When reading about investing, you often hear that it’s important to do your research. That educated investing is the key to successful investing. That you should never invest a dime until you understand just what it is you’re investing in.
However, there’s not much information out there about where or how to find the information you’re supposed to be researching. This creates a conundrum: As a beginner investor, you know you should research opportunities before making investments, but you’re not sure where or what to research to make the right decisions.
Don’t worry. We’ve got you covered.
Stock Research Process to Use Before Investing
Below are the steps to take when researching stocks, and how to find the information you need to make educated investing decisions.
Step 1: Get the Story From the Horse’s Mouth
When considering investing in a company’s stock, first get the story straight from the company. There are several places to look for information that has been released by the company.
Read the Investor Relations Website
To find a publicly traded company’s investor relations website, all you’ll need to do is a Google search. Simply search the name of the company or ticker symbol of the stock followed by “investor relations” —for instance, if you’re interested in investing in Apple, you could search for “Apple investor relations” or “AAPL investor relations.”
Most publicly traded companies have investor relations information on their websites. If you come across a company that does not have an investor relations page on its website, it’s a serious red flag for investing in the stock.
Once you find the company’s website, take the time to read their story as they want it told. In particular, pay close attention to the Home page and the About page to get an overview of what the company is and what it represents.
Look for Investor Presentations
Once you’ve gone through the company’s investor relations website, look for investor presentations. These are generally slide presentations in the form of PDF files.
Investor presentations are designed to attract investors by providing details on the company’s past, present, and future. They are a great way to get a more detailed understanding of the company and its products, the size of the market in which the company operates, its competitive advantages, and the opportunity that lies ahead.
Read Press Releases
Next, most investor relations websites will have a press releases page. This page provides an archive of all press releases issued to the public by the company.
Press releases are valuable sources of information. They are where companies make just about all material announcements that have a fundamental impact on the business. Some of the most common topics you’ll find in press releases include:
- Management Changes. In most cases, when a CEO, CFO, or any other member of a management team is hired, fired, or steps down, the company will issue a statement to investors via press release. Because the quality of a company’s management is a key factor in a company’s success or lack thereof, it’s important to keep tabs on any changes to the management team of any stock you own or are considering investing in.
- Quarterly and Annual Results. Publicly traded companies are required to provide financial and operational information to their investors on at least a quarterly basis in what is known as the quarterly report. So, every three months, you can expect to see a press release outlining sales and other operational highlights as well as the financial position of the company. The information in these reports will prove to be invaluable when getting an understanding of the quality of investment a stock represents.
- Product and Service Launches. Any company that’s going to stay ahead of its competition is one that is constantly innovating. When innovation leads to a new product or service, publicly traded companies generally issue press releases announcing their launch. Any time you invest in a company, it’s important to know what products and services they offer, what their flagship product is, and what new products are either being launched or coming down the line.
- Meaningful Orders. A company with a great product must also be able to sell that product to make money. When the first large orders are placed, companies often share with investors the fact that they have received substantial revenue-generating orders.
- Philanthropic Efforts. Investors are becoming increasingly socially aware. As such, philanthropic efforts often lead to increased interest in publicly traded companies and the products they create. Lately, there has been a trend of companies announcing what they are doing to improve the lives and well-being of others with a portion of the profits their companies are generating.
- Mergers and Acquisitions. Finally, mergers and acquisitions are some of the most valuable moves the stock market experiences. These transactions are generally shared with the investing community by way of press releases.
All of this information combined helps to further your understanding of what the company is doing and its potential for future growth.
Check Into SEC Filings
Finally, in the United States, the Securities and Exchange Commission (SEC) is a regulatory authority that overlooks just about everything associated with investing. Among other requirements, the SEC requires publicly traded companies to file material information for the public to see, whether good or bad.
There are several different types of SEC filings; a full list is available on the SEC website. The most common filing types include:
- 10-Q. This is the quarterly reports filing. It’s where you find all required information surrounding quarterly financial and operational results.
- 10-K. This is the annual report filing. Once per year, publicly traded companies provide an annual report that outlines financial and operational progress achieved in the prior fiscal year.
- Forms 3 Through 5. Forms 3, 4, and 5 are required filings surrounding beneficial ownership. When a company insider such as a high-level executive buys or sells shares of their own company, the SEC requires the disclosure of these purchases or sales. The same disclosure is required for institutional purchases and sales as well as any purchase or sale of a security that represents a value larger than 5% of the market capitalization of that security.
- 8-K. This is a filing used to announce unscheduled material events or changes in corporate structure. For example, the signing of agreements, results from a clinical trial, or approval from a regulatory authority will all be shared through 8-K filings with the SEC.
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Step 2: Seek the Opinions of Others
It would be great if everyone were honest even when it wasn’t in their best interest to do so. Unfortunately, that’s not the case, even when talking about the executives of companies worth hundreds of millions or billions of dollars.
When assessing the merits of investing in a stock, it’s never a good idea to simply take the company’s word for it. Keep in mind, the company you’re invested in is run by human beings that ultimately have their own best interests at heart. Your best interests and theirs aren’t always going to align.
So, it’s best to get a second opinion. There are several websites out there that are happy to provide their takes on just about any company you can think about investing in. Some of the best websites that provide independent analysis include:
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Yahoo Finance is an all-inclusive stock-research powerhouse. When you search for a stock ticker on the website, you’ll be brought to a page that includes a mix of technical and fundamental information, as well as a stock chart.
As you scroll down the page, you’ll notice article-formatted content. There are three different types of article content served by Yahoo Finance.
- Press Releases. Yahoo Finance is one of the largest press release syndication services online today. The website lists all press releases issued by publicly traded companies through most PR services.
- News. The website also outlines third-party news about the company. In the news section, you’ll find detailed analysis from various trusted sites across the Web.
- Research Reports. The research report content is only available to premium members. However, it might be worth the $35 monthly price tag (or $350 annually). The curated research reports included in this section are provided by registered stock analysts that live to analyze market conditions.
Aside from the article-formatted content on Yahoo Finance, you’ll find quite a bit of quality information about any company you care to research. At the top of the each company’s page, there are several blue links that give you access to the following:
- Chart. The chart link will bring you to an interactive stock chart, jam-packed with options to add useful indicators for technical analysis.
- Conversations. Conversations is a chat room of sorts. In the chat room, a group of investors interested in the stock share their opinions, giving you a better idea of what the investing community is saying about the company.
- Statistics. The statistics page is a great source of information, providing details on the company’s market cap, valuation ratios, and more.
- Historical Data. The historical data page provides price data including high, low, open, and close prices on a daily basis throughout the company’s history.
- Profile. The profile gives you an overview of the company, where it’s located, and the management team in charge.
- Financials. On the financials page, you’ll find the balance sheet for the company, outlining its financial stability.
- Analysis. The analysis page gives you analyst data, including average target price, average rating, the number of analysts covering the stock, and more.
- Options. The options page gives you a view of what’s going on with regard to the options market. Because options activity gives you an idea of investor sentiment, this page gives you the data you need to determine how the investing community looks at the stock.
- Holders. The holders page outlines what type of investors are purchasing the stock, outlining what percentage of the stock is held by insiders, institutions, and retail investors. This data is important because high levels of ownership by insiders and institutions suggests a high degree of confidence in the company’s future.
Another intuitive source of information is Google News. Although it’s last on the list, it may quickly become your favorite. Google News sources information from websites big and small.
Oftentimes larger, more prevalent news outlets won’t write about stocks that don’t have massive appeal among retail investors. Meanwhile, smaller media companies are happy to cover smaller stocks where there is less competition for readers’ attention.
As such, when searching a ticker on Google News, you’re likely to find a long list of articles to read from both experts and retail investors. With different levels of articles being listed, Google News provides a more all-inclusive view of how those following the stock feel about its prospects.
Step 3: Consider Analyst Views
Registered analysts spend their entire careers assessing investment opportunities. If anyone knows the market inside and out, these guys and gals are it.
Although you should never blindly follow anyone’s opinion — not even a registered analyst’s — analyst opinions are a great way to validate your conclusions. The best place to find information with regard to analyst opinions is through Atom or TipRanks.
TipRanks sources data from more than 15,000 analysts around the Web. By searching a ticker on the website, you’ll find a host of information including average analyst rating, average price target, changes in analyst opinions, and more. All of this will give you a more intuitive understanding of how analysts view the opportunity.
Another great place to get an understanding of how analysts feel about a stock is Zacks Investment Research. Zacks is one of the most widely trusted research firms on Wall Street. The company’s services go far beyond analyst ratings.
When you search a stock on Zacks, you’ll see a page that outlines analyst opinions and offers commentary by way of articles, technical data and charts, and key fundamental data to help you make your investment decisions.
There are many more stock market investment news, analysis, and research sites out there. Find a few that speak your language that you can rely on to give you further insights into any investment you’re considering before you pull the trigger.
Research is the foundation to any strong investment decision. While it may take some time to properly research a stock, understanding the view from both the company’s perspective and the perspective of experts and analysts is time well spent.
Making investments without educating yourself on what the company is doing and the potential for the future is akin to gambling. However, by following the steps above, you’ll be able to greatly expand your chances of making profitable moves in the stock market.