Researching Companies

1
Researching Companies

• for the Stock Market

2
How do you know?

• There are about 2,800 firms listed on the New
  York Stock Exchange, and many more listed on the
  American Stock Exchange and the NASDAQ.
• YOU MUST
• Recognize that you cannot know it all
• Select a few companies to research, then follow
  their progress closely.
• Do not try to use too many sources, Newspapers
  and the Internet are probably sufficient.

3

• Many individuals spend a great deal of time and
  effort trying to find companies whose stock
  prices might increase faster than average for the
  market.
• Many financial institutions brokerage
  companies, banks, life insurance companies
  spend even more time and effort trying to
  identify companies whose stock price might
  increase faster than average for the market.
• It is very difficult to earn unusual gains in the
  stock market because most of the information
  about most companies is already known.
• People who earn above-average returns from their
  stock are usually surprised. But it is hard even
  for experienced investors to find surprises in
  the market.

4

• The value of Nike shares increased after Nike
  became associated with LeBron James. James is an
  exciting young basketball player who jumped
  straight from high school to a staring role in
  the National Basketball Association. James had
  surprising success as a NBA rookie, and he signed
  with Nike to endorse Nike products early in his
  professional career.

5

• Could you make big money today by purchasing Nike
  stock, thinking that its value might be enhanced
  by the LeBron James connection?
• No, probably not today. But you might have done
  well if you had gotten in earlyif you had bought
  Nike stock just before James became a star and
  signed with Nike.

6
Useful tool to summarize important
characteristics regarding various companies.

• Share Price
• Price/Earnings Ratio
• Annual Revenue or Sales
• Earnings Per Share
• Changes in sales
• Changes in earnings
• Demand for goods and services produced.