The most obvious publications of interest to stock investors are the Wall Street Journal (www.wsj.com) and Investor’s Business Daily (www.investors.com). These excellent publications report the news and stock data as of the prior trading day.
Some of the more obvious websites are MarketWatch (www.marketwatch.com), Yahoo! Finance (finance.yahoo.com), Bloomberg (www.bloomberg.com), and Investing.com (www.investing.com). These websites can actually give you news and stock data within minutes after an event occurs.
Don’t forget the exchanges’ websites that are listed in the earlier section “Looking to Stock Exchanges for Answers.”
Figuring out what a company’s up to
Before you invest, you need to know what’s going on with the company. When you read about the company, either from the firm’s literature (its annual report, for example) or from media sources, be sure to get answers to some pertinent questions:
Is the company making more net income than it did last year? You want to invest in a company that’s growing.
Are the company’s sales greater than they were the year before? Keep in mind that you won’t make money if the company isn’t making money.
Is the company issuing press releases on new products, services, inventions, or business deals? All these achievements indicate a strong, vital company.
Knowing how the company is doing, no matter what’s happening with the general economy, is obviously important. To better understand how companies tick, see Chapter 4 in Book 3.
Discovering what’s new with an industry
As you consider investing in a stock, make a point of knowing what’s going on in that company’s industry. If the industry is doing well, your stock is likely to do well, too. But then again, the reverse is also true.
Yes, some investors have picked successful stocks in a failing industry, but those cases are exceptional. By and large, it’s easier to succeed with a stock when the entire industry is doing well. As you’re watching the news, reading the financial pages, or viewing financial websites, check out the industry to ensure that it’s strong and dynamic.
Knowing what’s happening with the economy
No matter how well or how poorly the overall economy is performing, you want to stay informed about its general progress. It’s easier for the value of stock to keep going up when the economy is stable or growing. The reverse is also true: If the economy is contracting or declining, the stock has a tougher time keeping its value. Some basic items to keep tabs on include the following:
Gross domestic product (GDP): The GDP is roughly the total value of output for a particular nation, measured in the dollar amount of goods and services. It’s reported quarterly, and a rising GDP bodes well for your stock. When the GDP is rising 3 percent or more on an annual basis, that’s solid growth. If it rises but is less than 3 percent, that’s generally considered less than stellar (or mediocre). A GDP under zero (a negative number) means that the economy is shrinking (heading into recession).
The index of leading economic indicators (LEI): The LEI is a snapshot of a set of economic statistics covering activity that precedes what’s happening in the economy. Each statistic helps you understand the economy in much the same way that barometers (and windows!) help you understand what’s happening with the weather. Economists don’t just look at an individual statistic; they look at a set of statistics to get a more complete picture of what’s happening with the economy.
Seeing what politicians and government bureaucrats are doing
Being informed about what public officials are doing is vital to your success as a stock investor. Because federal, state, and local governments pass literally thousands of laws, rules, and regulations every year, monitoring the political landscape is critical to your success. The news media report what the president and Congress are doing, so always ask yourself, “How does a new law, tax, or regulation affect my stock investment?”
www.congress.gov). Also, some great organizations inform the public about tax laws and their impact, such as the National Taxpayers Union (www.ntu.org) and the Tax Foundation (www.taxfoundation.org).
Checking for trends in society, culture, and entertainment
Keep your eyes open to emerging trends in society at large by reading and viewing the media that cover such matters (Time magazine, CNN, and so on). What trends are evident now? Can you anticipate the wants and needs of tomorrow’s society? Being alert, staying a step ahead of the public, and choosing stocks appropriately gives you a profitable edge over other investors. If you own stock in a solid company with growing sales and earnings, other investors eventually notice. As more investors buy up your company’s stock, you’re rewarded as the stock price increases.
Reading (And Understanding) Stock Tables
The stock tables in major business publications such as the Wall Street Journal and Investor’s Business Daily are loaded with information that can help you become a savvy investor — if you know how to interpret them. You need the information in the stock tables for more than selecting promising investment opportunities. You also need to consult the tables after you invest to monitor how your stocks are doing.
Looking at the stock tables without knowing what you’re looking for or why you’re looking is the equivalent of reading War and Peace backwards through a kaleidoscope — nothing makes sense. But this section can help you make sense of it all (well, at least the stock tables!). Table 1-1 shows a sample stock table. Each item gives you some clues about the current state of affairs for that particular company. The sections that follow describe each column to help you understand what you’re looking at.