How much research do you do before to buy?
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Thread: How much research do you do before to buy?

  1. #1
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    How much research do you do before to buy?

    Realizing how little I get from my TSFA and RRSP, I decided to see if I could get better returns if I take care of it myself. Being the nerd I am, I first read a big bunch of books about investing. Long story short, most advice to research about the companies before to by (and that makes sens to me). So, following those advice I chose a random company (crescent point energy corp) and downloaded 4 years of annual report and the last quarterly reports so study while at work tomorrow. Then I realized it would take me the week (if lucky) to see clear in all that and that's just one company.

    So that brings me to two questions:

    1st, how far do you go in your research before to feel confident about buying into a company?
    2nd, how is that working out for you?

    Regards,

    Pat


  2. #2
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    I prefer a technical approach which means minimal fundamental research. A technical trader goes by the charts, a fundamental trader goes by the news. Your study of annual reports would be appropriate for a long term, value oriented fundamental investor.

    Only Warren Buffet reads random company reports for fun. Everyone else narrows down the field by using a few key indicators to zero in on the most promising prospects.

  3. #3
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    It's not so much how much work you need to do, rather are you doing the right kind of work.

    I follow the rule of only investing in things I understand. If a company makes a widget that I've never used and sells it to people I don't associate with, I think I'm a pretty poor candidate to understand if it's a good company. I've learned not to trust the opinions of others.

    So, first I pick companies I understand, the next step is to learn about the company in some detail. Things that are important to know is how the company makes money, how stable that source of money is, how likely is it going to continue and increase going forward.

    Once I know the source of the company's revenue, and am sure of its security, I need to know how much it's going to cost me to get a piece of it. No point in paying $1000 in order to make $1 (though some companies have this kind of valuation). If the cost is reasonable, it may be worth buying, at this point I look for intangibles which may affect the company (this is where some general information is needed).

    If everything checks out, I'd probably buy...if not, I put it on my watch list and wait for a crisis to hit which drives the price down. A quick check to make sure nothing has changed and it's just the baby being thrown out with the bath water and I jump in if it's on sale.

    Patience is often rewarded in investing.
    I'm not JustAGuy (without spaces), or Donald, or <insert name here>.

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  5. #4
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    Cant see a play in a chart step aside till there is one. There are times all it takes is one look @ a chart & you know precisely what to do

  6. #5
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    before buying parameters for when to sell after you bought should also be established

  7. #6
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    Side question - what do you do? I'd like to be able to read financial reports at work instead of... well work itself.

  8. #7
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    My general rule is to go back and find the last major move in price. Or last management change at the top. Find why the price went up or down and then study current situation. The in between area a quick look.

  9. #8
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    You say you read a bunch of books on investing. They must have given you some criteria for picking out a stock to research. If not, you could try Benjamin Graham's book on Security Analysis. Don't bother with The Intelligent Investor, you won't learn anything from it you don't already know.

  10. #9
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    Quote Originally Posted by Rusty O'Toole View Post
    ... Only Warren Buffet reads random company reports for fun. Everyone else narrows down the field by using a few key indicators to zero in on the most promising prospects.
    Odd that I didn't notice my name was "Warren Buffet".

    I read them because the press story is mostly quoted from the company's rosy release. At times, the reports contradict this view long before anything surfaces in the media. Sobey's walking away from about $45 million in SAP licensing fees due to not be able to stock their stores with the new system was buried in the reports, long before the press announcement or the heated annual meeting that covered the topic.

    There's also things like poster's here on CMF doubting Canadian banks can diversify into other markets while the BNS reports have years worth of Central/South America revenue/profits are at 90% or better of Canadian retail revenue/profits or have contributed 1/3 to 1/2 of the overall, new record profits announced.

    The couple of years in the job Canadian oil company US citizen CEO moving the Canadian HQ out of Calgary to Colorado.

    The "US" software company incorporated in Las Vegas with 95% of it's staff including developers in Vancouver.


    Cheers

  11. #10
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    Quote Originally Posted by Arnak View Post
    ... So that brings me to two questions:
    1st, how far do you go in your research before to feel confident about buying into a company?
    Depends on the company and how volatile their market is ... lots gets written up about large companies while less popular smaller companies with a success story aren't written up much.

    Though if you are learning, it may be better to go with the bulk of the investing in a low effort/reasonable results style like a couch potatoe setup then branch out as you learn/test investing in individual companies.
    http://canadiancouchpotato.com/


    Quote Originally Posted by Arnak View Post
    ...2nd, how is that working out for you?
    Some +700% before dividends over a long time, some nice short term big gains (two to three years) by buying in Dec '08 through July '09, some that were overall losers for others (ex. Corel, Nortel) I risked a set amount that did well.

    Had some cut dividends or become worthless (mostly in the '90s when I was trying out different things).

    Keep in mind there's many ways to make money. At times for something I liked long term, I've bought low then sold for a modest profit while leaving the basic amount as is. In mid 2008, I had AGU that had run up from $28 to $115. With the gathering storm clouds as well as not willing to lose out on the gains, I sold 60% for about $105. After watching for months, I re-bought in less than two years for $50.

    While a lot gets posted here about 2008/2009 dividend cuts, from what I owned going into the crash - I could find only two that cut their dividends. Where it is pointed out that the index as well as ETFs dropped by 40 to 50%, on a monthly basis - I could only find a drop of 10% for my equity at the same time. I'm sure some of that is because of trimming some equity in 2008 (ex. AGU) and buying into the lows.


    Cheers


    PS

    There is also making money by knowing the rules so that one makes them work in one's favour. Another item from 2009 was to have an investment that had been held for years, paying an 8% dividend. Being short of cash, when it dipped to have a minor CG - it was transferred as a stock to my TFSA. A tiny CG was paid, where dividends were now tax free and the share price recovered within a year.

    Last edited by Eclectic12; 2017-03-10 at 11:31 AM. Reason: added PS

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