Gathering Relevent Financial Information

When a company is traded on the major stock exchanges, they are required to file financial documents with the Securities and Exchange Commission. The SEC set guidelines as to what these documents contain so they are pretty much uniform. Companies are required to file these documents in a timely manner.

At first glance company filing look like alphabet soup, but they are some of the most comprehensive and important documents you will read. The most comprehensive and useful document is the 10-K. The 10-K is the annual report that outlines a wealth of information on a company, including , number of employees, business risk, description of properties, and business strategies. The 10-K also cotains the year end audited financial statements. In addition to containing crucial financial informantion, it also cotains management's discussion and analysis of the past year and compares it with the preceding years.

The 10-K should be your first stop when gathering information about a company. How do you find the 10-K? Go to the SEC Website and click on "Filings and Forms", and then "search the company's filings". After plugging the company's name into "Companies and other Filiers" search, you can pick the 10-K out of the list of forms. What about the other forms? Some of them are worth reading and some are not. The 10-Q is worth reading. It is a little less comprehensive than the 10-K and is unaudited, but it is filed on a quarterly basis so it is a good way to keep tabs on your comapany throughout the year. Another important document is the annual proxy statement, also called the DEF 14a. In the proxy you will find detailed information about executive compensation, the board of directors, and the shareholders voting process. You must read the proxy in order to learn about the corporate governance of the comapany you are researching and better understand your rights as a shareholder. The 8-K statement deals with recent major annoucements and earnings release. The 4 forms deal with insider buying and selling. Insider are the board of directors and upper level manangement. Before these individual buy and sell the stock of the comapany that they manage, they are required to report it to the SEC. This is filed on the form 4s. Their insight may be better or worse than yours, but at least you will be able to tell if they are walking the walk and not just talking the talk.

Another good way to find information about the company you are researching is to go to the company's web site. Just type in the company's name into the search engine of your choice and the company should come up near the top of the results. Go to the investor relation section of the site. It will contain copies of the 10-K and other public filings. This does not take long and the press releases will give you some good information. Also you can see how the company does business on the web.

After you have done some research (read public filings and visited company's websites), now it is time to set up a watch list. How do you do this? Morningstar offers these services for free:

1. Go to www.morningstar.com and click on the tab labeled "Portfolio".

2. In the tab labeled "Portfolio Manager" window, uder "Create A Portfolio" click "New Portfolio".

3. You will 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 names of the companies you want to watch. The ticker symbol is the letters the exhanges use to identify a stock. You will get the ticker symbol from the public filings or the company's website. After you have entered the ticker symbols , click "Done".

5. In the following window, you will see a list of updates, alerts, and tips that Morningstar will send you daily for the companies you have on your watch list. Click "Done" again.

6. Now you have a watch list that you can view anytime by clicking on the Portfolio tab on Morningstar.com

The benefit of having a watch list is now you can eaily tabs on the companies you are researching and find stock prices. Your watch list will help you stay organized and informed.

After you have sifted through information, you have learned a great deal about a company. You may want to check out analyst opinons. Your investing decisions are yours to make, but sometimes you may want to see what others have to say. It may give you more insight or another angle by reading another person's research.

Don't feel bad because you can't read everthing written about a company you are researching. You will feel overwhelmed from time to time by the vast amounts of information available to you. You don't need to read all of it to become successful. Some of it will take your attention away from what you really need to know. Here are a few steps to take to become an informed investor:

1. Obtain the company's 10-K report and really give it a read. Don't try to digest it all at once. Give it a few days and go over it thoroughly. You spend a lot of time on this step. This is your foundation.

2. Read through the 10-Qs when they are released each quarter. These are much shorter than the 10-Ks and will not take up too much of your time. Once you get a profound understanding of the 10-Ks, the 10-Qs will be a breeze.

3. Set up your watch list so that you can keep informed about the companies that interest you.

4. Poke around the company's web site.

5. When you have time, poke around the industry web sites and catch up on industry trends.

The Financial Reality

If you follow these steps, you will be able to form a foundation of understanding about a company. Work at you own pace don't move from one step to the next until you have an understanding of each step. This is your foundation. All of the time you spend now will pay off in the future. Over time, you will build on your foundation and gain a much deeper understanding. All told and if you stay the course, you will be surprised at how your knowledge will grow by applying this simple process.