In our series about learning how to invest, I was doing some research for this post and was going to recreate the wheel, but why do that when someone already has a better one? I found an article written by Dave Ahern on exactly what I was going to create. So, without butchering it up, I will post the article here. His article was written on einvestingforbeginners.com which has lots of information on it toward investing.
I found that the SEC 10-K form is a lengthy document that is a very hard read, but hey when you are throwing your money at a company you should be involved in the decision, although lots of information can be gained from reading it.
The Security and Exchange Commission also has a information paper on how to read the 10-K listed here. I found the article from Dave Ahern to have a better analysis, although from his point of view, than the SEC had listed. The information from the SEC tells you all the parts of the form, but not the parts you would want to focus on to make informed decisions about the company you are looking to invest in.
The biggest take aways from reading this form is to look for the past years returns compared to the current years return, look for any legal problems that may have arisen for the firm, the size of the company and information on the competitors. This coupled with the declared risk factors and the section outlining the different segments of the business helps build a better picture of the outlook of the operations of the company.
Since these are required and audited by the SEC if there is any vagueness to them, this might be a sign that you would want to watch out for. They also have a section if there was a disagreement with the accountant who prepared the form, this could be another red flag of the company.
To get a SEC 10-K, you would have to go here and use the EDGAR, here you can fin any public traded company, mutual fund, ETF and many more. There will be several forms listed by the company you are looking for to include the 10-K.
Bottom line is to do your research on a company to figure out if you want to own a piece of it. There is no get-rich-quick scheme, these barely work, and Ted from the front desk probably does not have the next “HOT” stock pick. Become an informed investor with your money, conduct your research and invest wisely.