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How To Research Stocks

As with gamblers in Las Vegas so it is with stock investments, 'everybody's got a system'. The goal of research, however, is to make the activity a lot less like gambling and a lot more like investment.

For those without the time or temperament to carry out research themselves, there are full time research services available - for a fee, of course. Full-Service brokerages, such as Merrill Lynch and other large, well-established firms offer research as part of their value to clients.

But there are firms, both traditional and the newer online variety, that offer research without the advice available from the broker. Whether the research (and the advice) are worth what it costs is an ongoing debate.

For those who see research not as a necessary evil or time-consuming burden, but as part of the process or even an adventure, there are now more sources than could be used in a lifetime.

Starting with the source of data is always a safe bet, since it's the most unbiased, thoroughly audited information around. That source is the legally required filings of individual publicly traded companies.

In the U.S. those are 10-K's - more or less equivalent to lengthy annual reports - which can be viewed or downloaded from the SEC's website ( (10-Q's are filed quarterly, 8-K's for significant financial changes in between.) Other countries have their equivalents, such as the Hong Kong Securities Regulatory Commission (HKSRC).

In those reports you'll find recent (as of the filing date) financial data about income, expectations, competition and lines of business, current senior management listings and other information useful to those inclined toward Fundamental Analysis.

Quarterly reports and annual reports are sent automatically to share holders, even those with only one share (though they're usually traded in lots of 100 or more.) But, they're often available free by calling or emailing the Investment Relations department; after all, companies want you to buy their stock. They contain the same factual data as 10-K's and 10-Q's but occasionally wording differs, for those interested in subtle details.

For a modest annual or one-time fee, a blizzard of chart data is available that matches any produced by the in-house research departments of the large brokerages. (Sometimes they're produced by the same people.)

Newsletters are another potentially good source of information, though opinions about the market vary so widely that researching whom to believe takes as much time and care as researching individual stocks. Sometimes they're a few dollars per year, sometimes many hundreds - and price is no indicator of quality here.

One direct source of one kind of information are the in-person, on TV, or on the Internet interviews of company senior managers, usually by one or a panel of analysts.

CEOs, CFOs, and others often talk to the financial press and brokerage stock analysts to give their views on where their company stands, what challenges they face, and where they expect to be in the near to long-term future. Often they're asked about specific pending lawsuits or legislation and to assess its potential impact.

Of course, executives have an interest in painting a rosy picture, but analysts have often heard it all and are very adept at keeping the 'spin factor' to a minimum. If nothing else, it tells you what the executives want you to believe, which in itself is useful.

Even armed with nothing more than an inexpensive online trading account, the average investor has access to charts of historical and current data, future expectations, and a wide variety of statistical information which would keep even the most technically inclined busy for quite some time.

Be sure to use it all, or as much as you can absorb in the time available, when formulating a trading strategy.

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