Step 8.Soberite information on the best companies

Step 8.Soberite information on the best companies

Once you feel that you have already grown out of such simple mechanical forms of investment like an index fund or strategy, Dow-dividend, your next step is to choose its own shares. You will need to understand what type of company you should look for, and then these companies will need to be evaluated to ensure that they are moving in the right direction and deserve your trust.
Mechanical filters shares
Let's spend a little time talking abouthow you do not lose to promising companies. Given that the open sale of shares are more than 9,000 companies, the space for potential investment can be very difficult to study.
One of the handy tools investors is the stock filter. Filter stocks usually takes one or two options and check all the existing stocks to meet these parameters, giving the output, those that meet criteria you specify. For example, you can find all the shares, the dividend yield on which more than 4%. Or those companies whose annual revenues exceed $ 5 billion, while net profit margin - at least 10%. You get the idea?
Another example of using a filter is to find stocks whose price is not less than $ 7, increase sales and profits at least 25%, with sales less than $ 500 million and the share of domestic shareholders is 10% or more. It's - some of the criteria on which the filter is based Foolish 8 stock screen, the proposed site The Motley Fool. This filter is a good starting point if you want to invest in stocks "small cap", which we'll talk later.
So what, you should immediately go out and buy those stocks that have gone through your filter? Not at all. At least, "no" as long as you have not carried out further research. However, filters can be very effective when it is necessary to reduce the number of applicants for your money with a few thousand shares to at least a few dozen.
Other filters
Filters can look even easier. For example, the primary filter may be a question that you ask yourself: "What products or services I (and most of my friends) are used constantly and are very fond of? What companies produce them?" Your brain can process this filter quite independently, and we will help him start to do it: McDonald's, Coca-Cola, Gillette, General Motors, Wal-Mart, AT & T, Black & Decker, Federal Express and others. A good set. If you took this list as a basis and conducted further research in these companies, you probably would have made as a result of very good investment.
Another simple way to find interesting companies is to study the news. If you hear that Costco reported quite a stunning new type of store, it might be a good opportunity to look at this company. If a company announces that withdraws from the market any of its products, and its shares fall 20% on this news, on your part would be wise to find out if the market did not react too violently. If so, at this point may be advantageous to enter into shares of the company (provided that the company has been and remains a strong and growing, and its financial affairs in good order).
There are other good ways to select a few companies to start, but for now let's decide that you have made your first choice and now you want to learn more about these companies.
Gathering information
No reasonable investor would not even think about how to buy a stock based solely on conversations over cocktails, the recommendations of a broker or a discussion board, crowded with enthusiastic remarks. Even if you choose to share yourself, do not immediately rush and buy them in large quantities. First of all, grab a company's financial statements and carefully study the situation.
The easiest way to gather information about the companies included in the listing of U.S. stock exchanges. Below are the phone numbers of three major stock exchanges. Just call these numbers and ask the phone company of your interest.
Nasdaq (Over-the-Counter):
202.496.2500
AMEX (American Stock Exchange): 212.306.1490
NYSE (New York Stock Exchange): 212.656.3218
Call the company of your choice, ask to connect you with the investor relations department and request a "package of information to investors" (investor information packet). Complete package includes the following documents, each of which you definitely need:
• Annual report (latest)
• Form 10-K (most recent)
• Form 10-Q (most recent)
• Press releases (all latest)
• Analyst Reports (all relevant to today's date)
But let us take into account different: you're online, but today it is - the best way to conduct research. Most of this information you can get online. You can get all the latest financial reports of companies, including Forms 10-K and Form 10-Q, without leaving your computer. All you need to know this company's ticker symbol and you can learn the news, a brief financial review and assessment of future profits of the company. We ran a little ahead, but soon will explain what you do with all these indicators.
The study of performance of the company
You have received a packet of information about the company. Let's see what you have. The first thing you need to do is get an idea of ??what the company's mission, which is represented by its products, its future perspectives. Here is an example.
Suppose you are passionately fond of ice cream and decided to explore your favorite branch in search of potential sites for investment. Suppose further that, even though you love ice cream in general, a particular fondness you feed to the ice cream company Sal and Harry's Froosh, completely inimitable, all-natural fruit ice cream, which is being prepared, frozen and available for sale in the company's headquarters, located in Bastrop , Louisiana. You call in Bastrop, requested information about Sal and Harry's Froosh, and now this information is received.
On the first page of the annual report, you will likely see a very nice photo of Mr. Salah and Mr. Harry, standing near the machine for the manufacture of ice cream Froosh. On other pages, as in all financial reports you will find the financial performance of the columns that look much more boring. (Once you are an experienced investor, these pages will seem to you the most interesting.) The annual report consists of three main forms:
• Profit and loss account
• Balance
• Statement of Cash Flows
The easiest way to deal with profit and loss statement that shows how much money the company earned in the last year and its profit margins. The next is the balance that shows how much the company has cash, inventories and liabilities. The third and most difficult is the statement of cash flows, showing how much cash a company has in fact how it conducts its operations, makes investments and borrowing money.
By studying the financial statements of the company, you should be able to determine how quickly sales are growing, how the company financed its growth, not whether it took too much credit, how well it collects receivables, how much profit it receives from the sale of its products and services, and other important things. You also need to pay attention to trends, to understand, improve or decrease the financial health of the firm. And finally, it would be best to compare companies with their competitors in the industry and find out what the relative position of each of them is.
These types of financial statements are also found in reports on Form 10-Q and 10-K. Form 10-K is published once a year, together with the annual report and Form 10-Q - three times a year, at the end of the financial district. Form 10-Q represents the performance achieved by the company during the quarter. Form 10-K is dedicated to the current financial situation of the company, not its history, and therefore includes the information that you just can not find in most annual reports, for example, the proportion of domestic shareholders and brief biographies of members of the management team. The latter is of particular interest for a competent investor. We're always curious to know is that one member of the board of directors of the company has experienced in personal bankruptcy in 1989, and to obtain other information "of life."
Press releases are more frequent source of information about your company and should be read and taken into account. Those who prefer a less carefully monitor their actions, may well ignore press releases and quarterly reports deal only. Of course, this position is much better with a reliable, large companies, if you own shares in the growth of small capitalization companies that can move quite radically on information from press releases, it will force you to do their regular reading. Naturally, one should not forget that the press releases in general are trying to set a positive tone for the news as released by the company.
Analyst Reports
Most of the companies studied and analyzed by one or more analysts. These professionals often are employees of brokerage firms, they write reports on companies, including the analyst's opinion on stocks, as well as estimates of future profits of the company and other projections. This information is publicly available. If a company whose financial package you have received, under the supervision of an analyst, one of these reports may be included in the package. (If not, the company will give you the name and telephone number of the analyst, and you can call him and make his own request.)
One of the most valuable information components of these reports are estimates of earnings per share. (Quality assessment reports published quarter after quarter.) Comparing the quarterly analysts' estimates with the actual quarterly financial results of companies as they become known, investors can find out if the company's earnings per share forecast of analysts, exceeds or falls short of them.
We find that analyst reports are extremely useful, recognizing that good analysts understand how to assess the growth prospects of the companies. And although we do not accept all the assumptions that make the analysts, we believe that comparison of the results of several tests is a key component to improve the understanding of the investor companies.
This - the positive side analyst reports. But it should be noted, and the other side.
We do NOT advise you to pay attention to ratings that analysts assign one or other securities, whether it is "actively buy" to "buy", "accumulate", "attractive" to "hold" - it does not matter. These subjective estimates may be severely biased due to a conflict of interest exists in the industry brokers. Those same firms that write ANALYSIS, you are reading, AT THE SAME TIME to build their business to fund those companies they analyze. It is therefore not surprised that the first recommendation to "buy", which you can read on the new company has just launched his first campaign, will almost always come from the same firm or firms that were underwriters of the IPO.
Furthermore (and even more important): if brokerage analyst ever will assign rating to "sell" shares of any particular company, that company will likely never again will have nothing to do with this broker. That's why you almost never see in analysts' Wall Street advice to "sell". In fact, analysts Wall Street, who see that the shares are sold at a price of $ 10, and predict that the price of these shares will fall to $ 5, still often call the rating for the company "neutral" and not "sell."
So, you gather all the necessary information. Let's see, what to do next.