How To Do Investment Research

A generic image of a person on their laptop
Credit: Shutterstock photo

By SA Author Experience :

By Mike Taylor

When I started reading and writing about the stock market in the summer of 2007, I had little background in financial research and analysis. I'd studied poetry in college, and I'd moved to New York to become a fiction writer. But when my laptop full of mediocre short stories was stolen from my apartment during a raucous late-bull-market housewarming party, it was time for plan B.

When I joined that October to copy edit investment commentary, I was both mystified and skeptical by the world of finance. How could anyone predict what would happen among the seemingly random events of a given market day? Was everyone who pretended to know what was going on a complete fraud and a liar?

As I spent the first year of my career watching the Great Financial Crisis unfold, my skepticism seemed increasingly warranted. But as I learned more about the investment research process, I also gained confidence that a smart and enterprising writer could publish informative work that would help investors make better decisions - or at least avoid some of the stock market's most dangerous traps.

It was a steep climb up that first section of the learning curve for me, and I imagine it's the same for many aspiring analysts and portfolio managers when they're getting started. To provide an orientation to those beginning their education and to offer a brush-up for veterans, we've compiled here a guide to the Seeking Alpha Author Experience's treatment of the investment research process.

Put Your Investment Research In Context

The universal right way to invest may not exist - everyone has different preferences for risk, cognitive strengths and weaknesses, future cash needs, and time horizons. But you can convince readers that you have useful insight (and confront some of your own imperfections with honesty) by being transparent about your own circumstances , and explaining those circumstances to your audience.

Remember, whether you're discussing your own portfolio decisions or analyzing a particular company, context is the lifeblood of investment research . Make sure you're situating the evidence you've unearthed so that someone who's new to the story can incorporate the discussion into his or her own decision process.

How To Do Investment Research

We believe that sound research forms the basis from which all success at Seeking Alpha follows.

If you're writing about an individual company, it never hurts to start by reading the most recent 10-K filing . This annual report gives highly detailed insight into company business models, recent performance, and key risks.

Don't stop with the 10-K. Use Seeking Alpha's SEC filing database to get more key primary source information. Make sure you know the benefits of going directly to the filings vs. relying on third-party data sources.

Armed with many of the details regulators have decided companies need to share with investors, it can help to contrast what you know with what the company management says in its press releases . If the narrative the company is feeding to the press differs from what it's disclosing to the SEC, there's usually a big opportunity to inform investors - the basis of a successful Seeking Alpha article.

How To Write Investment Analysis

Investment analysts need to know the difference between factual information/data and their reasoned opinions and inferences. Successful Seeking Alpha articles provide a balance of fact and opinion . Avoid rants and screeds that are heavy on opinion and light on fact; conversely, avoid recaps and overviews that gather readily available information without injecting your own independent perspective.

Analysts have a variety of approaches, but it's important to be comprehensive along two dimensions: qualitative and quantitative information . Make sure you have a solid understanding of the fund or company's strategy and competitive position (qualitative) as well as how that strategy plays out in the financial statements (quantitative). When the connection between the qualitative and quantitative is strong, you have the beginnings of a very compelling investment analysis.

How To Credit Sources In Investment Analysis

In investment research, attention to detail is key. And nowhere is this more true than in the basic but absolutely critical matter of giving proper credit to one's sources . Know when to use direct quotes, paraphrases, and summaries when presenting material from outside sources.

How To Value A Stock

The investment community abounds with variations on the cliche that valuation models are never right, but they're often useful. To land closer to the "useful" side of things, it can help to understand how different models work and when/why to use one compared to another.

Get familiar with the classic discounted cash flow model . Then, as you're deploying it, make sure you're putting discounted cash flows in proper context . Understand that cash flow estimates can be refined and improved and that caveats apply.

Some analysts prefer to use EBITDA as a basis for financial decisions. But be careful using EBITDA - it's got some known flaws to go with its benefits. Check the inputs to your model - are you using traditional and often more conservative GAAP accounting, or are you making some adjustments ?

Maybe you're just going with a handy P/E ratio. If so, make sure you understand how the P/E ratio works .


More experienced authors may want to try their hand at writing for Seeking Alpha's PRO+ research offering. Before you embark on that journey, familiarize yourself with what PRO+ does , look for upcoming catalysts , and see if you can find a mispriced opportunity in the market . PRO is all about the asymmetric risk-reward .

Article Index

Investment Research In Context

Conducting Investment Research

Writing Investment Analysis



See also Intel Security Risk Is Much Worse Than Management Commentary Indicates on

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics


Latest Markets Videos