Events
BI > JUNE 2006
What's Important in an Annual Report
Running a Faster Paper Chase
by Bob Adams
Editor's note: This article is based on a class taught by Bob Adams at past CompuFest meetings and is just a sample of
the excellent education available at the annual event organized by the Computer Group Advisory Board. This year's
meeting will be June 23-25 in Reno, Nev. Bob, a CGAB vice president, will teach sessions titled Advanced SSG Topics:
Judgment Aids; Take the Oops Out of the SSG; and Follow Your Stocks: A Monthly Analysis Tool. CompuFest 2006
details and registration information are available at www.compufest2006.com.
Corporate annual reports are important research tools that enable investors to keep current on the outlook for a company
and to follow trends from year to year. Some key trends to watch are sales, profits, inventory, receivables and debt levels.
In addition, read the footnotes to ferret out pertinent information.
Annual reports have two major sections: the glossy paper at the beginning and the cheap paper everywhere else. The
truly revealing information is on the mundane paper in the back and in the flimsy booklet for the annual meeting notice
and proxy statement.
Buried a half dozen pages from the back of the proxy statement -- sometimes for good reason -- is a graph comparing the
company's stock price history with that of a peer group and of the S&P 500 index. This graph can't be beat for a snapshot
of a company's performance.
Stay away from companies with numerous pages of explanatory notes except for industries such as banking that require
many notes. Search for key words such as litigation, relationships, acquisitions and joint ventures. If you find any of these ...