Advertisement
investing

There's Gold in the Fine Print

Mine reports to uncover inside details and company hyperbole.

Michelle Leder unearths nuggets that companies bury in routine Securities and Exchange Commission filings. She blogs about her discoveries at Footnoted.org.

Where's the best place to find these filings?

A number of places: EDGAR (the SEC's online database of corporate financial information), a company's Web site under "investor relations" or a number of free and subscription sites, such as SECWatch.com. Unfortunately, these filings aren't easy to plow through. Bank of America's recent Form 10-K report was over 750 pages. And the language can be daunting.

Advertisement - Article continues below

So what's an investor to do?

It's up to investors to do due diligence if they want to own individual stocks. If that seems like too much trouble, then maybe you belong in ETFs or mutual funds. Pay attention to key documents, such as the 10-Q, which is filed quarterly, and the Form 10-K, filed annually. Don't rely on a company's glossy annual report with the pretty pictures; you want the 10-K with a lot of heavy writing. Companies are required to file documents, but they're not required to make reading them easy on investors.

What should we look for?

In 10-Ks and 10-Qs, look for the list of the company's risk factors and look at the financials. See whether there are significant differences from what the company reports in its press release. I have yet to see regulators go after companies for overstating facts in a press release. "Record earnings," "record revenue," "record growth" -- when I see that hyperbole, I put the company on my watch list.

Are there other filings to watch?

The other one is the proxy statement: officially, Form DEF 14A. That's where you'll find the juicy stuff, such as executive compensation. I like to pay attention to how much directors are making. The other day I saw three directors of the same company who make more than $600,000 a year each -- for a part-time job. How many questions will they ask? Are they really going to rock the boat? Check out any related-party transactions -- business dealings with insiders or affiliates. Are the deals the best use of shareholder money? Look at how perks are doled out. Use of the corporate jet comes up a lot -- that's expensive. When you see millions of dollars a year spent on personal use of the corporate jet, you have to wonder, When are these people working?

Advertisement
Advertisement

Most Popular

Social Security Recipients, Veterans Must Act Now to Get Extra $500 Stimulus Check
Coronavirus and Your Money

Social Security Recipients, Veterans Must Act Now to Get Extra $500 Stimulus Check

The deadline for seniors and veterans to request an additional $500 stimulus check for a dependent child is approaching fast. See how you can claim yo…
September 25, 2020
Trump Promises $200 Prescription Drug Card for Seniors
Medicare

Trump Promises $200 Prescription Drug Card for Seniors

Medicare beneficiaries will soon receive a debit card in the mail that they can use to pay for prescription drugs.
September 25, 2020
Election 2020: Joe Biden's Tax Plans
taxes

Election 2020: Joe Biden's Tax Plans

With the economy in trouble, tax policy takes on added importance in the 2020 presidential election. So, let's take a look at what Joe Biden has said …
September 18, 2020

Recommended

Bonds: 10 Things You Need to Know
Investing for Income

Bonds: 10 Things You Need to Know

Bonds can be more complex than stocks, but it's not hard to become a knowledgeable fixed-income investor.
July 22, 2020
Best Bond Funds for Every Need
Investing for Income

Best Bond Funds for Every Need

In a changing market, it’s important to remember why we hold bonds in the first place.
September 15, 2020
Does a 40% Bond Allocation Make Sense in Today’s Portfolios?
retirement planning

Does a 40% Bond Allocation Make Sense in Today’s Portfolios?

For many investors, the short answer is no. Here’s why, and what you might consider instead.
September 7, 2020
Is the Stock Market Closed on Labor Day?
Markets

Is the Stock Market Closed on Labor Day?

The good news: Stock markets and bond markets alike get the day off for Labor Day. But traders don't get an early start to the weekend.
September 5, 2020