Wednesday, February 8, 2012

Follow Your Companies Full-Time

Many value investors tend to favour quantitative over qualitative factors when evaluating stocks. Nevertheless, it is absolutely imperative that investors go beyond the quarterly reports in evaluating a company's prospects.

In the past, we have seen many instances where qualitative information gleaned from conference calls has been useful in determining the future direction of the business. For example, it was clear that Acorn International was under pressure to pay out some of its large cash balance. It was also clear that Quest Capital was intending to buy back shares as quickly as regulations allowed. Qualitative factors such as these allow investors to make more accurate quantitative assessments of a company's intrinsic value.

Throughout a quarter, in between conference calls and financial reports, companies will also release material filings. For example, companies often release filings that give an indication that buyout talks are ongoing, as Parlux has done several times. While this kind of filing may not change an investor's estimate of the company's value, it does certainly increase the likelihood of a catalyst.

For part-time investors, there are options that can make it easier to stay in touch. For example, one can subscribe via RSS to a company's filings or press releases. Investors then only have to consult their RSS feeder every now and then to see all the filings of all the companies they follow. Companies will make disclosures throughout the quarter, and the onus is on investors to follow along.

1 comment:

ShortBus said...

Most companies, even the small ones have email lists for investors which email all the filings and news to your inbox, so there is no need to even check your RSS reader occassionally, just incorporate it into your normal processes of reading email.

Sign up for http://secfilings.com/ and get ALL the SEC filings emailed to you for every company you follow.

Every new company I investigate. The first thing I do, is look at thier website to see what they do, and then I look at the financials and if it is even slightly interesting after that I sign up for the email list.

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