The amount of available data on particular stocks can be overwhelming, and often results in information overload. Market timing, chart movement, societal trends, political intrigue, wind direction, natural disasters – all, some, or none may play a role in whether a particular stock goes up or down at a particular time on a particular day.
But none of this is predictable or reliable, and these phenomena are all very complex. How the market works, what you can determine from a financial statement, when certain markets will go up or down, who can you trust to give you unbiased information – it is enough to make your head spin!
In the beginning of my investing career, I often made impulsive investment decisions that turned out poorly, mostly based on my inability to separate the wheat from the chaff among all of this data. But I have spent the last five years teaching myself about investing, and over that time I have identified certain reliable sources to which I return every time I am deciding whether to purchase or sell a particular stock.
One preliminary point – let’s not fool ourselves about whether your research will make you beat the market. You might, and you in fact might do much better than the market. But you should know that picking individual stocks largely comes down to luck. Even the best money managers ultimately succumb to mean reversion, and you will too. This does not mean you should throw caution to the wind. Your research will make you a better investor. My own experience demonstrates that your success as an investor will improve as your understanding of finance and investing improves. Truisms like “buy and hold beats burn and churn” are true, but you still need to pick the right stocks to buy and hold. When we pick juries as trial lawyers, we often say we are “picking the jury,” but in reality we are “getting rid of the worst jurors.” We do a lot of questioning and research to do this, and you should do a lot of investing research to help you do the same thing with stocks and other potential investments.
The best research sources recognize that they are not gurus or seers, and they don’t pretend to be. Beware of anyone who promises you will make money if you follow their advice. Also watch out for touts, penny stock promoters, and others whose advice might be better for them than for you.
The rules of profitability are pretty simple – a public company must make more money than it spends in order to stay in business over the long term. The information that is in the sources I have identified below may help you determine which companies are most likely to be profitable for the foreseeable future.
It is my goal with this post to point you in the direction of sources you can utilize when trying to decide whether to buy or sell a particular stock. But please remember I am not an expert or an investment advisor! I will periodically update this compendium as I find additional good research sources.
Books on investing and financial analysis
The Millionaire Next Door, Thomas J. Stanley
The Intelligent Investor, Benjamin Graham
Irrational Exuberance, Robert Shiller
A Random Walk Down Wall Street, Burton Gordon Malkiel
The Richest Man in Babylon, George S. Clayson
The Ultimate Dividend Playbook, Josh Peters
Your Money or Your Life, Vicki Robin and Joe Dominguez
The Strategic Dividend Investor, by Daniel Peris
Free information on the web for researching individual stocks
Investopedia (for definitions and explanations of finance terms)
Website of the company you are researching
SEC Filings – use the EDGAR database from the SEC
Yahoo Finance pages
Blogs (like this one :)) and Twitter Feeds
National Association of Real Estate Investment Trusts (this is a good site for researching REITS)
Newsletters put out by many prominent investors, such as Warren Buffett.
Media stories on the company and its industry/competitors
Information provided by your broker
I use E*Trade, but most of the large brokers provide good information for your use in picking stocks to buy or sell. For virtually every stock out there, E*Trade provides financial fundamentals, charts, news, earnings, insider activity, blogger sentiments, and more. Research reports are provided (where available) from Morningstar, Tipranks Analyst Consensus, Credit Suisse, Market Edge, Thompson Reuters, SmartConsensus, and sometimes other sources.
There are a number of paid sources. I have not subscribed to any of them and cannot vouch for their quality, but you should know they are out there. Examples are InvesTech Research and Zack’s Investment Research.
In a separate post I will outline my own methodology for picking dividend growth stocks, and I will show you how I use each of these sources as I do my research. You will see that while there are a large number of individual data points to collect, this data is readily available if you know where to look. You just need to spend the time collecting it, and then analyze it.
As with most things in life, if you do the work, you will do very well for yourself.
I hope you find this information useful, and as always it would be great to hear your own experience and wisdom in the comments. Happy investing!