How to Research Investment in a Company’s Stock through SEC Filings

The serious stock investor doesn’t overlook the wealth of information that he can cull from documents filed with the SEC. Take the time and effort to review these documents because they offer great insight regarding the company’s activities.

Here’s how to obtain the main documents that investors should be aware of:

  • Drop by the company itself. Stockholder service departments keep these publicly available documents on hand and usually give them out at no cost to interested parties.

  • Visit the SEC, either in person or online. These documents are available for public viewing at the SEC offices. You can find out more by contacting the Securities and Exchange Commission, Publications Unit, 450 Fifth St. NW, Washington, DC 20549.

    At the SEC's website, you can check out EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) to search public documents filed. It’s a tremendous source of documents that date back to 1994. You can search, print, or download documents very easily. Documents can be located either by document number or keyword search.

Form 10K

Gee, how intimidating. Just the report name alone makes you scratch your head. To some people, 10K refers to running a race of 10 kilometers. But if you’re reading (not running) a 10K, you may wish you were running one instead.

Form 10K is a report that companies must file with the SEC annually. It works like the annual report that you get from the company, except that it provides more detailed financial information. It can be a little intimidating because the text can be dry and cumbersome.

It’s not overly difficult to read because the data isn’t laden with as much spin as the annual report the company sends to shareholders. Go through each section of the 10K. Take some extra time to scrutinize the section on financial data. Ask the same questions that you do when you’re looking at the annual report.

The following websites can help you make sense of 10K reports:

Form 10Q

Form 10Q is a quarterly report that gives you the same basic information as the 10K, but it details only three months’ worth of activity. Because a long time can pass between 10Ks, don’t wait 12 months to see how your company is progressing. Make a habit of seeing how the company is doing by comparing its recent 10Q with one that covers the same quarter last year.

Keep in mind that not every company has the same fiscal year. A company with a calendar year fiscal year (ending December 31) files a 10Q for each of the first three quarters and files a 10K for the final quarter. The company reports its fourth quarter data in the 10K, along with the statistics for the full year.

Insider reports

Two types of insiders exist: those who work within a company and those outside the company who have a significant (10 percent or more) ownership of company stock. Tracking insider activity is very profitable for investors who want to follow in the footsteps of the people in the know.

Every time an insider (such as the CEO or controller) buys or sells stock, the transaction has to be reported to the SEC prior to the transaction. These reports are publicly available documents that allow you to see what the insiders are actually doing. Hearing what they say in public is one thing, but seeing what they’re actually doing with their stock transactions is more important.

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