Research Guidelines

The following information is meant to be a guideline for researching a company. 
It assumes that you have already found a company that interests you.

STEP 1:       Complete Preliminary SSG
       
Make sure the quality criteria are met

STEP 2:       Cursory Review of Company

Use one of the financial websites to take a quick tour.  What does the company do? How do they make money? How do they compare to their industry?  Any recent negative news? Do analyst projections meet your  goals?  What do S&P and Value Line analysts think of the company's prospects?  If all is well, move on...

STEP 3:       Order Investor's Packet

Email Investor Relations through their corporate website

STEP 4:       Company Review

Read the 10K Business, Legal & Management sections
Read the Annual Report and Proxy Statement
Read the Management section of all 10Qs since the last 10k
Be prepared to provide a review of the company's overall business

STEP 5:       Business Outlook

Look at the competitive landscape. What are the primary drivers of growth for the company and its industry?  What are the positive and negative influences that could affect future growth?

STEP 6:       Ratio Analysis - Competitors

Who are the company's primary competitors?  Where does the company rank among them?  How does the company compare on Debt, Pre-Tax Profits, Return on Equity, P/E, etc.

STEP 7:       Relevant News and Articles

Search news sites, online financial magazine archives, the company's hometown newspaper, and message boards to find any articles that may provide helpful insight.

STEP 8:       Back to the SSG

Now that you are better informed, reconsider your original SSG judgments.

 

 

STEP 1:       Complete Preliminary SSG

After finding an interesting company, complete a preliminary SSG.  There's no sense in performing an in-depth study on a stock that doesn't meet our basic quality criteria, such as:

STEP 2:       Cursory Review of Company

If the SSG looks good, we will want to do a cursory check of the company to make sure it's worthy of an in-depth study.  Most of this can be done on any or all of the following websites:

Using Multex Investor as our default checkpoint, try to gain some quick insights by entering your ticker symbol and moving through their entire list of company tabs.  Here are some things to look for:

STEP 3:       Order Investor's Packet

This is pretty easy!  Most of the websites' Profile tabs will have a link to the company's website.  Once there, you will be looking for their Investor's Relations link, or their Contact Us link.  Most companies actually have a form you can fill out to request materials.  You can also make your request by phone.  The number can be found at the end of the Value Line Business Section. Investor Packets should arrive in 3-7 days.  Make sure you request an Annual Report, 10k, the latest 10Q, the Proxy Statement and any analyst reports available.  A packet that arrives late, or that never arrives at all, is a sign of the company's commitment to shareholders.  Make note of it.

STEP 4:       Company Review

The following questions are not to be answered individually.  They are meant to give you an idea of what you should be paying attention to while reading through the company and SEC documents.  Use a highlighter as you read, highlighting anything you think is important for your presentation.  You can condense it later into a much smaller and more defined set of paragraphs.  Consider the following:

After reading the annual report and 10K, it would be wise to read the Management's Discussion section of every 10Q (quarterly SEC filing) since the last 10K (Don't worry! The 10Q is much shorter!).  This will alert you to any new developments that may cause you to abort the  study.)

 

STEP 5:       Business Outlook

After reading the annual report, 10K and 10Qs, you probably highlighted some information that would shed some light on the industry and what drives the companies in it.  Try to list any opportunities or threats that would affect the SSG judgments and, ultimately, your decision to buy.  Consider these items:

Industry:

Finding Industry Information: Be sure to read the Value Line Company Report, the Value Line Industry Page, and the S&P Report, along with the Annual Report, to gain some insights into the company's industry.  Also check out industry-related sites such as http://finance.yahoo.com/.  They have an Industry News section.  You might find news on a competitor that could cause some temporary problems for the whole industry.  This could create a buying opportunity.

Positive and Negative Influences on the Company:

All this information can be gleaned from the company and SEC documents, which you've already read, and from online news and magazine articles (see Step 8)

Primary Drivers of Future Growth:

These details have to be mined from the Letter to the Shareholders (annual report), the 10K, 10Q, conference calls with the CEO and CFO, press releases from the company website, and newspaper or magazine articles.  Conference calls are a simple way to gain information. You can find them on the company's website or at www.vcall.com.  Value Line and S&P reports are great sources for long-term growth rates, as are the financial websites in Step 2.

Combine the above information into a paragraph or two that clearly states where the company is going, how it's going to get there, and what stumbling blocks may get in the way.

STEP 6:       Ratio Analysis - Competitors

Find competitors: Check out Hoover's Snapshot of your company ( www.hoovers.com ).  Or Value Line. Any of the financial websites listed in Step 2 will also provide a list of competitors. 

Find Ratio Comparisons: Wright Services ( www.wisi.com ) has a nice comparison in their Report format, as does Quicken ( www.quicken.com ) in their Evaluator section.  Other good sites include MSN ( www.moneycentral.com ), and Multex Investor ( www.multexinvestor.com ). 

STEP 7:       Relevant News and Articles

There are literally 100s of websites that report financial news off the news wires.  MSN, Quicken, Yahoo, Motley Fool, and Multex Investor are just a small handful.  And most financial magazines have an online presence, such as Individual Investor, Money, Smart Money, Forbes, Fortune...the list goes on and on.  Message boards are also an interesting place to gather information or ask questions of investor's who already follow the stock.  Just remember to take the boards with a grain of salt, and always try to verify that information.  In our Quality Stocks Handout (November, 2001) you will find that many of these websites are already listed.  Go to www.bivio.com/crowriver , click on Education -  Assignments and Downloads.

STEP 8:       Back to the SSG

By now, we will have a much better understanding of the company and its future prospects.  Now is the time to revisit the SSG.  Does our new-found knowledge change our original judgments?

Written March 8, 2002
From www.bivio.com/crowriver

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