An overwhelming amount of information is available on stock investments. With more than 8000 U.S. public companies to choose from and another 50,000 stocks in other countries, stock selection takes time. Hundreds of investment resources exist, including television and radio shows, books, websites, blogs, and newsletters. What approach should you take? Use the Internet because everything you need is online. The Internet is a source of up-to-the minute, high-quality information on investments.
Begin by Setting Criteria for Your Stock Investments
The process of setting criteria for a stock investment starts with a review of your investment plan, To make informed selections of the specific stock investments that match your investment goals, philosophy, and time horizon, begin by making decisions on criteria for your stock investments:
Begin by Setting Criteria for Your Stock Investments
The process of setting criteria for a stock investment starts with a review of your investment plan, To make informed selections of the specific stock investments that match your investment goals, philosophy, and time horizon, begin by making decisions on criteria for your stock investments:
- What classifications of stocks are best suited for your goals?
- What market capitalization meets your desires?
- What specific numeric measures do you require on beta, sales, profitability, P/E ratio, dividends, payout ratio, and market price?
- What projected EPS growth do you require?
- Do you want to invest in an industry leader?
Basic Investment Information
Comprehensive investment websites provide updated news headlines; market overviews; market statistics; industry statistics; industry trends; corporate stock symbols;current stock market prices; specific company profiles, history, financials, prices, and outlook for the future; tips on how to build a portfolio; and stock-screening tools with search capabilities. Following are some popular websites for investing:
• The Motley Fool (www.fool.com)
• Kiplinger’s Personal Finance (www.kiplinger.com/personalfinance/)
• CNNMoney.com (www.money.cnn.com/pf/index.html)
• Yahoo! Finance (www.finance.yahoo.com/marketupdate?u)
• BusinessWeek.com (www.businessweek.com/investor/)
• SmartMoney.com (http://www.smartmoney.com/)
• AOL Money Basics (http://money.aol.com/basics/index)
Stock Screening
You can research stocks, bonds, and mutual funds by using stock-screening tools available on the Internet. Screening enables you to quickly sift through vast databases of hundreds of companies to find those that best suit your investment objectives. For example, you can use the Kiplinger screening tool to filter thousands of stocks using 27 search criteria, and you can use Kiplinger’s or another company’s tools to identify dividend-paying stocks, small companies, and growth companies. You simply set the standard for screening, such as high P/E ratios, and the program sorts out the investment choices, including five-year EPS growth projections by professional stock analysts. You may be surprised to find how easy it is to screen stocks. The following websites offer stock-screening tools:
• Yahoo! Finance (screen.yahoo.com/stocks.html)
• Morningstar (http://screen.morningstar.com/stockselector.html?hsection=tool centerstsel)
• MSN Money (http://moneycentral.msn.com/investor/finder/customstocksdl.asp)
• MarketWatch (www.marketwatch.com/)
• BusinessWeek.com (www.businessweek.com/investor/)
Security Analysts’ Research Reports
Stock analysts working for independent stock advisory firms or stock brokerages write research reports on companies and industries, as illustrated in Figure 14.1 with a report from Standard & Poor’s. Reports based on fundamental analysis are quite informative. The quality of advice is uneven, ranging from brilliant to pedestrian as analysts have a tendency to run with the herd and make similar recommendations. They often recommend buying certain stocks and rarely suggest selling. The prudentinvestor interprets “hold” recommendations as a signal to sell.
Corporate News
Public companies must regularly report their financial status to the government and the public. Corporate filings required by the Securities and Exchange Commission are available on the Internet from the Electronic Data Gathering and Retrieval (EDGAR) project (www.edgar-online.com). Top online sources for stock, bond, and mutual fund information include Morningstar (morningstar.com) and Bloomberg (bloomberg .com). Each public company has its own website that offers insights from management about the future of the firm, and it is easy to request a company’s annual report.
Annual Reports
Comprehensive investment websites provide updated news headlines; market overviews; market statistics; industry statistics; industry trends; corporate stock symbols;current stock market prices; specific company profiles, history, financials, prices, and outlook for the future; tips on how to build a portfolio; and stock-screening tools with search capabilities. Following are some popular websites for investing:
• The Motley Fool (www.fool.com)
• Kiplinger’s Personal Finance (www.kiplinger.com/personalfinance/)
• CNNMoney.com (www.money.cnn.com/pf/index.html)
• Yahoo! Finance (www.finance.yahoo.com/marketupdate?u)
• BusinessWeek.com (www.businessweek.com/investor/)
• SmartMoney.com (http://www.smartmoney.com/)
• AOL Money Basics (http://money.aol.com/basics/index)
Stock Screening
You can research stocks, bonds, and mutual funds by using stock-screening tools available on the Internet. Screening enables you to quickly sift through vast databases of hundreds of companies to find those that best suit your investment objectives. For example, you can use the Kiplinger screening tool to filter thousands of stocks using 27 search criteria, and you can use Kiplinger’s or another company’s tools to identify dividend-paying stocks, small companies, and growth companies. You simply set the standard for screening, such as high P/E ratios, and the program sorts out the investment choices, including five-year EPS growth projections by professional stock analysts. You may be surprised to find how easy it is to screen stocks. The following websites offer stock-screening tools:
• Yahoo! Finance (screen.yahoo.com/stocks.html)
• Morningstar (http://screen.morningstar.com/stockselector.html?hsection=tool centerstsel)
• MSN Money (http://moneycentral.msn.com/investor/finder/customstocksdl.asp)
• MarketWatch (www.marketwatch.com/)
• BusinessWeek.com (www.businessweek.com/investor/)
Security Analysts’ Research Reports
Stock analysts working for independent stock advisory firms or stock brokerages write research reports on companies and industries, as illustrated in Figure 14.1 with a report from Standard & Poor’s. Reports based on fundamental analysis are quite informative. The quality of advice is uneven, ranging from brilliant to pedestrian as analysts have a tendency to run with the herd and make similar recommendations. They often recommend buying certain stocks and rarely suggest selling. The prudentinvestor interprets “hold” recommendations as a signal to sell.
Corporate News
Public companies must regularly report their financial status to the government and the public. Corporate filings required by the Securities and Exchange Commission are available on the Internet from the Electronic Data Gathering and Retrieval (EDGAR) project (www.edgar-online.com). Top online sources for stock, bond, and mutual fund information include Morningstar (morningstar.com) and Bloomberg (bloomberg .com). Each public company has its own website that offers insights from management about the future of the firm, and it is easy to request a company’s annual report.
Annual Reports
Companies issue an annual report once a year (hence the name), both in hard-copy format and online. Today’s annual report is mostly a numbers-free publication that looks like a slick marketing magazine. While annual reports do contain some summarized financial information, they serve more as promotional corporate brochures.
10-K Reports
10-K Reports
The financial statements and details on a public company are contained in its 10-K report, which every company registered with the SEC is required to file once each year to ensure public availability of accurate current information about the firm. It summarizes the firm’s financial activities for the year. A 10-K report includes information on sales, earnings, profit, and legal problems, and it forecasts the company’s future. You can obtain 10-K reports from the SEC online (www.sec.gov).
Prospectus When a company issues any new security, it files a prospectus with the Securities and Exchange Commission. This disclosure describes the experience of the corporation’s management, the company’s financial status, any anticipated legal matters that could affect the company, and potential risks ofinvesting in the firm. The language is legalistic and full of technical jargon, but the interested investor may find it useful to sift through the details.
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