A week or two ago, I wrote an article called Understanding Stock Repurchase Plans for About.com, a division of The New York Times, which discussed Sonic Restaurant and the massive stock buy back program that had taken place over the past few years. I walked the readers through a lot of the math and explained that I had purchased a couple hundred shares to watch and monitor the stock through one of my companies, Mount Olympus Awards, LLC. (I’ve since increased it to about 500 shares to continue watching and waiting to see how events unfold).
Here's a shot from my iPhone of a typical investor packet cover sheet, in this case the one for Sonic Corporation that was used when I wrote my report on the share repurchase program for About.com.
Some of the readers wanted to know how I read a stock report or analyze a company. Buffett often jokes, “Well, I start at the beginning and work my way through the end.” There is a lot of truth in that. Still, I thought it might be helpful to include some details on the process by which I put together our research.
How I Structure the Investment Files or Packets for Each Company
In terms of specifics, I often have an what we call in-house an “investment packet” or an “investment file” constructed on companies that have passed an initial screen or have piqued my interest somehow. (The initial screen consists of things that I look for in potential investments such as low valuation relative to historically high returns on non-leveraged assets).
This packet contains several things: (more…)
