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reddingrunner (92.45)

Annual Reports are a waste of time, or worse.



December 20, 2012 – Comments (5) | RELATED TICKERS: VTI

I'll concede that it's a good idea to read (or skim) through the most recent one prior to purchasing shares.  It will put some useful pictures and visuals in your brain to go with all the numbers and data.  Helps you to see it as a real business and not just a computer simulation.

But otherwise, totally useless.  Worse than useless.  Studying annual reports in detail gives you the illusion of having learned something actionable regarding the future stock price of the company.  But it's just an illusion.  And the illusion will cause you to discount or overemphasize hard data and thus make bad choices.

Now, any good theory needs to be falsifiable.  So if you have outperformed the stock market over the past 5 years and you can attribute a portion of that outperformance to reading annual reports, then I'd like to hear what you say and learn from you.   

5 Comments – Post Your Own

#1) On December 20, 2012 at 8:18 PM, JohnCLeven (28.36) wrote:

Interesting thought.

What is your preferred method for research/due dilligence?

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#2) On December 20, 2012 at 8:28 PM, SuntanSuperman (99.83) wrote:

It is only worse than useless if you don't do proper due dilligence (and in that case, a lot of things are worse than useless). I like to read through an anual reports of companies I am not too familar with. And if what I read interests me, I will do further research (outside of the annual report).

It isn't the annual report's fault if that is the only thing a potential investor uses for research.

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#3) On December 21, 2012 at 9:22 AM, reddingrunner (92.45) wrote:

John, I basically use a news feed to see what others (many of whom have read the report) say about a company, pro and con.  I use that to eliminate some of the stocks that come up on my screens.

WSW, Everything in the annual report has already been baked into the stock price.  I'll glance at it to understand the company better and I'll access financial statements via the internet if I need to although most the information I need is already factored into my screens.

The idea that an individual investor will find something hidden in the fine print, or in the marketing hype, of a company's report that will give him an advantage over the big institutional investors is sheer nonsense and a waste of time. 

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#4) On December 21, 2012 at 9:41 AM, SuntanSuperman (99.83) wrote:

And when did I say all if that? Haha.

All I said is they are useful when you want to find out general info about a company you aren't too familiar with (before doing more due diligence).  

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#5) On December 21, 2012 at 9:42 AM, SuntanSuperman (99.83) wrote:

*all of that?

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