Do profit, loss, and balance sheets get your engine revving? If so, you’re in luck. Today, SteadyTrade tackles what might be our sexiest topic yet: How to read SEC filings.
Joking aside, SEC filings are anything but alluring. Actually, they can be downright boring. But by learning how to read them, you can gain better insight about the companies behind the you’re considering trading. This can help you make more informed, intelligent trades, which definitely is sexy.
In the episode, host Tim Bohen talks all things SEC filing with trading superstar Michael Goode. Whether you’re a new trader or an established one, you’ll pick up valuable tips in this episode that can help you refine your trading techniques.
But First, a Listener Question
Before getting to the meat of the episode, hosts Tim and Stephen answer some listener mail. This week’s question: Is the market oversaturated with traders?
True, there are more penny stock day traders than ever. This means there’s a lot more volume and a lot more volatility. Does this mean it’s harder now than ever to find success as a trader? You may be surprised by the answer!
SEC Filings 101
Every trader has his or her own methods of doing stock research. However, no matter what your style, it’s important to do well-rounded research that includes evaluating price action, charts, and fundamentals.
The problem is, many traders prefer to bypass the nitty gritty and trade based on news alone.
Unfortunately, this can be problematic as it doesn’t tell you the full story, and press releases tend to put a positive spin on everything, even if the company is actually ailing.
SEC filings, most notably earnings reports, can give you a more factual look at the company in question.
Why Do SEC Filings Matter?
What are SEC filings, and why should a low-priced stock trader care?
As Tim is fond of saying, when it comes to trades, you need to “build your case.” The fact is, if you get too bullish or bearish based on news alone, things can (and often will) go wrong. So instead of believing the hype, it’s important to look at the numbers, too.
SEC filings may be totally dry, but if they can help improve your trading know-how, they’re worth your time.
In the episode, you’ll learn:
What filings should you look at? There are many different reports that publicly listed companies are obligated to release to the public per the SEC. Michael explains which reports you should look for, including 10-Q quarterly reports and 10-K yearly reports, and 8-K reports, which divulge notable news, as well as where to find them.
What should you look for in the report? Michael helps you navigate earnings reports, offering up tips for reading between the lines and what information you should be looking for. Hint: it’s not just about their profits or lack thereof!
What does insider buying and selling mean? If a bigwig in the company is selling shares, is that a bad sign? Maybe, maybe not. It could be that he or she is just paying their taxes or buying a yacht. Learn what to look for that could alert you that there’s trouble ahead.
What about warrants? Stock warrants and options are an important thing that Michael looks at when reviewing a stock. Learn why, and how this data relates to the earnings reports.
Are there any offerings on the horizon? An offering is when a company sells shares to raise money. This is normal; sometimes companies need to do it to keep the lights on. However, it can potentially have a diluting effect.
In the episode, you’ll learn how to sniff out potential stock dilution on the horizon. This is important because it throws off the supply and demand for the stock and can cause big price swings.
Have Something to Ask?
Do you have a question or comment on the episode or on a trading-related topic? Drop it in the comments below, or on YouTube!
Thanks for tuning in to the SteadyTrade Podcast. Stay tuned for weekly episodes featuring the hottest topics for aspiring traders!
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