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3 Ways to Research on Stocks

Before the Internet era, researching stocks was a tedious affair. Investors had to either call the company directly to request an annual report or visit the company office. Thankfully, the Internet and the proliferation of computers have made everything much simpler. We can now do a quick search of the company on the Internet to find everything we need to know about it. However, with so much information available, there lies another problem. Which information do we focus on?

With that in mind, I would like to point out three areas that we can look at to obtain information about a company.

Annual and quarterly reports

The annual report is the first document that I look at when I  research on a stock. It provides vital information on the operations of the company, the outlook and its past performances. The annual report also introduces the management team, and the chief executive officer’s statement will highlight challenges and opportunities that a company may have in the years ahead.

These reports also provide information on the company’s financials, which to me is the most important aspect of a company. A company with a stable balance sheet and high earnings capacity is vital to its sustainability.

Analyst reports

Although you may have to pay for analyst reports online, there are some that are available for free. These reports provide information on market size, competition and other information that cannot be found in annual reports.

Investors can make use of the information provided to get a clearer picture of the company prospects and risks.

However, it is important not to be over-reliant on the recommendations of analysts reports. Analysts often prescribe a company as a “buy”, “hold” or “sell”. These recommendations are usually only for the short-term, and some great companies may end up being “sell” simply because they have run into some short-term, solvable issues that, in reality, will not affect its long-term prospects.

Online blogs and reviews

There are numerous blogs and online stock analysis websites. These websites attempt to do the research for the investor and present them in an easy-to-understand article.

These articles can be useful for an investor who is looking for stock ideas or is trying to find a second opinion on a stock they are interested in.

The Foolish bottom line

Information on stocks is readily available on the Internet. As investors, this is great for us as it enables us to make better decisions based on sound research. These three sources of information are where I do most of my research and more often than not, is sufficient for me to make a sound investment decision on whether or not to buy a company’s shares.

Meanwhile, for more (free!) investing insights, sign up here for your FREE subscription to The Motley Fool's investing newsletter, Take Stock SingaporeIt will teach you how you can grow your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.