Investigate before buying: using an online tool called EDGAR can make you a better stock picker - Black Wealth Initiative - Brief Article

Black Enterprise, May, 2002 by Claire Hunte

WHEN IT COMES TO MONEY MATTERS, JANICE WILLIAMS AND HER HUSBAND, BRIAN MARTIN, DO THEIR ONLINE RESEARCH TOGETHER

JANICE WILLIAMS DOESN'T HAVE A PROBLEM WITH making sacrifices today to reach tomorrow's financial goals. "I'm good at delaying immediate gratification for future payoff," the self-confessed chronic saver says of her money management philosophy.

In recent years, Williams has embraced direct investing to meet her objectives. The 35-year-old program director for the New York-based Bailey House Inc., a supportive housing provider, has grown more confident in picking stocks for two good reasons. First, she's created a solid safety net through her aggressive savings program. Williams has a rainy day account in which she tries to keep the recommended six months salary cushion and, in preparation for her golden years, she maxes out on her annual contributions to her company's 403(b) plan. She also invests in her IRA account regularly and in a Fidelity Destiny II (FDETX) mutual fund.

The second reason: She only purchases equities she has thoroughly researched. Williams developed this ethic more than a year ago when she thought it would be fun to choose stocks as market exuberance began to fizzle. "It's a good time [to buy] now," she says of the recently battered market. "It's like a bargain basement."

Williams and her husband, Brian Martin, have built their stock portfolio by using the online broker ShareBuilder, investing $250 per month. Their holdings, which include shares from Intel (Nasdaq: INTC), AOL Time Warner (NYSE: AOL), General Electric (NYSE: GE), and Taro Pharmaceuticals (Nasdaq: TARO), are currently worth about $2,000.

In order to spot investment-worthy candidates, Williams reads the business sections of newspapers and watches financial news programs. But her greatest tool can be found on the Web: the Securities and Exchange Commission's (SEC) online corporate filing database EDGAR (Electronic Data Gathering, Analysis, and Retrieval system; www.sec.gov/edgar .shtml). By engaging in such research, Williams has adopted DOFE principle No. 2: to be a proactive and informed investor.

It's important for individuals to have timely, accurate information before making an investment decision. EDGAR is Williams' research tool of choice because it's a free, accessible way to get the inside scoop on companies 24 hours after they've filed with the SEC.

EDGAR doesn't make stock recommendations. Instead, it furnishes you with all the financial details of a given company; critical information to help you gauge the company's current health, revenue outlook, and profit potential. What makes EDGAR more valuable than the plethora of other financial Websites? Corporations and mutual funds registered with the SEC are required to file a number of forms that hold information that may or may not be found in a company's annual report or on its Website.

The database is fairly easy to navigate, but you do need to know the type of information and form you are looking for. You can perform two kinds of searches on EDGAR. If you conduct a general-purpose search, you can review specific forms filed with the SEC using the company name, or perform an archival search using a keyword or phrase to help you locate a company. Through a special-purpose search, you can search for specific information, such as a company's unique CIK (Central Index Key) n u tuber assigned by the SEC. to help identify an array of SEC filings. Moreover, check out prospectuses for specific mutual funds or search under Current Events Analysis to help you find any recent filings made during the previous week. Documents on EDGAR are presented in plain text or HTML.

Mark Robertson, senior contributing editor to the National Association of Investors Corp. in Madison Heights, Michigan, recommends that investors new to EDGAR focus on a few common forms that hold the most important details. They are:

* FORM 8-K

This document is used to report any material or corporate events that could impact a given company's share price such as a government investigation or any merger and acquisition activity.

* FORM 10-K

Filed within 90 days after a company's fiscal year ends, this document provides investors with such critical financials as the income statement (also known as the profit and loss statement); a summary of the revenues, costs, and expenses of a company; and the balance sheet, a statement that shows the status of a company's assets, liabilities, and owner's equity. You'll also be privy to insider information such as the number of shares held by management, or any pending litigation against the company.

* FORM 10-Q

Filed within 45 days after the end of a company's first, second, and third fiscal quarters, this form is a shorter, unaudited update of the 10-K. It provides investors with useful information regarding the status of outstanding securities, debt agreements, and matters subject to shareholder votes, including the election of directors.

It's important to learn how to read these documents.