Tips on How to Research What Stocks to Invest In
Becoming a successful investor or trader requires research. A great investment opportunity will not have neon signs surrounding it telling you to invest your money here. Researching a company also allows you to figure out the best time to take your money out of the stock market. Sites that compare stocks can also help investors who are short on time conduct research about a company and market conditions.
Currently, COVID-19 is wreaking havoc on the stock market. Investors who were well researched and needed their money this year or sooner would have been paying attention to the headlines. They would have withdrawn their money from the stock market early, protecting their earnings. Tech companies like Microsoft and Apple were hit hardest by the COVID-19 outbreak in China. Tech companies like Apple and Microsoft manufacturer parts in China. A hiccup in china’s economy causes problems for these tech companies.
Now that COVID-19 has become a pandemic, more industry sectors have been affected. In an interview with side-line.com, some Italian bands talk about how COVID- 19 is affecting the music industry and their personal lives. But even when the market is in a general downward trend, there are still companies that are worth investing in.
During the 2008 recession, companies were forced to innovate and buy products from open-source companies. This made open-source companies like Red Hat an excellent investment at the time. For new investors or investors who are unsure of the best way to research a company, here are a few tips on how to research the best stocks to invest in.
Form 10-K
Once you’ve figured out which company or sector of the market you are interested in, you can begin conducting your research. Every company that is publicly traded is required to submit certain documents by the Securities and Exchange Commission. Forms 10-K and Form 10-Q can help you judge the return potential of a company.
Form 10-K gives financial statements for a company and company information. This document is over 100 pages, making it a tedious read. The 10-K form is separated into several parts. Part one is the basic information about the company. Part two focuses on the company’s decisions and the results. Part three focuses on discussing the company’s corporate governance practices. Part four includes the company’s financial information.
Form 10-Q
Every publicly-traded company is required to submit a 10-Q form by the Securities and Exchange Commission. 10-Q forms are submitted every quarter except for in the fourth quarter. The 10-K form is required to be submitted in the 4th quarter instead of the 10-Q. The 10-Q form provides investors with financial information about a company on a regular basis. The 10-Q form is separated into two parts. The first part includes the company’s financial information from the quarter. The second part of the form includes information about a company, like legal cases or defaults.
8-K and Annual Report
Other documents investors should check include the 8-k form and annual reports. The 8-k form must be submitted when there are changes that weren’t reported on the 10-Q or 10-K form. This form could disclose information like press releases or leadership changes in a company. A company’s annual report is submitted each year. The annual report includes information like financial statements and a statement from the companies CEO to shareholders.
Important Details
When researching a company, investors should look for specific financial numbers. There are several financial numbers that will reveal the condition of a company.
- Net income
The amount of money that is left after taxes and other expenses is the net income of a company.
- Return on equity and assets
Return on equity or return on assets is how much profit a company can produce from shareholders’ investments. Return on equity and return on assets calculates for each dollar invested how much profit is made.
- Earnings and earning per share
Earnings and earning per share is calculated by dividing a company’s earnings by the number of shares being traded.
- Revenue
A company’s revenue measures how much money a company made in a certain time span.
These numbers can tell you if a company is making a profit, but they will not tell you how a company is investing its profit. Investors will have to use these numbers and also research basic information about a company to find out how it is spending its profits.
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