III. Workflow for Researching Stocks

Introduction to Fundamental Stock Research

Before we get into specific financial information, let’s take a broad look at the process of finding and researching stocks. There is a lot of information out there, and there are countless, competing messages about how to approach it and interpret it. But don’t despair, you’ll be able to create a straightforward and repeatable process for investigating stocks to stay on top of the important stuff. Plus, as you increase your investing literacy, the data will become increasingly approachable.

This chapter offers a possible framework you can follow for your stock research. Later chapters will help you make sense of the information you find. Remember that as you become more experienced, you will discover your own stock research process and strategies.

Find Stocks

There are tons of places to find interesting investment ideas. Check the finance/business pages of your favorite news source, explore finance-specific news sources (see Stock Rover News or bivio’s list of sources here), check out what’s featured on Seeking Alpha or in Stock Rover’s newsletter, blog, and Ideas page. You can also talk to your friends and co-workers for ideas, and think about the quality of the public companies you interact with as a customer. A good investment candidate can be found anywhere.

Screeners are also a fantastic way to comb through large populations of stocks to find strong under-the-radar candidates. You can try some examples of screeners in our Ideas panel. In later chapters, you’ll learn about parameters you can use to set up your own screeners.

Once you have some ideas for stocks to investigate, you can keep track of them using watchlists.

Quantitative & Qualitative Research

So you’ve found some interesting companies. What next? It’s time to start asking some questions to learn more about them. Good questions to ask fall into two categories, qualitative and quantitative.

Qualitative questions include:

  • What does the company do? (You’d be surprised how many people buy stocks without knowing this!)
  • How does it make money?
  • What is its competitive advantage?
  • What is the potential future demand for the product or service it sells?
  • Who are its competitors?
  • Where does it do business?

Quantitative questions include:

  • Is the company profitable and financially healthy?
  • How does it make money?
  • What is its competitive advantage?
  • What is the potential future demand for the product or service it sells?
  • Who are its competitors?
  • Where does it do business?

If you are new to investing, you may find it easiest to start with the qualitative questions. Make a trip to a company’s website and investor relations pages. Read recent news articles about the company and open its annual and quarterly financial reports to find very readable sections that describe what the company does and what it considers the potential risks to its success.

Make sure you understand what a company does and how it truly makes its money. Some companies make most of their profits in unexpected ways. For example, did you know that Pepsi makes more profits selling snack foods than soft drinks?

Insights like this from your qualitative analysis will help point you to the quantitative factors you might want to investigate further. Don’t worry if you don’t feel equipped to answer the quantitative questions yet—that’s what you’re here to learn about, and we will be providing guidance in later chapters.

Develop a Thesis

At some point, you will begin to develop an opinion about the company you are researching. Do you want to own its stock? Perhaps you find its past performance to be impressive, but are wary of industry changes on the horizon. Or perhaps you think it’s a great company, but currently too expensive. You might even identify a price at which you would trade the stock (called a target price). Your investment thesis will give you guidance on how to act. If you’re not ready to buy it yet, but you find it interesting, add it to a watchlist to keep an eye on it.

Note that your purchase decisions might also hinge on how the stock works with other holdings in your portfolio, but we’ll get into that later.

If you decide to purchase shares of a company, record your reasons for doing so in personal notes or in investment club meeting minutes. This will help you remember the original thesis when assessing your holdings at a later date.


These tasks will launch you into real stock research! See this page for specific instructions on finding the information below.

  1. What is a company you are interested in studying? Why? Where did you hear about it?
  2. What do they do? How do they make money? Visit the company’s website and find its investor relations page. You can also find direct links to the Investor Relations pages for many companies in bivio’s Ticker Research links.
  3. How is the company planning to grow its business? What are some of the risks the company faces? The opening sections of annual or quarterly filings can be a great place to find this information.
  4. Find the company’s earnings per share and sales (AKA revenue). Are these numbers getting better or worse over time?
  5. Find the company’s current price and price/earnings (P/E) multiple. How does the P/E compare to the prices and P/E’s of other companies in the same industry?
  6. What is your thesis about this stock so far? Do you think it could be a good investment?
  7. If you like it, add it to a watchlist for later research. Be sure to make a note of the factors you are going to keep an eye on.

Next: Balance Sheet

This guide was created in partnership with bivio, which provides online investment club accounting and hedge fund management services.