Have Your Eye On A Company As A Prospective Investment? Here Are Some Steps To Consider.

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Let’s say there is a brand, product, or service you absolutely love and find yourself using all the time. Or maybe is a product or service you may not necessarily love but find yourself spending a whole lot of money on consistently because you don’t have many alternatives. You start to consider the business behind the brand as a prospective investment and are wondering where to begin. Below are a few initial steps to consider.

Step #1: Find out if the company is public

If you are very new to investing, something you may or may not know is that not all companies are public or “publicly traded”. In simple terms, a publicly traded company is one that issues shares of stock to the public and allows people like you and me to buy a “piece” of the business. Unless a company is public, the average person is not able to buy shares in the business.

As a side note – the only people who can buy stock in a company that is not publicly traded are the founders, co-founders, private investors, angel investors, and such individuals that are offered pieces of the business before it ever becomes public.

Finding out whether a company is public or private for the purposes of stock investing is fairly easy. A simply Google search can do the trick. You can Google any of the following:

“Is [insert company name] a publicly traded company?”

“Is {insert company name] a public company?”

Immediately after you hit search, you’ll likely notice a flood of results which will either include stock charts and articles indicating that the stock is public – or – a series of headlines telling you the company is private. In the latter case, your research ends there. At least for now.

Now, let’s say you confirm that the company is public. The next step will be …

Step #2: Add the company to both, a virtual and written watch-list.

When starting your investing journey, it is super important (and very useful) to keep a list of businesses you may be interested in as prospective investments so that you can watch them week by week while doing your research on the side.

Keeping a watch list will also become very useful when you start putting together your own personal portfolio of investments. Sites like Google Finance or Yahoo! Finance have a “my portfolio” tab where you can add stocks you are watching.

In addition to adding companies to those virtual portfolios, I would also recommend keeping your own written record of the companies you are considering and writing down the reasons why a business(s) may have caught your attention, why you feel it may be a good investment, and your findings while doing research.

To be honest, some companies may require more research than others before you make any final investment decisions. However, keeping a virtual and/or clear written record of ALL prospective investments can be an incredibly valuable resource that can make it a lot easier to make decisions down the line. You can always go back to your original thought process or thesis for wanting to buy something and think about whether your original considerations were accurate or not.

I have my own excel spreadsheet where I keep track of information I consider important when investigating the companies on my watch-list. I’d be more than happy to share the template, let me know where to send it by clicking here.  

Also, if you come across any issues while trying to put together a virtual portfolio on yahoo! or Google, email me  – girlsonthemoney@gmail.com. 

Step #3: Officially start your research!

Your first official step in researching a stock you may be interested in is to locate the company’s Annual Report (also known as 10K) and start reading!

The 10K is completely free and available to the public. It is also fairly easy to find. All you need to do is go to the company’s official website and find the tab that says “Investors Relations”. Some companies keep Annual Reports under a link that says “SEC filings” while others will explicitly simply say ‘Annual Reports’. It may take a little bit of digging depending on the company.

To make things easier, you can also go back to Google and simply type in the following:

“[company name] annual reports”.

*Just make sure you look at the year of the report so you don’t waste your time reading something from 10 years ago. 

To give you an example of an annual report looks like, here is Apple’s (NASDAQ: AAPL) most recent annual report. All US-based companies use the same exact template when presenting their information so you’ll notice all 10Ks will look the same across the board.

The not so good news about annual reports is that they are quite long (about 100+ pages on average) and contain a lot of legal lingo and information that can confuse most of us.

The good news is that you don’t have to read the entire thing cover to cover. There are sections of the Annual Report that are more useful than others and provide a lot of valuable information you can use for your research. I personally focus my reading on a few main sections including the following: The “business profile” section, business plans and strategies (if available), risk factors, and selected financial data. I also like to look into management and see who is at the helm of the business, how long they’ve been working there, and their background.

Reading the 10K is the tip of the iceberg when it comes to investing research. I explain the entire process of analyzing a prospective investment in my Investing Boot-camp for beginners. However, the annual report is one of the most important pieces of your research puzzle and you should start there.

Step #4: Determine if the company can actually make you money!

Gather all your data, what you know about the business, and think hard about this one.

Let’s be honest. The reason we invest is to make money. Something important to understand is that not all companies that offer products or service you know and love will make you money. As I recently shared on my Twitter and Instagram page:

For that reason, it is incredibly important to make educated decisions on whether or not something we are considering can actually be profitable. There are several important factors to consider.

If you’d like me to share a post regarding some of the steps I take to determine whether an investment can potentially be profitable, let me know! No one has a crystal ball or can guarantee exact returns for any company. However, there are factors that can help you make educated decisions on that and I’d be happy to share if you’d like to hear more.

Thank you for reading. If you enjoyed the post please share it with friends, family, and loved ones and let me know below if you have any questions or comments. Also, don’t forget to sign up here if you’d like to check out  the template I use to keep track of my watch list stocks.

Have an amazing weekend! Happy mothers day to all the mothers in the Girl$ on The Money community <3.

Cheers to profits,

Mabelle

PS: Did you know … you can check out ALL the newsletters from 2016 in our exclusive eBook.  If you are looking for our Amazon bestseller for investing beginners, Click here.