Chapter 12. Putting Companies Under the Microscope

In This Chapter

  • Picking apart companies' financial statements

  • Unearthing overlooked details about companies

  • Uncovering details about a company's financial condition

  • Researching the people running the company

If you're the kind of online investor looking to buy the next home-run stock like Google, this chapter offers tips that might help you. I show you how to use online tools to unearth details about companies that aren't picked up by general investing Web sites. I explain how you can glean insights about companies by picking apart financial statements, and I show you how to compare companies with their peers.

Just be careful. Consistently picking winning stocks and buying and selling them at the right times is infamously difficult and time consuming. If you don't know what you're doing, you might make less money picking individual stocks over the long term than you would if you just bought a mutual fund or exchange-traded fund that keeps up with the market.

Understanding Financial Statements

Most investors focus on companies' quarterly earnings reports. It's understandable. Stocks rapidly respond to whether a company topped, matched, or missed earnings expectations for the quarter. Online tools, which I describe in Chapter 6, also make it easy to instantly see how a company did during the quarter and decide whether that changes your opinion on a stock. When companies report earnings, though, they provide only the most basic and top-level ...

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