Hot Stock Tips

A:  Welcome to “Your Money,” a show devoted to helping you achieve your saving and retirement goals.  Today we’re going to discuss hot stock tips.

B:  I’ve got one:  Growth Venture Limited.  It’s the world’s largest supplier of construction foundation materials. 

A:  Great!  How do you know?

B:  I found it on the Internet.  Actually, I got an e-mail about it.  The e-mail said Growth Venture is going to double in price over the next 6 months.  I went to the website, and found out why.  Growth Venture just signed a big contract.  It will sell building materials to the US Government to rebuild the New Orleans area.  And I heard an interview with the CEO.  They donate 40% of their profits to charity.

A:  Sounds like a terrific company!  How much have you invested?

B:  Well, nothing yet.  I wanted to ask how you check out a company to find out if it is a good investment.

A:  First thing you should do is look at the financial statements.

B:  Boooring!! 

A:  Yeah, but necessary.  You want to make sure the company exists, and that it actually has the contracts it claims.  You need to understand the company's business and how it makes money.

B:  How do I find financial statements?

A:  Most companies that sell stock send electronic filings to the Securities and Exchange Commission.  You can find all public filings on their website, at sec.gov.  Click on “search for company filings.”  You can put in the company name, or the trading symbol if you know it.

B:  What if the company doesn’t file financial statements?

A:  Then you’ll have to do extra work to make sure the company exists, that it really has the contracts it claims.   Now, just because a company files reports with the SEC doesn’t make the company a "good" investment.  But you take on extra risk when you invest in a company about which little or no information is publicly available.

A:  OK, I will find the financial statements.  What should I look at?

B:  Many companies file annual financial statements on something called a Form 10-K.  The financial statements show you where a company’s money came from, where it went, and where it is now.

A:  Any words?  I hate numbers!

B:  The front part of the annual report has words.  There is a section of the quarterly or annual report entitled, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” This section has management’s analysis of what the financial statements show and do not show, as well as important trends and risks that have shaped the past or are reasonably likely to shape the company’s future.

B: Many thanks!  I’m going to go check out Growth Venture – dot – com now.  And you should too – it’s a really hot stock.

A:  Thanks for joining us.  This podcast has been brought to you by the US Securities and Exchange Commission.  Write us at Podcast@sec.gov.