December 23, 2008

The Right Investment Tools For the Job

Value Investor ToolboxGive us the tools and we will finish the job.
Winston Churchill
The evaluation of companies was once a very laborious exercise. Information about historic earnings and historic pricing information involved significant research and compilation. Today that effort is significantly reduced, thankfully there are numerous sources one can access to retrieve sets of desired information. Choosing just one source in all these options is often difficult though. Today we are going to have a look at some of the tools I use in analyzing companies I would love to hear so of your feedback and suggestions on other tools you use.

Tool 1: SEC Data

The Security and Exchange Department regulates that members of companies submit filings on buying and selling that they do in their own company within a few days of the transaction. There is a wealth of information here if you believe in the adage "people sell stock for all sorts of reasons but only buy it for one".

The SEC after much fighting made this information available via a website. http://www.sec.gov/edgar.shtml The usability of this website is, well, poor. There are alternatives if you happen to have $30K lying around to buy the "public" data. Or you can build your own data feed like I did.

Baring both of these alternatives I think the best source to get updates on SEC filings comes from J3SG they have a free daily email that comes out that shows some of the major trades from the day, they also have some interesting charts you can browse and it is all free.

Tool 2: Historical Data

Being a value investor the next place I go to is looking at fundamental analysis data such as balance sheets and income statements. Data is data so the key factor that sells me on a source is the number of years of available data. The winner in this category is Morningstar once you have an account setup with them you can access ten years of data.

Value Investor Google Finance
Great site with 4-5 year data package and it is free!
The Morningstar website is a bit clunky though so if four to five years of data is acceptable Google Finance has a fabulous free site where info can be tracked down much more quickly.

Tool 3: Ratios

It is impossible to compare companies of different sizes and revenue streams without the use of some ratios.
Wow that P/E is high compared to the industry, but wait, the dividends are very different.

I personally like the ratios that are presented on Reuters they provide a number of the core ratios that I look at and also provide comparisons between the company, the sector, industry and market which helps greatly as a P/E of 10 may look good in one sector but absolutely dismal in another sector.

Tool 4: Charts

I am a not a huge fan of technical analysis but understanding a few things about a stock's moving pattern certainly does not hurt when you are getting ready to pull the trigger. I look at two sets of charts.
Looks like the market wasn't too excited about PSD purchasing another energy source.

I look at Google Finance to get a sense of any news stories I may have missed during my research of the company, and then I look at Yahoo Finance to review the insider trading patterns and stock volumes.

That is basically it my tools, the rest is just hard work. So what tools do you use?

* The author of this article was in no way paid or compensated for promotion of any website or service mentioned in this article.

2 comments:

j said...

Thanks for the blog, would be interested in the ratios that you look at and the relative importance you place on the various ratios. Thx.

value investor said...

Hi J, thanks for the question! I am a Graham style investor so I typically look at P/E, Book Value, Price to Book Ratio, Current Ratio, Dividend Yield. Here is a link to a posting I did on the different Graham criteria (have a look at all the links on the bottom of the article for other parts in the series):

http://buyvalue.blogspot.com/2008/12/buy-with-solid-dividend-session-7.html