Shownotes
BIO: Michelle Leder has probably read more SEC filings than just about anyone else on the planet since writing her book, Financial Fineprint: Uncovering a Company’s True Value, and starting her website, footnoted.com nearly 20 years ago.
STORY: Michelle invested in a company without going through important SEC reports.
LEARNING: Dig deep into the company’s 10-K annual report before investing. Look at the risk factors and what the company says about risk.
“Pay attention to the stuff in the 10-K if it is a significant position for you.”
Michelle Leder
Guest profile
Michelle Leder has probably read more SEC filings than just about anyone else on the planet since writing her book, Financial Fineprint: Uncovering a Company’s True Value, and starting her website, footnoted nearly 20 years ago.
Michelle recently relaunched Friday Night Dump, a weekly newsletter. It focuses on SEC filings made after 4 pm on Friday afternoons when companies tend to bury the most negative information that they are required to disclose.
Worst investment ever
Twenty years ago, Michelle was relatively new to investing and had been a business journalist for about 10 years. She bought some shares of Quest Communications because she was covering IBM at the time. IBM had just announced a big deal with Quest. Michelle thought this would be an excellent opportunity to buy some Quest shares. She watched the shares go up until they stopped and started plummeting.
Michelle went back, and I looked at the footnotes she’d collected while researching IBM. She discovered that IBM had booked the whole billion dollars for the deal with Quest upfront in year one, even though it was a 10-year deal. Michelle had missed this, so she watched Quest go all the way down.
Lessons learned
- It’s a great time of year to dive into investing, as 10-K reports have been filed.
- Before investing, look at the risk factors and what the company says about risk.
- Dig deep into the company’s 10-K annual report for a clear picture of its financial performance.
- A 10-K report contains much more detail than a company’s annual report. It will give you enough information before you buy or sell shares in the company.
- For every significant position in your portfolio, ensure you’re aware of important details such as revenue recognition and inventory disclosures.
Andrew’s takeaways
- Financial statements and annual reports are a treasure trove of information for analysts.
Michelle’s recommendations
Start with one or two companies you know well. See what you can discover by reading essential filings like the 10k and proxy statements. Does the new information you get make a difference?
No.1 goal for the next 12 months
Michelle’s number one goal for the next 12 months is to focus a lot more on her business.
Parting words
“Life is a learning experience. In the end, it’s not about the money; it’s about the quality of your relationships.”
Michelle Leder
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