Chapter 2 Information Collection Flashcards
A forecast is only as good as the information that is used to construct it!
Why should an analyst focus mainly on company-specific information instead of macro-information?
Because over half of the variation in a company’s stock prices is explained by company-specific information. Therefore, get a good grasp of the macro-environment that a company is in, but focus mainly on their specific information.
What is a 10K Filing?
Form 10-K is a comprehensive report filed annually by a publicly traded company about its financial performance and is required by the U.S. Securities and Exchange Commission (SEC).
What is a 10Q Filing?
SEC Form 10-Q is a comprehensive unaudited report of financial performance that must be submitted quarterly by all public companies to the Securities and Exchange Commission (SEC). It stands in contrast to SEC Form 10-K, which is required to be filed annually and is audited.
What is an 8K Filing?
SEC Form 8-K, titled Current Report, is a mandatory filing that publicly traded companies must submit to the Securities and Exchange Commission (SEC) to announce significant or “material” events that shareholders need to know. Unlike mandated periodic reports such as annual (Form 10-K) or quarterly (Form 10-Q) filings, Form 8-K is designed to reveal essential matters in time for shareholders to react. Matters that must be reported on the form include acquisitions, bankruptcy, directors’ resignations, or fiscal year changes.
What is a DEF14A Filing / Proxy Statement?
A proxy statement is a document provided by public corporations so that their shareholders can understand how to vote at shareholder meetings and make informed decisions about how to delegate their votes to a proxy. Issues covered in a proxy statement can include proposals for new additions to the board of directors, information on directors’ salaries, information on bonus and options plans for directors, corporate actions like proposed mergers or acquisitions, dividend payouts, and any other declarations made by the company’s management.
What are Forms 3, 4 and 5?
SEC Form 3 is required to be filled out when an individual becomes an insider in a firm, according to specific SEC rules. The individual will need to disclose their ownership of company shares. SEC Form 4 needs to be filled out when there is any change in the ownership of a company’s stock.
What are the contents of a 10K Filing?
- Description of the business
1A. Risk Factors - Properties
- Legal Proceedings
- Mine Safety Disclosures
- Market Information for Stock
- -
- MD&A
- Financial Statements and Supplementary Data
- Changes and Disagreements with Accountants
9A. Controls and Procedures
9B - 16. Consists of less relevant info such as corporate governance etc.
What is the Management Discussion & Analysis (MD&A)?
A company’s management uses the MD&A section of its annual report to provide commentary on financial statements, systems and controls, compliance with laws and regulations, and actions it has planned or has taken to address any challenges the company is facing. Management also discusses the upcoming year by outlining goals and approaches to new projects.
It ends with some Safe Harbor Statements about future projections to avoid legal accountability.
What is the “Must Read” section on the company website?
Press release section.
They often provide more timely information than periodic SEC Filings. However, you should also remember that any financial information in these press releases is not subject to the same standards as the company’s financial statements on Forms 10K and 10Q. Therefore, companies can publish their own earnings announcements but use their own accounting measures to appear healthier as a business.
What is the difference between an SEC 10K Annual Report and a common Company Annual Report?
A common Company Annual Report is not subject to the rules and guidelines of the SEC, so there is more room to manipulate or “cook the books”.
Why are things to keep in mind when analyzing information from the Financial Press?
Writers from the Financial Press get paid for exciting stories, hence, they pay less focus on the truth and more on the excitement of the story which can alter the reality of the information.
What is the difference between buy-side and sell-side research reports?
Analysts that are working for brokerage houses are referred to as sell-side analysts while buy-side analysts work specifically for institutional investors. Therefore, buy-side information is typically not public, while sell-side analyses might be distributed.
What are advantages and disadvantages of sell-side analyst research?
Since sell-side analysts are often industry experts, they might provide some new, valuable industry insights. However, read these reports with a dose of skepticism because since these analysts work for brokerage firms, they earn money by getting people to trade so they often write overenthusiastic.
What are the five layers in doing macro-economic analysis?
Global economy
Domestic economy
Economic sector
Industry
Company
What is the difference between a sector and an industry?
An economic sector consists of a broad group of companies that engage in related activities. For example, Consumer Nondurables.
Within each sector, there are a lot of industries which are defined by the nature of the good or service that is provided by the business, for example, Apparel and Tobacco in Consumer Nondurables.
Firms in the same industry provide similar goods and services and will typically use similar inputs and production technologies. Because of these similarities, common analysis techniques and competitive analyses can be applied to firms in the same industry.
Why is it a bad idea to download the necessary data in a standardized sheet?
Standardized sheets use systematic coding of the data so if there are lines that the coding doesn’t know, he will fit or push data there. Therefore, the actual data and the data output in a standardized format might differ.
The solution is to manually insert the numbers yourself in Excel, which is called the “As Reported” Statements.
