CHAPTER TWELVE GATHERING INVESTMENT INFORMATION Practical Investment Management

CHAPTER TWELVE GATHERING INVESTMENT INFORMATION Practical Investment Management Robert A. Strong

Outline u Research Philosophy Know Thyself u Screening u u Resources at the Library Standard & Poor’s Publications u Mergent / Moody’s Publications u u Company Information Annual Reports u SEC Filings u The Prospectus u South-Western / Thomson Learning © 2004 12 - 2

Outline u Investment Letters Advisory Letters u The Popular Press u u Computer / Internet Services u u Screening Services Investment Seminars Brokerage Firms u Bank Trust Departments u Employee Relation Programs u Exchange Seminars u South-Western / Thomson Learning © 2004 12 - 3

Research Philosophy u Before conducting any research, decide what kind of information will be useful. u Know thyself : Knowing their own attitudes toward various issues can be a big help in allowing investors to make productive use of their research time. E. g. fundamental analysis, technical analysis, the experts’ approach. u Screening is the process of sorting through the list of potential investments. South-Western / Thomson Learning © 2004 12 - 4

Categories of Investment Information Insert Figure 12 -1 here. South-Western / Thomson Learning © 2004 12 - 5

Resources at the Library Standard & Poor’s and Mergent / Moody’s publish easy-to-use reference material that can be found in most public libraries. South-Western / Thomson Learning © 2004 12 - 6

Resources at the Library u Standard & Poor’s Publications - monthly stock guide - quarterly company stock report - bond guide - weekly Outlook (with highlights, summary opinions and statistics) - stock market guide (S&P 500 stock reports) - earnings forecaster (compilation of estimates) - annual corporation records with daily updates South-Western / Thomson Learning © 2004 12 - 7

Resources at the Library u Mergent / Moody’s Publications - detailed manuals - weekly dividend record - bond record - quarterly handbook of common stock South-Western / Thomson Learning © 2004 12 - 8

Company Information Numerous audited publications are required for publicly traded firms. u Annual reports contain corporate statements about the results of the previous year as well as the prospects for the future. South-Western / Thomson Learning © 2004 12 - 9

Company Information u u SEC filings - 10 -K report (annual report) - 10 -Q report (quarterly report) - Schedule 14 A (proxy statement) - Form 144 (insider’s “intent to sell” document) The prospectus outlines the terms of the intended transaction, e. g. issue of new debt securities South-Western / Thomson Learning © 2004 12 - 10

Investment Letters Investors often consider publications that make investment recommendations or forecasts. u Advisory letters offer specific investment recommendations. - Value Line Investment Survey (with timeliness and safety rankings) - Institutional Brokers Estimate System (I/B/E/S) and First Call - Zack’s Investment Research - research information from brokerage firms South-Western / Thomson Learning © 2004 12 - 11

Value Line Investment Survey Insert Figure 12 -9 here. South-Western / Thomson Learning © 2004 12 - 12

Investment Letters u The popular press offer more general information, although recommended investor behavior may still be suggested. - The Wall Street Journal - Barron’s (weekly) - Investors Business Daily - Forbes (twice monthly) - Smart Money - other magazines South-Western / Thomson Learning © 2004 12 - 13

Computer / Internet Services w One group of computer services is static databases with periodic updates, used primarily for security screening. w Another group is dynamic with continuous updates, used for augmenting the results of other security selection activities. w Many databases and the home pages of many listed companies and investmentrelated firms and organizations can be found on the Internet. South-Western / Thomson Learning © 2004 12 - 14

Screening Services u Screening services use static databases with periodic updates. - Value Line Investment Survey for Windows - Compustat - CRSP tapes - Academic Search Premier - Info Trac - Disclosure South-Western / Thomson Learning © 2004 12 - 15

Investment Seminars u Local brokerage firms often hold educational seminars for their current and prospective customers. u Bank trust departments also hold seminars. u Some employee relation programs provide investment information to boost employee morale. u The securities exchanges offer educational sessions too. South-Western / Thomson Learning © 2004 12 - 16

Review u Research Philosophy Know Thyself u Screening u u Resources at the Library Standard & Poor’s Publications u Mergent / Moody’s Publications u u Company Information Annual Reports u SEC Filings u The Prospectus u South-Western / Thomson Learning © 2004 12 - 17

Review u Investment Letters Advisory Letters u The Popular Press u u Computer / Internet Services u u Screening Services Investment Seminars Brokerage Firms u Bank Trust Departments u Employee Relation Programs u Exchange Seminars u South-Western / Thomson Learning © 2004 12 - 18