Author Topic: Do you read all of the filings of a company you invest in?  (Read 5111 times)

TheAiGuy

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I understand that this is sort of a heterodox view, but I basically just glance at fillings, looking for one or two things that I've previously identified as being material to my thesis. For example, I am looking for revenue growth or indications that a company does, in fact, have enough liquidity to survive, etc. That is, I am looking for something specific to support or falsify a previously constructed thesis on drivers of value in the business and don't bother with other things. Curious how other people think, but I'll be damned before I read about Nike's currency hedges again.


ScottHall

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Re: Do you read all of the filings of a company you invest in?
« Reply #1 on: May 08, 2017, 07:57:47 PM »
I pretty much don't read filings at all, beyond the financials that get posted to Google/Yahoo finance.
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TheAiGuy

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Re: Do you read all of the filings of a company you invest in?
« Reply #2 on: May 08, 2017, 07:58:19 PM »
I pretty much don't read filings at all, beyond the financials that get posted to Google/Yahoo finance.

 8)

dyow

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Re: Do you read all of the filings of a company you invest in?
« Reply #3 on: May 08, 2017, 08:21:36 PM »
You guys better keep hoping this bull market saves you.

"in any sort of contest financial, mental or physical its an enormous advantage to have opponents who have been taught that its useless to even try."


TheAiGuy

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Re: Do you read all of the filings of a company you invest in?
« Reply #4 on: May 08, 2017, 08:26:39 PM »
You guys better keep hoping this bull market saves you.

"in any sort of contest financial, mental or physical its an enormous advantage to have opponents who have been taught that its useless to even try."

Scott is doing a pretty good job of making fun of me. Probs don't take him seriously here.

I, however, am asking what one hopes to gain from an undirected search through the filings in contrast to a direct (or hypothesis driven) approach. An aphorism about the benefits of preparation doesn't really address the issue.

dyow

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Re: Do you read all of the filings of a company you invest in?
« Reply #5 on: May 08, 2017, 08:58:49 PM »
This applies to concentrated bets.  If you are diversified than i consider this closer to indexing and not investing - then i get it. 

But I don't understand how anyone can call a holding "an investment" and not look at all the filings, and at the least, go through every page of the 10K. 

You find things hidden in 10Ks, sometimes ludicrous things , things you don't expect and weren't looking for, that could make, break or make your thesis a lot more fuzzy. 

To me this is a crazy question, it is like asking whether i should put on a parachute if i go sky diving.  but hey that is just me.   

dyow

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Re: Do you read all of the filings of a company you invest in?
« Reply #6 on: May 08, 2017, 09:08:35 PM »
Also this isn't about whether you are right or wrong on any given stock.

It is about having a good process you consistently apply to all your investments.

But this doesn't even really matter....the truth nobody is going to change their process, i think a lot of investing is genetics...people who look at filings are the type of people who enjoy it, and enjoy doing detective work (i enjoy doing this it does not feel like work to me)....people who don't simply like doing other things (their brains are wired different).

ScottHall

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Re: Do you read all of the filings of a company you invest in?
« Reply #7 on: May 08, 2017, 09:46:16 PM »
You guys better keep hoping this bull market saves you.

"in any sort of contest financial, mental or physical its an enormous advantage to have opponents who have been taught that its useless to even try."

Scott is doing a pretty good job of making fun of me. Probs don't take him seriously here.

I, however, am asking what one hopes to gain from an undirected search through the filings in contrast to a direct (or hypothesis driven) approach. An aphorism about the benefits of preparation doesn't really address the issue.

I am serious. I used to do all that shit and then I started trying a new style and found it way more interesting.

There is no way I am reading every page of a 10-K. I have 30 positions and don't care that much about any one of them, and when I did read through 10-Ks, I found that more often than not most of what's in is completely useless.

I wouldn't say I've been taught it's useless to even try. It can be very fruitful to try. I just reject the idea that reading SEC filings, beyond the financial statements, is necessarily all that useful in analysis. Most of what I've found to be important is qualitative. One way to look at it is that official filings are one source of information, but there are many. The Star Wars poster on my nephew's wall says a lot to me. So does the fact that when I'm searching for something, my first instinct is to load up Google. When I'm looking to buy something specific, I go to Amazon.

Anecdotal evidence is so useful to me because it says a lot about customer or user psychology. My brother was a Star Wars fan when he was a kid, and now he takes all of his kids to see the Star Wars movies and has them hooked on them, too. That's a 30+ year loyal customer. And there are a lot of them. Obviously Disney is larger than just Star Wars, but that tells me a lot about one of the big drivers for its studio and consumer products businesses.

Why would I look at SEC filings with all of their legalese and Mine Safety Disclosure risks when I can look within my own community to see how sticky brands can make customers? What is more useful? For some companies, probably the SEC filings. Probably the farther you go on the value spectrum, the more important these primary sources become. Obviously in bankruptcy situations, it is a must.

But for the most part, I do not look at those companies. I look at the companies that excite me, and capture my imagination; the ones that really drive me to understand what is it that this business does? And not just what it does in the traditional sense of, they make pet food, or auto parts, or whatever.

What they do for the consumer. What sort of reaction to the product do they have? Does this company's service make them happy enough so that they have them for life, or are they able to retain customers DESPITE shitty service?

All of these things - and many more - are my own sort of mental flags, and when one gets set off I get very interested because these flags all tell me things about a business that aren't necessarily going to show up in the filings. These sort of questions are much more interesting to me than obsessing about the maturity dates of all of a company's debt.

In many ways, focusing on filings can obfuscate the nature of a business rather than clarify it. As a person who aims to see the spirit of a business... to see a business for what it REALLY is... filings are only one part of the picture.

And for many of the businesses I invest in, they are a very small part.

I understand that filings may be useful for many people and aids them in the way they look at companies, but for me and my style, I've found them irrelevant. For most businesses I think only a few things really matter and though a trace of their spirit may be present in the filings, it is not where the spirit lives or where it can be seen most clearly.

The spirit - what really matters for a company - are often inputs rather than outputs. So, it can be useful to go to the top of a funnel and observe what's going in... rather than what's coming out.
« Last Edit: May 08, 2017, 09:48:44 PM by ScottHall »
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Green King

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Re: Do you read all of the filings of a company you invest in?
« Reply #8 on: May 08, 2017, 10:24:06 PM »
You are supposed to do both. The 10-Ks are just homework. But on the next level investing is allocation time and money. In some investments, the 10-K doesn't say much.

You have to effectively allocate all your resources.

On another note, there is also execution. If you are making 1to 2 percent bets on multi-baggers with high convexity exposure to the upside you don't even need to be right half of the time.
GK

rukawa

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Re: Do you read all of the filings of a company you invest in?
« Reply #9 on: May 08, 2017, 10:39:09 PM »
Quote
I understand that this is sort of a heterodox view, but I basically just glance at fillings, looking for one or two things that I've previously identified as being material to my thesis. For example, I am looking for revenue growth or indications that a company does, in fact, have enough liquidity to survive, etc. That is, I am looking for something specific to support or falsify a previously constructed thesis on drivers of value in the business and don't bother with other things. Curious how other people think, but I'll be damned before I read about Nike's currency hedges again.

I mostly do this.

Quote
You find things hidden in 10Ks, sometimes ludicrous things , things you don't expect and weren't looking for, that could make, break or make your thesis a lot more fuzzy. 

Great. Do you have examples...more is better.