There’s an old line about CEOs or management teams. Maybe it was about politicians and then adapted to business. The line goes, “How do you tell when a CEO or company executive is lying?”

“Their lips are moving.”

That’s not a fair comment, but it is a useful one. When a company executive talks about the company’s results, prospects, or anything else to do with the business and the stock, they are going to put the company in the best possible light.

To counterbalance that, we need to get information on the companies we follow from outside sources. This will widen our perspective, teach us about new industries, and maybe open our eyes to new ideas. Here are a few places you can look.

This post echoes the scuttlebutt post we made a few weeks ago, and the ‘using other people’s ideas’ post before that.

Competitive Research

The companies you invest in are likely to have publicly traded competitors. Their filings may:

• Show your company’s performance stacks up to peers. If your company is growing 5% this quarter and its competitors are not growing, that’s encouraging, for example.
• Tell you industry insights: competitors will talk about recent events and what worked or didn’t work in recent months. You can compare and contrast with your company, and with the industry or economy as a whole. The difference in tone on a conference call, for example, could be telling.
• Reveal different business models and financial performance/structure. Some competitors may carry more or less debt than others. Or have higher profit margins, or better free cash flow. We talked about comparing the valuation of peer companies, but the power of comparison goes beyond that. Seeing how companies differ in the way they structure their business can be invaluable.

This can be time consuming. You research one company, and then have to replicate that for its three or four competitors? But, you don’t need to go as deep into the research of competitors as your company.

The aim of this study is to see how your company stacks up in a number of areas. Similarities help you place your company in context. Differences highlight points you need to understand. Why does company X say one thing and companies Y and Z something else? What does that mean? It’s not necessarily good or bad, but you should be able to explain it.

And sometimes, when studying company X’s peers, you will find that company Y or Z is the better investment.

Financial media / social media

How investors think about companies matters, if only because eventually, investors will have to buy shares for the stock price to go up. Reading and following financial media and social media will help you see what investors are talking about for a given company.

I’m referring here to websites like where I’ve worked, Seeking Alpha or Investing.com, or similar competitors like CNBC, Barron’s, MarketWatch, and so on. Substack financial newsletters are another source of information. Twitter is (or was, at least) a good source for breaking news and general sentiment on stocks; maybe Threads will grow into a new source for this. And investing podcasts will often follow news and break down ideas and companies.

While before I mentioned these as potential sources of new ideas, here I mention them as places where you can find news on companies as well as opinions and comments. Dive into a rabbit hole thread about a given company and you might get the full scoop on a company.

You also may hit on short ideas for the subject company, i.e. what people betting against the company think about it, and why they are betting against it. Nothing is more helpful to ‘long’ investors – investors buying shares of a company – than to hear what the short case, or negative argument is for the company.

Reddit and online message boards offer another source for anonymous insights on a company or an industry. The things people who know want to say, but don’t want to have attached to their name. I don’t spend a ton of time on these, but if you find a relevant board to your company or industry, it can be a gold mine.

Lastly, there’s local news. This is less explicitly financial coverage and more business coverage. Sometimes, especially for smaller companies, this local coverage will give more context on how a change or announcement is viewed in the community. This might be more context than you get anywhere else.

An old-fashioned but useful source of information.

Job Sites

Job sites like LinkedIn and Glassdoor can give you two insights that are useful and worth tracking.

• New jobs listings, which show how the company is trying to grow. An example – Twitter listed a job for a developer that mentioned “Gryphon”, a subscription product code name. Twitter’s shares popped on July 8^th, 2020, when investors heard about the listing. Investors had been waiting for Twitter to build a subscription for a long time, so this was greeted happily. (Alas…)
• A sense of company culture and how employees feel about the company. Glassdoor provides a CEO rating and employee satisfaction at the company. It isn’t foolproof: a lot of big-spending tech companies earned great ratings right until they had to start cutting jobs as the Covid hangover set in last year. But it is a useful data point.

Industry specific publications

Industry-specific resources – trade publications and journals – can help you learn how your company stacks up to the industry, and also provide a more specific domain knowledge. For example, I came across Footwear News. I can’t vouch for them, but that’s the sort of publication that might be helpful if you are following DSW or Foot Locker, say, companies that don’t receive quite as much national coverage.

The more niche or technical the publication, the more useful it can be in learning about the industry and the specifics of the company. The more analysis and insight a publication brings to the reader, the better. At the same time, it may be harder to understand that analysis, and sometimes those specifics are focused on the trees when an investor needs to see the forest.

Filtering the Noise

There are a lot of potential sources for information on a company. You don’t have to find each one each time you study a stock. There will come a point where, in deciding to buy or not buy, you reach saturation. No new information is useful at that point. And once you own a stock, there is such a thing as following too closely.

I find competitors and financial media as the most useful of today’s sources. There will be times, though, where for lack of anything else you will want to use all of these.

Next, we’ll move from the general how to’s and where from’s of researching and deciding to buy a stock to how I actually go about buying a stock. In our next part of how to buy stocks, I’ll share my process for finding stocks to buy. I will go into what I look for in a company, what I look for in a stock, and any red flags I am watching for.