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106-Gathering Relevant Information-
 
  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 lesson, we'll point you in the right
  direction and tell you where to concentrate your efforts.
  
  
  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.
  
  We suggest making the 10-K the first stop in your journey to researching a
  company. 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. Morningstar.com 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 unaudited, 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.
  
  
  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 the search engine of your choice. 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 offers these services for free:
  1. Go to the Morningstar.com and click on the tab labeled "Portfolio."
  2. In the Portfolio Manager window, under "Create a Portfolio," click "New
  Portfolio."
  3. You'll see a box labeled "Step 1." It's automatically set up to build a
  watch list, so click "Continue."
  4. Pick a name for your portfolio, or just call it "watch list." Then, plug in
  the ticker symbols of the companies you want to watch. Click "Done."
  5. In the following window, you'll see a list of updates, alerts, and tips
  that Morningstar will send you daily for the companies in your watch list.
  Click "Done" again.
  6. Now you have a watch list that you can visit anytime by clicking the
  Portfolio tab on Morningstar.com.
  
  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. Obviously, we think a subscription to
  Morningstar.com's Premium Membership service, which would allow you to read
  our analysts' opinions, is one worthwhile resource.
  
  
  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 we've highlighted the key pieces of information you will need to
  make an informed decision.
  
  Here's a quick step-by-step guide to becoming informed about a company:
  
  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. Over time, you can build on
  your foundation and gain a much deeper understanding. Further, you'll be able
  to weed out the news 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.