A common image of a savvy investor is one who hunts down hard-to-find pieces of information about companies to cleverly figure out how well they're doing and whether they're worthy of any hard-earned dollars. I can't argue with that approach. It can yield terrific insights. Scuttlebutt is effective.
But you know, there's actually a lot of information about companies that comes right to you in plain sight, as you sit at your kitchen table or lounge in your recliner. I'm talking about annual reports.
We're right in the thick of annual-report season, and those of us without the discipline to keep our holdings down to a manageable and most promising small handful are coming home to new reports in our mailbox day after day after day. Permit me to share some examples of things I've learned from perusing some of mine.
My Johnson & Johnson
I had to shake my head when perusing my Home Depot
That's not enough to make want to sell, though. I still have high long-term expectations for the company, and since I hope to hold my shares for many years, the long-term results are what really matter to me.
In contrast to the typical blue-chip company's glossy, full-color annual report, Intuitive Surgical
Intuitive's report led with a quotation from Leonardo da Vinci and quickly moved on to the company's mission -- "to take surgery beyond the limits of the human hand." The company's success in that area was reflected in its numbers: revenue up 64% in 2006 over 2005 and operating income up 93%, excluding a stock option expense. Intuitive launched a new model of its robotic surgery machines, and as it said itself, it became "the new standard in robotic surgery in less than one year, accounting for 87% of the systems sold in 2006 and 94% of the systems sold in the 4th quarter."
One thing that annual reports (specifically, the 10-K reports) include that I always find interesting is a discussion of risk factors that a given company faces. In Intuitive's case, here are a few of the risks disclosed:
- Customers, anticipating a new product's upcoming release, may postpone purchasing a product, thus depressing sales.
- If defects are discovered in the products, the firm's reputation will take a hit and hospitals may curtail their orders.
- The company faces possible liability claims and lawsuits, should things go wrong with any products or in some procedures.
Reading about such risks can help temper overblown enthusiasm for any company.
These are just three of the annual reports I've received. Stay tuned for another installment of my mail review. If you're interested in any of these companies, I encourage you to seek out their annual reports, read them carefully, and also check out those of their competitors. Lowe's
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Longtime Fool contributor Selena Maranjian owns shares of Johnson & Johnson, Home Depot, and Intuitive Surgical. Home Depot is a Motley Fool Inside Value recommendation. Johnson & Johnson is a Motley Fool Income Investor recommendation. Intuitive Surgical is a Rule Breakers recommendation. Try any one of our investing services free for 30 days. The Motley Fool isFools writing for Fools.