Investing classroom: Gathering information

Lesson 1.6: The latest in our series of investing lessons assesses how to form a foundation of relevant understanding about a company

Morningstar 27.10.2009
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Now that you know the definition of a stock and the purpose of a company, how do you go about finding more information about a firm you may be interested in? Because knowledge truly is power when it comes to investing, your success as a stock investor depends on your ability to locate information and determine its importance. In this lesson, we'll point you in the right direction and tell you where to concentrate your efforts.

Sorting out the public filings
At first, public filings may look like alphabet soup, but when researching a company, they are some of the most important documents you will read. In the UK, the Companies Act 2006 seeks to promote greater shareholder involvement and requires by law that companies listed on the London Stock Exchange (but not, importantly, on the Alternative Investment Market or AIM) publish an annual report, as well as holding an annual general meeting (AGM) for shareholders and filing their accounts within six months of the end of the financial year. In addition to annual profit and loss accounts, a publicly-listed company’s annual report must also contain information on, among other things, trends and factors likely to affect the future development and performance of the business.

This annual report is likely to be the most comprehensive and useful of the public filings you can get your hands on. It will outline a wealth of general information including business strategies and risks, executive compensation, number of employees and asset values. In addition to possessing crucial facts and figures, the annual report also includes management's analysis of the past business year and compares it with preceding years.

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