Investing Tip:

Five Things to Know About a Company

If you do your own stock research there is tons of data available on the internet. But here are 5 important things to research about your company that don't show up in the balance sheet.

1. Malfeasance by executives. It would be nice to know if executives at a company have been in trouble with securities regulators before. An exhaustive search can be expensive, but you can go to www.sec.gov and search the administrative proceedings to see if they've had their wrists slapped by the SEC in the recent past.


2. Bond ratings. How safe is your stock? Bond ratings can help answer that question. If they've issued bonds Moody's probably has rated them. Go to www.moodys.com. You'll have to register, but it's free.


3. Legal insider trading. Are the executives at your company buying or selling the stock? Find out at Yahoo Finance. Get a detailed quote and then click on 'Insider'.


4. Who owns the stock? You can find out who holds major blocks of the stock on the SEC's Edgar page. Search for your company and then look at the DEF 14 filing.


5. Background of executives. Do executives have an appropriate background? Especially important if a new president or chairman has been installed in the last year. You can also get this information in the DEF 14 filings on Edgar.

None of these things is usually a show stopper (except for a really bad debt rating or crooks running the company). But if a few red flags come up it might be a sign to hold off that you wouldn't have found any other way. If you're investing your hard earned money, it's important to understand what the company is up to.

Back to Investing Tips

Donald Steinmann and Advanced Financial Management assume no responsibility for any actions taken due to comments made in The Investment Tip of The Week.