© 2000 John Petroff

1)- Information about US Companies

The most important source of information about a company is naturally the company itself. The primary vehicle is the annual report. Most financial analysts go beyond an annual report. For instance, loan officers demand more updated and precise information in the form of cash budget and business plan. Such material is not obtainable by most analysts that do not have a relationship with the company. They must seek greater insight in what takes place in the firm from specialized services, government agencies overseeing securities and the media. For those seeking information for a trading strategy, information on individual company background and future prospect is very abundant. The following will list a large number of different information sources serving a wide range of needs.

a)- Annual Report
This is the official document prepared by a corporation to inform its shareholders, as well as the general public, about its results for the year and its plans for the future. Non-incorporated businesses do not issue annual reports. Closely held corporation (i.e. those owned by just a few individuals) do not make their annual reports available to the public. In an annual report of major American corporations one would normally find the items required by the SEC, as well as other self-promoting information, including
- a narrative describing the company, its products, its people and its performance;

- management's discussion and analysis of results of operations and financial conditions (MDA);
- balance sheet and income statement for the current and previous year, with notes that explain some of the items;
- auditor's opinion;
in addition, most annual reports would also have
- statement of cash flows, statement of stockholder equity (for three years), retained earnings reconciliation, earnings per share and other ratios;
- break down of revenues, profits, assets, depreciation, new investments and possibly some other data by segment (i.e. products, regions, affiliates or departments);
- historical data on various financial and performance data;
and in rare cases
- projected income statement.

Annual reports are received by shareholders and most anyone who asks for them in their mail. Many can be found in libraries and at investment brokerage firms. Some corporations have placed their annual report on their web site. Some annual reports are also available on-line from the Reports Gallery and from PRARS at http://www.prars.com/. Unaudited quarterly reports are also sent to shareholders. For corporations that plan to sell shares to the public (i.e. initial public offering or IPO), the registration statement filed with the SEC (discussed below) is often used as a preliminary prospectus (which is called a red herring because of a disclaimer stamped across the front page in red letter stating that this is not an offer to sell). Prospectuses for IPO's are usually found in offices of stock brokers and from IPO Central on-line at http://www.hoovers.com/.

 

See research assignments R-1.D1a.1, R-1.D1a.2 and R-1.D1a.3.

b) Government

- Form 10-K filing at the Securities and Exchange Commission (SEC): Required for all corporations whose shares are publicly traded in more than one state of the United States, this annual registration statement must be filed with the SEC. It consists of annual audited financial statements together with notes and MDA (i.e. Management's Discussion and Analysis of Results of Operations and Financial Condition which touches upon the company's competition, clients and major products) which are usually the same as in the annual report, plus information about major shareholders and key executives (who are deemed to be insiders) and their compensation, which is not present in the annual report. The SEC, which was created in 1934 by the Securities Exchange Act, does not verify the accuracy of financial statements, but only that they provide adequate disclosure. Failure to have Form 10-K accepted by the SEC for filing will cause a rejection of a company's SEC registration which is necessary to sell shares to the public. As observed in Chapter 6 Section B-3, the SEC plays an important supervisory role over financial reporting. Since 1972, corporations must also file quarterly financial statements on Form 10-Q and reports on current developments of Form 8-K. Although the information is more abundant in these SEC filings, corporations put in their annual reports essentially the same financial numbers. The most useful trading information obtainable from SEC files are reports on insider names and trading. SEC filings are obtainable on line from the SEC at EDGAR on-line (Electronic Data Gathering, Analysis, and Retrieval http://www.sec.gov/cgi-bin/srch-edgar or http://www.edgar-online.com/). Latest filings are also found through search engines, investment services and company web sites.

- State filing: All corporations whose shares are publicly traded in a given state must be registered with a state administrator of that particular state. State administrators who were set up starting in 1911 in Kansas, and later in every state, by "blue sky" laws to prevent speculative schemes, and which were given additional powers in 1956 by Uniform Securities Acts passed by many states, have parallel functions to that of the SEC for securities traded within one state, with one difference that they do have power to review the merits of the investment scheme.

See research assignments R-1D1b.1 and R-1D1b.2

-c)- Specialized services
Standard and Poor (S&P) "Corporate Records" contain much detailed financial and administrative information for publicly traded corporate stocks, which may be useful to prospective shareholders. S&P "Stock Reports" offer a historical analysis of corporations with financial, product and management information, as well as about the competition and the industry. These reports are updated periodically and constitute an extensive and current source of information about companies. S&P also publishes a stock price summary called "Stock Guide", a monthly evaluation of four thousand bonds called "Bond Guide", and stock market predictions and recommendations called "Outlook". S&P has offices worldwide and can be found on the web at http://www.standardandpoors.com/.

- Moody's "Manuals" published annually (grouped as industrial, utility, transportation, banks, municipal and government, and international) contain the most complete financial and historical information on thousands of traded companies and issues. Moody's also publishes an abbreviated information in "Handbook" and "Survey" formats. Moody's "Bond Record" offer very complete information on corporate, municipal and foreign bonds, as well as some preferred stocks. Moody's is on-line at http://www.moodys.com/

- Value Line "Investment Survey" contains brief descriptions of company's history and prospects, with much precise data on past stock prices, performance and prospects, which is especially convenient for trading in securities. On-line at http://www.valueline.com/.

- Dun & Bradstreet offers company analysis for a fee for just about any American and foreign company, and is extensively used. On-line at http://www.dnb.com/.

- Corporate Data Exchange publishes "Stock Ownership Directories" for different sectors, which can be used to track insiders' holdings.

- Duff & Phelps Credit Rating Co. http://www.dcrco.com/

- Fitch Investors Service, L.P is full service bond rating agency with news and research. On-line at http://www.fitchibca.com/

- Canadian Bond Rating Service provides investors with reliable credit analysis and ratings since 1972. On-line at http://www.cbrs.com/.

See research assignment R-1D1c.1.

d)- Other sources

Other sources of information about corporations can come from all forms of media including programs on TV and radio, speeches at conferences and article in the press. Recent stock price history is available from all on-line e-traders and investment brokerage firms, and even from search engines such as Yahoo. Cutting edge news about companies is usually first found in the business press (listed in Section D-5) which must be considered as mandatory reading for anyone in finance professions.

See review questions Q-1D1.1 to Q-1D1.14

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