Prof's. Guidance: This may or may not be helpful. It will certainly be confusing - so who do you believe? One guy says Buy and the other says Sell. Who can you believe or trust? Remember these three words: Patience, Discipline and Wisdom. A little common sense doesn't hurt! One in a hundred have the stock market figured out. Maybe one in a thousand, but keep digging until you find the right guy or gal.

Avoiding Information Overload

You shouldn't feel bad if you can't read every article from every source that comments on a company you're researching. In your journey to becoming an informed stock investor, you'll almost inevitably feel overwhelmed from time to time by the vast amounts of information available. Fortunately, you don't need to read it all to be successful. In fact, some information may actually harm your performance by taking your focus away from what's truly important. That's why I've highlighted the key pieces of information you will need to make an informed decision.

Prof's. Guidance: Here's a quick step-by-step guide to becoming informed about a company: You'll want to eliminate some of these, after you have read all these (reports and articles) for a lot (a hundred or so) of different companies.

  1. Obtain the firm's 10-K and really try to give it a thoughtful read. Don't feel bad if you spend a lot of time on this step. (Give it a couple of days to digest.)
  2. Read through the 10-Qs when they are released each quarter. These are usually much shorter than the 10-K and shouldn't require more than an hour or two of your time.
  3. Set up a watch list to organize the steady flow of news on all the companies that interest you.
  4. Poke around on the company's Web site. This takes less than a half hour.
  5. When time allows, visit relevant industry Web sites and catch up on some of the industry trends.

The Bottom Line

If you follow these steps, you'll be able to form a foundation of understanding about a company in about a week or two. Over time, you can build on your foundation and gain a much deeper understanding. Further, you'll be able to weed out the news and data that just isn't worth your time. All told, if you stay the course, you could be surprised how your knowledge will grow by applying this simple process.

Quiz 106
There is only one correct answer to each question.

  1. What is the must-read public filing that provides a comprehensive overview of a company and is published annually?
    1. 10-Q.
    2. Form 4.
    3. 10-K.
  1. Which public filing provides investors with a quarterly update?
    1. 10-Q.
    2. Form 4.
    3. 10-K.
  1. If you want to find out if the CEO is selling his or her stock or buying more, you should search which public filings?
    1. 10-Q.
    2. Form 4.
    3. 10-K.
  1. Which one of the following sources contains financial information audited by an independent accounting firm?
    1. 10-Q.
    2. 10-K.
    3. Press release.
  1. Which of the following sources is written from a point of view other than the company itself?
    1. Press release.
    2. 10-Q.
    3. Analyst research report.

Thanks for attending class this week - and - don't put off doing some extra homework (using Google - for information and answers to your questions) and perhaps sharing with the Prof. your questions and concerns.


Investment Basics (a 38 Week - Comprehensive Course)
By: Professor Steven Bauer

Text: Google has the answers to most all of your questions, after exploring Google if you still have thoughts or questions my Email is open 24/7.

Each week you will receive your Course Materials. There will be two kinds of highlights: a) Prof's Guidance, and b) Italic within the text material. You should consider printing the Course Materials and making notes of those areas of questions and perhaps the highlights and go to Google to see what is available to supplement those highlights. I'm here to help.

Freshman Year

Course 101 - Stock Versus Other Investments
Course 102 - The Magic of Compounding
Course 103 - Investing for the Long Run
Course 104 - What Matters & What Doesn't
Course 105 - The Purpose of a Company
Course 106 - Gathering Information
Course 107 - Introduction to Financial Statements
Course 108 - Learn the Lingo & Some Basic Ratios

Sophomore Year

Course 201 - Stocks & Taxes
Course 202 - Using Financial Services Wisely
Course 203 - Understanding the News xxx
Course 204 - Start Thinking Like an Analyst
Course 205 - Economic Moats
Course 206 - More on Competitive Positioning
Course 207 - Weighting Management Quality

Junor Year

Course 301 - The Income Statement
Course 302 - The Balance Sheet
Course 303 - The Statement of Cash Flows
Course 304 - Interpreting the Numbers
Course 305 - Quantifying Competitive Advantages

Senor Year

Course 401 - Understanding Value
Course 402 - Using Ratios and Multiples
Course 403 - Introduction to Discounted Cash Flow
Course 404 - Putting OCF into Action
Course 405 - The Fat-Pitch Strategy
Course 406 - Using Morningstar as a Reference
Course 407 - Psychology and Investing
Course 408 - The Case for Dividends
Course 409 - The Dividend Drill

Graduate School

Course 501 - Constructing a Portfolio
Course 502 - Introduction to Options
Course 503 - Unconventional Equities
Course 504 - Wise Analysts: Benjamin Graham
Course 505 - Wise Analysts: Philip Fisher
Course 506 - Wise Analysts: Warren Buffett
Course 507 - Wise Analysts: Peter Lynch
Course 508 - Wise Analysts: Others
Course 509 - 20 Stock & Investing Tips

This Completes the List of Courses.

Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the experiences of life, I hope you make it fun.

Learning how to consistently profit in the Stock Market, in good times and in not so good times requires time and unfortunately mistakes which are called losses. Why not be profitable while you are learning? Let me know if I can help.



Author: Steve Bauer

Steven H. Bauer, Ph.D.

Steve Bauer

Steve has several degrees, i.e. post graduate degrees and doctorate and a great deal of (too much) continued education. For seven years, he did a stent as a University Professor of Finance and Economics.

He owned a privately held asset management firm and managed individual investor and corporate accounts as a Registered Investment Advisor - for over 40 years.

Professionally he is a financial analyst and private asset manager / consultant / mentor.

Steve can be reach at

Copyright © 2010-2011 Steven H. Bauer, Ph.D.

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