UNIVERSITY OF ILLINOIS
College of Business - Department of Finance - Finance 300 (Financial Markets)
Professor James Jackson
Stock Investment Research Reports
Historically, stock has been the powerhouse of the investing world, consistently providing stronger returns over extended
periods than any other investment category. Those higher returns result from a combination of increasing share prices plus
dividend income, which is a portion of corporate profits paid out to stockholders.
Despite this record, many people think of stock as a risky investment because the prices of individual stocks and the stock
market overall can fluctuate, often dramatically from day to day or even year to year. In addition, dividends can be reduced or
even eliminated if the company issuing the stock suffers reverses. Other major asset classes, such as bonds and cash equivalents,
tend to be less volatile and produce more predictable income.
Types of Research
A company's SEC filings, in particular the annual 10-k report, is a comprehensive overview of the company's financial health.
The 10-k report gives you detailed, audited numbers — the company's balance sheet — where you can review debts and assets,
revenues, expenses, and descriptions of the company's activities, developments, and a catalog of the risks it faces. It also
contains detailed footnotes that elaborate on specific situations and may provide valuable clues to the company's prospects.
While it's dry reading, many investors and their financial advisers view the 10-k as an indispensable resource.
Many SEC filings are available free of charge through the SEC's online database, EDGAR — the Electronic Data Gathering,
Analysis, and Retrieval system. EDGAR is accessible from the SEC Web site, www.sec.gov.
It's also important to follow the financial press, to keep abreast of what's current in the industries and stay informed about the
companies you're following. If you're tracking a stock closely, it's smart to set up automatic email news alerts that send you the
latest stories about the stock's industry and company as they're published. Your adviser can also help direct relevant news and
information your way and help you single out important developments.
How Analysts Work
Typically, an analyst follows a number of companies, often in the same industry. The analyst's job is to know these companies
inside and out, and to deliver objective, accurate recommendations about their stocks. Analysts must examine whether a
company is financially sound, whether it has potential for increased future earnings, how it measures up to others in its industry,