Stockology

This post sort of strays from the norm. But I think it’s necessary. It’ll be short and sweet, I promise.

I read an interesting article from SeekingAlpha.com by Matthew Hougan called “Has the Internet Made Us Better Investors?” You can read it here. In it, the author talks about how he did not have internet in his office, and woe and behold, got tons of work done. Then he goes on to say that the amount of information we have our fingertips might be overload. And that’s the meat of the issue I want to get to.

This kind of goes back to using research resources efficiently. There is so much information we have to digest on a daily, hourly, minutely (word?) basis that there is no way for our brain to functionally process it all.

First of all, information needs to be presented in a useful way. This is one of the problems I face everyday. I’m reading all these publications that basically regurgitate the same information, maybe with a tad bit of differentiating analysis from each… Maybe 10%. So 90% of the information presented on an article is either 1) something I’ve already read about and know, or 2) something I’ve already read about and know, but presented in such an obtuse way that it confuses me. Either way, it sucks.

Alright, so I guess that was more of a rant… Probably not informative at all. But keep that in mind next time you’re reading something. Are you wasting your time or are you really learning something new? And if you are learning something new, is this really the best way to go about doing so?

A last reference to that article from SeekingAlpha.com. The author poses a question near the end: Is the average investor doing any better today (assuming we have so much information at our fingertips) than they were 10 or 20 years ago?

That’s interesting, isn’t it? Today, it takes all of 10 minutes to do some solid due diligence on a company. 10 years ago, it would have taken a hell of a lot longer and a hell of a lot more work. But “is the average investor making more sensible decisions?”

Something to think about…

Imagine the days before there was the internet. Researching anything required either a drive or a long-ass hike to your local library, which may or may not have had information on what you were looking for. Back in the day, people got stock quotes by either 1) calling their broker, or 2) waiting for the quotes on the next day’s business section.

Now, we have all the information we need at our fingertips. Sure, some stuff cost money, but there are plenty of great resources available for free. The only thing I would recommend paying for, and incidentally the only thing I pay for myself, is a subscription to The Wall Street Journal. Being an investor without a subscription to The Journal is like being a priest without access to the Bible. What a great analogy. I surprise myself sometimes… Get it in print. Get it online. It doesn’t matter.

If $100 per year (translating to $8.33 per month, significantly lower than my porn subscription) is just too much to ask for, then you have a few options. Share the paper with a roommate or two, reducing your cost by 66% to 50%. Share the online subscription with a few friends (it’s frowned upon, but what the heck, right?). Go to the library and read it there. If none of those work, you’re likely an uptight cheap-ass and maybe shouldn’t be investing in the first place.

Every other resource I’m going to mention is free. Some will have premium content available for a fee, but you can do without those. Know that currently there is enough information out there transcribed every minute to dizzy you. And if you don’t have a set way to sift through, ingest, digest, and analyze and put to use all the information, you’ll be wasting a lot of time.

So here’s how this is going to work. I’ll tell you some of the research resources I use. You can pick and choose from those, and hopefully find some of your own. You mix and match to create a method that best suits your time restraints, interests, preferred-media, etc.

First off is Investopedia.com. I believe I mentioned this a little earlier. It’s an investment encyclopedia. A great place to go and look up terms you don’t know. The reason I put this first is because if you dive right into The Wall Street Journal or some other publication without knowing some of the basic terms you’ll run into. It’ll be like a Chinese guy reading Arabic. So have it bookmarked, put it in your favorites, whatever. You’ll use it a lot when you first start.

In the investing world, The Wall Street Journal is the publication of record. That aside, CNBC, the network station or the website are great resources. They have up-to-the-minute headlines, and great analysis. TheStreet.com is also a good place to get market news, investing advice, and stock picks. And finally, a site that I recently discovered, SeekingAlpha.com. This site is more focused on analysis on certain industries and companies than news. I like it because experts (albeit many are self-proclaimed) break down how news affects the stock prices. And besides, it’s always good to hear it from a fellow investor who is biased toward one company or another.

For researching individual companies, obviously the best place to go is their website. Aside from information on what they do, publicly listed companies all have this “investor relations” section where you can find and download their financial filings with the SEC. That’s the Securities and Exchange Commission, a government commission that regulates the securities markets. For watered-down versions of financial information, including income statements, balance sheets, and cash flow statements, Yahoo! Finance is the place i frequent the most.

I also subscribe to print versions of BusinessWeek, Forbes, Fortune, and The Economist. And no, I don’t really have time to read all that. That’s what tables of contents are for. You find the stories that interest you and just read those. There are online versions of all of those, so they’re definitely worth checking out.

There are also research reports published by analysts who cover particular companies or industries. Your online brokerage should provide access to some of these on their site. I use Charles Schwab where, in addition to its own ratings, it provides outside research from Goldman Sachs, Argus, S&P, and Reuters.

Finally, I have a charting software called TeleChart 2000 by Peter Worden. I have no idea how much it costs because I don’t pay for it, but I imagine it’s not cheap. It’s definitely not necessary. But just thought I’d throw that out there because I’ve been using it for about a decade and a half now.

So all in all, I mentioned about 10 research resources that you should be able to access for free. One of the great things about the internet is hyperlinking. Through your readings, you’ll run across a lot of cross-linking. For example: A Yahoo! Finance story linking to a relating story from Reuters, which mentions something a TheStreet.com reporter says. The Wall Street Journal usually won’t have that. They’ll be telling the story from their reporters’ point of view. That’s why it’s the paper of record.