I’ll share a list of some of the things I do when I need to research a company online to determine if I want to invest or not. My list is by no means exhaustive of the things you can or should do in your research process, but it captures some of the major ones I feel are important. If you have any recommendations to add to the list please post it in the comments.
Download and read the company’s latest annual and quarterly reports
Reading through a company’s latest annual and quarterly reports is a must before considering an investment in any stock. These reports will give you insight into the company’s strategy, how they have performed in the past, their expectations for the future and any risks that apply to the business.
You can download these reports directly off a company’s website, usually under the “investor relations” section.
Download and read the company’s latest investor presentation
Most companies will also publish an investor presentation (PowerPoint deck) along with their quarterly and annual reports. This presentation is supplementary and often contains more detailed information about the company’s results or future expectations. It might just be me, but i often find these presentations overly optimistic and “salesy”. Just be aware that these presentations are often used to sell investors on the company and on management’s strategy.
Analyze the company’s financial statements
Dissecting a company’s financial statements is a must before making any investment. You can find the financial statements in a company’s annual or quarterly reports. As well there are several finance portals that offer standardized views of a company’s financial statements. Some of the best include…
Make sure to analyze the income statement, balance sheet and cash flow statements to get a sense of how the company has performed in the past and identify trends.
- Is the company growing top line revenue or is it shrinking?
- Are the company’s costs under control, with steady or expanding margins?
- Does the company have enough cash and assets on hand to service their short term & long term liquidity needs?
- To what degree is the company financed by debt or equity? If they have a lot of debt evaluate whether it is sustainable.
- How does the company compare on key metrics relative to it’s competitors?
Estimate the company’s fundamental value per share
Before you invest in any company you should make an attempt at calculating what the fundamental value of the shares are worth. There are a couple of tools to help you do this.
First there is my very own Excel Stock Valuation Model, which downloads historical financial data from the internet automatically and helps you calculate the fundamental value of a company within minutes.
The second option is a service called Vuru which recently launched. Vuru will also help you estimate the fundamental value of a company using the company’s historical financial data within a few minutes. The service also provides several other useful pieces of analysis on a company’s financial strength, management performance, sustainability of competitive advantages.
Read recent news and announcements on the company
Read expert opinions on the company
The best resource for viewing expert stock picks and commentary is Stockchase.com. Stockchase tracks stock recommendations and comments made by portfolio managers on BNN shows such as Market Call and publishes them online for the average investor to read. Simply search by stock ticker symbol and you’ll be able to view all recommendations and comments for a stock sorted by recency. This information is useful because it can help you identify issues or opportunitiesSport Betting for a company that you may not have considered. IfSport Betting many portfolio managers are recently recommendingSport Betting a stock then it is a good sign for that company’s future prospects. I find thatSport Betting if you track the recommendations of portfolio managers over time you begin to figure out which ones you can trust and which ones to ignore based on their previous track record.
Check the short trends
What percentage of the outstanding shares are sold short? The trends around short interest are important to understanding whether a company is becoming increasingly under, over or fairly valued. Short interest information can be found on the website ShortStock.com. Read here on how to use it.
Check insider trading trends
What are corporate insiders such as the CEO or CFO doing with their shares in the company? Are they selling or buying additional shares which may indicate what their beliefs are about the future prospects of the company. An easy way to monitor insider trading is through the website CanadianInsider.com.
Look up who the major shareholders are in the company
You can view who the major shareholders are of a company through Morningstar.com. Consider the following and determine if it leads you to any insights
- Are the major shareholders individuals or institutions?
- What shareholders are buying and selling?
- Do the major shareholders have a known investment style?
- What do you know about the reputation of the major shareholders based on their past performance or history?
Read other investor opinions
A good way to gain additional insights into a stock is to read the opinions, comments and discussions of other investors online and engage with them. This is one of the best ways to identify issues, opportunities and trends for a particular stock and understand the psychology of other investor’s towards the stock.
There are many investment discussion forums around the web, but some of the best with a focus on Canadian companies are the following.
Use the forum search to find discussions on the particular stock that you are researching.
That’s all I have for now and I think I covered the major ones. I am sure there are many more useful resources and tools out there on the internet for individual stock research. i’ll try to expand on this list over time.