SIMON BROWN: Find the data — aka, do your own research
Plumbing the depths of the internet is an invaluable way to get a better perspective on that company you want to buy
I recently commented on the Renergen* saga, pointing out that most of the information put out on social media should not be a surprise to shareholders who had done their research about the stock. After that, a number of people asked me how I do such research.
A company’s results, website and annual reports are well and good. But they also give only a picture of the business, and, frankly, it will be coloured by the company. We need to go further.
An easy start is to read analyst reports, if you have access to them; and not just recent ones. Go back in time. Comments from years ago can raise red flags or mention potential improvements.
In addition to that, we have a huge resource available, namely the internet. Google is always a good place to begin; but you need to go deep, down rabbit holes, to really find information.
For example, if an acquisition is being announced by a business, start with the website of the company being acquired. Head to YouTube and look for interviews with the CEO — even find competitors in the space and study interviews and reports about that company.
I especially like digging around among competitors in the sector a company operates in
I especially like digging around among competitors in the sector a company operates in. Sure, they’re different, but they can also give insights to challenges and/or opportunities. Is the stock you’re looking at facing the same challenges or opportunities? How are they managing them? And if they’re not seeing the same issues, why not?
The shareholder register can yield some insights. Who are the biggest shareholders, and what else do they hold? Often we get just a name, which tells us nothing. But Companies & Intellectual Property Commission documents can yield director details, and searching can also sometimes reveal what else the directors hold. Look into these directors and holdings, and head down those rabbit holes.
I really like the Wayback Machine, which is an archive of much of the internet, and while it is a little weak when you go back a couple of decades, it still often brings some gems from now deleted websites or web pages.
It is important to understand company-specific details, such as in the case of mining. For example, what are the inferred vs the actual reserves, and is a feasibility study worth anything?
The South African code for the reporting of exploration results, mineral resources and mineral reserves (Samrec), which sets out minimum standards, recommendations and guidelines for public reporting about solid minerals, explains it all, and often helps you spot dodgy deals. For example, many years ago a coal miner had a bank-ready study for funding, but steadfastly did not call it a feasibility study. The former description was jargon, the latter is a legal Samrec phrase. No surprise, then, that no deal was ever done.
Mostly this digging yields little or nothing, which is a good sign. However, sometimes you get a trove of information that really helps with investment decisions.
* The writer holds shares in Renergen
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