I find it useful to know as much as possible about any potential investment, especially if it may become a large position down the road. Why is Company X where it’s at today? Knowing their history, philosophy, and information about current/past management teams can help you solve that question. In turn, it will help when you estimate where they’ll be 10 years from now.
Sometimes I like to take the activist investor approach: For large long-term holdings, you’re ultimate goal should be to know the company better than the management team running it. Nine months ago, there was a story on activist investor Nelson Peltz in Fortune magazine. Commenting on his research methods, the author wrote: “Peltz prides himself on knowing businesses so intimately, from factory floor to supermarket shelf, that he can systematically break down any management’s rationale for mediocre results.”
Below are 6 useful sources for researching individual companies.
1. Wikipedia / If the company is well known, Wikipedia is a great place to research. Search for the company itself, competitors, and articles about the industry. Entries will also have references at the bottom of the page for further research.
2. Wikinvest / Includes history and stock information for most medium-to-large sized companies. Focuses more on strategy and financial information than Wikipedia. Also includes “Bull” and “Bear” arguments for popular stocks.
3. Company histories / This site has a surprising number of corporate histories. In many cases, much more detailed than those on Wikipedia or the company’s home page.
4. Morningstar / In addition to a 10-year financial history, under the “Key Ratios” section you can see how margins, efficiency ratios, and financial conditions have progressed over the past decade.
5. Google / This may be an obvious choice. Although it’s so widely used, I don’t see investors using it for specific company research often. Looking for website, blog posts, or news articles on the company and its management helps. Try searching for the CEO’s name, and see what comes up. Google News Archive is very helpful for information from many years back. Even searching Google Images to look at products/stores can give you a better feel for the company you’re investing in. Use Google Trends to help guage the popularity of the company or its products.
6. Annual reports / Another obvious place to look, but most people only look at the most recent 10K. It’s always good to read the entire 10K of the most recent period. But you should also look back over the last 5-10 years of 10K’s and read the summary of business conditions and management’s discussions of results. Looking at top competitors reports over the same period can also be very beneficial.