Have you ever wondered how Warren Buffett was able to outperform his peers during his early days investing in the stock market? Apart from his obsession for businesses and acute sense of logic, one of the things that very little people talk about is information.
If you were to turn back time and go back 40, 50 or 60 years ago, you’ll realize that getting the right information about a company isn’t as simple as clicking a few buttons of the mouse. The Internet doesn’t exist yet and the only way back then was to call up the different companies and request for their annual reports. Upon receiving those thick stacks of compiled papers, you’ll then need to carefully scrutinize each and every one of those numbers. It’s hard work!
Lucky for us, the Internet today is an information highway, and you can sift out all the critical information you need to know about your favorite companies with just a few clicks of your mouse.
The truth is, in order to profit from the stock market, you need to be informed. The more you know about a company, the better the edge you have over the rest. Obviously, you’ll then be able to make far better investment decisions.
Here are 3 pieces of information that you want to take note of before investing in the stock market.
1) Insider Trades
If there is anyone who knows the direction a company is headed, it’s the management. Before the earnings are released, these are the people who already know how well the company has been performing. Good or bad, they have first-hand insight. In fact, they’re also the ones who know which deals are coming up and which big joint ventures are already in the works.
Getting information on these insider trades gives you an extra edge to further probe into your analysis of the company. Is the CEO increasing his stake or is he divesting his stake in the company? It’s one of those critical bits of information you, as a part owner of the company, need to know about. The sooner, the better.
2) Macro Economics
Commodity prices, shipping cycles, forex rates and even GDP growth can affect the performance of your stock. As an investor, you certainly don’t want to be caught with your pants down by entering the peak of a cyclical company or when commodity prices (such as oil) are trading at ridiculous rates.
Knowing how the macro environment affects your favorite company allows you to make key decisions in buying and selling. You’ll get a feel of the overall market sentiment and how the company is being tested against the environment. It’s an edge that’ll help you improve your profits and minimize your losses.
3) Company Insights
One of the things that retail investors may also want to take note of is the resignation of key personnel in the management team. If you notice that the CEO and the CFO of a company is stepping down without any valid reasons, it may be something that you want to take note of before buying a stock.
Think about this, why would management suddenly step down? Note again, the word is ‘sudden’, not planned. When this happens, it could very well signal a challenge the company is facing and the management team has no clue or idea about how to handle it. As an investor, it is important that you investigate further before putting your money into the company.
As you can see, knowing what’s happening in a company can make or break your investment.
With the right information, profiting from the stock market will prove to be a lot easier than you imagine it to be.