How to Value Stocks: Security Analysis

Finding Information

How to Value Stocks

By Randy Befumo

One of the more perplexing tasks individual investors have to face is where to get information about publicly traded companies. As strangers in a strange land when they first come to the world of investing, they not only face the already daunting endeavor of finding information from a variety of sources, but they also face the even more important task of determining which information is important. Unless facts are placed in a framework that provides meaning, they can be confusing, contradictory chunks of white noise.

Getting Data
The lowest form of information is data, which almost always takes the form of numbers. Whether daily stock prices, condensed financial statements, or any of a variety of quantitative tools, fortunately for investors there are a wide array of places on the World Wide Web to get this stuff. At the risk of being self-promotional, one of the first places that you should look is the variety of tools that are available at www.fool.com. The Quote, Chart, and Financials offerings cover the gamut of current price, recent price history, condensed historical financials, and current earnings estimates.

For America Online readers, a faster way to get most of these items is Keyword: Quote, Keyword: Historical Quotes, and Keyword: FirstCall. For readers who like to use the World Wide Web, there are a quite a few options. For simple delayed quotes, you can go just about anywhere, although www.pcquote.com and www.quote.com are specifically designed with this in mind. For real-time quotes, don't waste your money unless you want to be a tick-by-tick trader swapping slightly higher returns for much higher tax burdens and an ulcer. For historical quotes, the quote places as well as www.BigCharts.com offer comprehensive charts.

For distilled financials, it ultimately depends on whether or not you want to pay money. The depth of the annual information at www.wsrn.com makes it the place to go when you want to look at five or six year financial trends. Although it costs money, www.marketguide.com's Provestor reports top www.wsrn.com in that they offer detailed quarterly information, although only four years at the most.

Finding Info
Information (or "info"), as distinct from data, is anything with words that is intended to be objective. Press releases, federal filings, and company descriptions are the three main objects of desire here. Like delayed quotes, press releases are nearly ubiquitous. On America Online, Keyword: Company News has BusinessWire, PRNewswire, and Reuters. At www.businesswire.com and www.prnewswire.com you have the databases of each of these companies, which make money by having the company sending out the press release pay them as well as having the services that subscribe fork over money, too. Over time its likely that their margins will get squeezed as the Internet takes off, but for the time being they control the flow of info, and if you are looking for just one or the other on the Web, their sites are not a bad place to start.

For great news analysis, don't miss the News & Commentary section on Fool.com. Here you'll find stories from Fool writers as well as articles from the Reuters wire service and other services. Dow Jones is carried for free on the new www.smartmoney.com site, which is one of the better aspects of this place. Another set of wires can be found at www.bloomberg.com. As for online newspapers, www.wsj.com and www.investors.com are the two major business newspapers online, while The New York Times has an America Online site in addition to its Web presence.

Federal filings through EDGAR are available in a number of places. I must stress here that nine times out of ten, the best information I get is from the company's federal filing. As the SEC forces the company to put certain key information in them, reading a few 10-Qs and a 10-K is often the most efficient way to figure out a company in a few hours. Although www.sec.gov has an EDGAR archive, I normally use either www.freeedgar.com or www.edgar-online.com via the Quotes & Data section on www.fool.com. As for company descriptions, for right now the major source of these are either the descriptions in the 10-Ks or www.hoovers.com, which has a subscription component for investors who like the format and style of the reports.

Certainly there are plenty of other places on the Web that offer investing information of some kind, but given that we'd like to keep you exploring the Fool editorial content as opposed to these other places, I probably have pushed the "mention other Web sites" envelope as far as it can go -- with one exception. At www.investorama.com, Doug Gerlach has done an outstanding job of cataloging a wealth of investment sites. Basically, if you are looking for anything else, you probably want to start there or in www.yahoo.com's business and investing areas. Believe it or not, substantially all of background information used to create Fool Editorial pieces comes from these sources, particularly EDGAR. If you as an investor do not check any other source, EDGAR is definitely where you should be looking.