Stock Advisor Investment Research Methods 1 — Questions and Answers
Question 1: What is a '10-K' report filed with the SEC?
- A quarterly earnings summary
- A company's comprehensive annual report including audited financials (Correct answer)
- A proxy statement for shareholder votes
- A form reporting insider stock transactions
Correct answer: A company's comprehensive annual report including audited financials
The 10-K is a comprehensive annual report filed with the SEC that includes audited financial statements, business overview, risk factors, and management discussion.
Question 2: What does 'due diligence' mean in the context of stock research?
- Filing taxes on investment gains
- Thoroughly investigating a company before investing (Correct answer)
- Monitoring a stock daily after purchase
- Comparing broker commission fees
Correct answer: Thoroughly investigating a company before investing
Due diligence refers to the comprehensive research and analysis an investor conducts before making an investment decision, including reviewing financials, management, competition, and risks.
Question 3: What is a 'proxy statement' (DEF 14A) filed with the SEC?
- A company's quarterly earnings release
- A document providing information about matters to be voted on at a shareholder meeting (Correct answer)
- A report disclosing insider trading activity
- An annual balance sheet filing
Correct answer: A document providing information about matters to be voted on at a shareholder meeting
A proxy statement provides shareholders with information about issues to be voted on at the annual meeting, including executive compensation, board elections, and major proposals.
Question 4: What is an 'earnings call' in the context of investment research?
- A call from a broker to buy shares before earnings
- A quarterly conference call where management discusses financial results and outlook with analysts (Correct answer)
- An SEC required filing after quarterly earnings
- A call between two CEOs discussing a merger
Correct answer: A quarterly conference call where management discusses financial results and outlook with analysts
Earnings calls are quarterly conference calls where company executives present financial results and guidance, and answer questions from analysts and investors.
Question 5: What is 'consensus estimate' in stock research?
- The average of all analyst earnings or revenue forecasts for a company (Correct answer)
- The official earnings forecast released by the company
- The median price target set by institutional investors
- An SEC-approved earnings projection
Correct answer: The average of all analyst earnings or revenue forecasts for a company
The consensus estimate is the average of earnings or revenue forecasts made by multiple analysts covering a stock, used as a benchmark for judging actual results.
Question 6: What is 'channel checking' in equity research?
- Monitoring stock price channels on charts
- Gathering intelligence from a company's supply chain, distributors, or customers to validate assumptions (Correct answer)
- Tracking insider trading via SEC channels
- Reviewing cable TV stock shows for sentiment
Correct answer: Gathering intelligence from a company's supply chain, distributors, or customers to validate assumptions
Channel checking involves talking to suppliers, distributors, customers, or competitors to gather real-world data about a company's business before it's reflected in official reports.
Stock Advisor Investment Research Methods 1
What is a '10-K' report filed with the SEC?