Do you read Annual Reports of Stocks
We have seen so many new investors are joining the market in the past year and the count is increasing. Every other colleague of mine is just telling that how they have made a good profit in this bull run. I am not sure what they are gonna do when the market goes down like in 2020 will they quit, continue investment of anything else, but this is true that as of now they are enjoying the profit.
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Whenever we buy a stock we are part of the whole business though in a very small percentage still investors are part and they get profit when the business does well. Now if the business is not doing well and it is reflecting on stock price, this is were reading annual reports can give you some picture about where the business is heading towards.
When we read the annual reports, we are already ahead of the game than other investors because if we know that the annual reports are good ad the stocks are tanking, it is time to buy more stocks. As most investors invest in the stock without understanding what the company is actually doing altogether.
The big-name companies do not have good business and that is only visible when we read the annual reports of the company. In the annual reports, the main study point is the financials where investors spend most of their time. There is a balance sheet, income statement and cash flow statement, which gives a clear idea of where the company stand within the industry and what is the growth prospect and future direction of the company.
I am not sure if we can check the management quality by reading the annual reports, but we can check if the company is heading in the direction or not. I know we will not get a clear picture about it but we will get some information which can help us. Reading the annual reports can unlock the future potentials of the company and we will know where the company is heading.
The problem is the annual reports are not readers friendly, it is around 200-300 pages. We should not be reading all the pages, but few like the Chairperson's report which gives an idea of the future business prospect, the Auditor's reports which gives the integrity of the company management as if they have given all the required details or hiding somethings, then the financial statements where we have to spend most of the time and see how the company is utilizing funds.
I know we will be investing around 10 companies and reading annual reports of 10 companies are not that worthy but you can read about 2-3 companies where you have invested the most and thus make investment decisions based on it.