Intro to Stocks Lesson 1
Know Your Stock

      Ownership of equity interests in companies has become considerably more difficult in recent years.  Since October 2007, under authorization from the feloniously corrupt Securities & Exchange Commision in violation of Article IV of the US Constitution Amendments, humans are no longer allowed to *possess* any stocks.  Instead the fraud and theft industry, consisting of broke makers and "transfer agents", have been allowed to illegally seize all stock purchases for their own permanent adverse possession into criminally slopperated "computers" which in turn depend on the criminally slopperated "computers" of a gang styled as a Depositary Trust Company.  Even your chosen broke maker never has actual possession of any of the shares of stock which they "show" in the account statements which they "show" on their web site or which, with only some broke makers, they report to you on printed "statements of account".  In my article about the Crash of 1987  I talk through the manner in which the "stock markets" have been subverted into an aggressively manipulated pretense which no longer have specialists assuring fair and orderly, publicly assessable, continuous auction markets but instead have been brutally fragmented so that a participant can no longer have confidence that orders placed aren't going to be "stepped around" by other fragmentary participants.  Since I have been involved with stocks since September 1961, I was already committed by 46 years of experience and numerous registered holdings in my name in my possession as stock certificates to continue under the inflicted unConstitutional changes in how the "markets" are actually operating nowadays.  As a newbie, you have the choice of never getting involved in the fraudulent system.  But you also have the choice of learning enough about how things work these days to perhaps survive what has become an even more complex Battle for Investment Survival.
      It is the purpose of these lessons to provide some insight into HOW TO ANALYZE STOCKS to minimize the adverse impacts of structural defects  The key to avoiding financial fraud is understanding how the financial system actual works and knowing HOW to obtain real information, how to evaluate it, and when and only when to get involved with anything financial.  An important first step would be to read the entirety of Charles Mackay LL.D.'s classic book "Extraordinary Popular Delusions and the Madness of Crowds".  It is a primer on numerous of the major financial and societal frauds which are perpetrated against humanity.  If you don't already have a copy, the book appears to be available on Amazon where is shown the correct cover in its 1970 reprinting available in paperback for $4.50.  If you are an Amazon PRIME member, you can read it online for free on their Kindle Reader.  The book's contents have been one of the guiding lights in my own survival in the markets.
      In their original incarnation, these lessons were designed for interactive email correspondence with an unrelated young person who has been enrolled practically since birth in the Scholarship Program that I fund for some special youngsters and for the mother of that child.  For this more generally accessible version, I have arbitrarily made some of the choices that were available for my correspondents in the interactive version, but there is no reason why you couldn't make different choices applying the same analytical techniques which are detailed.  The choice of stock
detailed here to be analyzed is not going to come through as a "buy me now" kind of stock because it has numerous current defects which didn't exist when I bought it in the period 1988-1996.  But it is one which over the years has become Fully PaidFor in my portfolio which means that the sum of dividends received plus capital gains realized, that total divided by my remaining tax basis in the shares I still have exceeds 1.41x my remaining tax basis (the .41 being needed to cover taxes which had to be paid on the income items).  It amounts to the underlying company having paid for its position in my portfolio.  I treat such stocks significantly differently from everything else.  I *ignore* several of the known defects of stocks which develop later, after it has become Fully PaidFor.  Such defects prohibit me, under my trading rules, from ever buying more shares, just as the rules prohbiti me from buying anything in the first place which has those defects.  But many such stocks go on, beyond my earlier estimate of full value, to become even more valuable, continuing to pay cash dividends to me (which increase the PaidFor Stock Ratio along with increasing the ratio of Market/Basis via those available higher prices) or to provide opportunities for realizing further capital gains.  It is a demonstration of the classic guidance to "let your profits run".
      With such a difficult environment, taking and keeping NOTES about everything one does research is essential.  Avoids having to redo the note gathering process when "somebody" mentions "something"  to "invest" in.  So the first step in learning about stocks is learning HOW to do the research and note taking process.  I'm going to point to a set of web sites that I have found useful for gathering information.  That doesn't mean that they're going to continue to function adequately "forever".  Very little in the way of "computers" does.  But here's how I go about gathering the information I need to decide *whether* a given stock is *worth* investing in.

      First thing for this learning exercise is to pick the "name" of a company that you think "might be" worthwhile.  Just because you like what they're doing in the world does *not* mean that they're worth investing in.  Nor does being "not worth investing" any impairment of your ability to continue doing business with them as a *customer*.  It only means "not worth investing" if that's what you find, as you will in more than 93% of all stocks these days.  Aside observation:  I've lost an awful lot of money over the years when I bought into companies that I liked what they were doing in the world only to have the *stocks* then wipe out most or all of what I put into them.  Keep the two different relationships, "doing business with" versus "investing" separate as they must be.
      For your first research project as part of this course, I suggest that you study the company which is traded as "MRK".  For any other company that you want to find out more about, the first thing is to go to the Yahoo Finance site  to find out what the "ticker symbol" of the stock might be.  At the top of that page is a "quote lookup" box.  Enter as much as you know of the "name" of the company into that box.  It might come back with a foreign traded security of similar name but if you reenter the name in the little search box at the right of the page, it will come back with the list of possible ticker symbols under which the stock of that company is traded.  Pick the symbol that is simplest with a designation such as "Equity-NYSE" or "Equity-NASDAQ".  Then plug that symbol into the same box that you originally searched in.  It will come up with a "Summary" page that shows a squiggly line of the latest day's trading activity in the stock (which you should ignore), the latest per share price of the shares of stock, and relevantly a list of information pages across that Summary page.
      Click on the word "Profile" from that list.  You can do it sooner, but at least now, open a NOTEPAD on your computer so that you can take notes on what you find.  In the upper left corner of your NOTEPAD type a "[", the ticker symbol in all caps, and a "]".  Go to the next line of your NOTEPAD and type "*addr".  Then copy and paste the address information from the Profile page next to that "*addr " line.  Edit out the "United States" line which is irrelevant, but the full company name, its physical address, telephone number, and website information are all crucial to you knowing *who* the rest of the notes have to do with.  At this point, do a "File/Save As" using the ticker symbol as the name of the file and save it into the directory you have chosen or created for purposes of storing your notes about stocks.  You'll be repeating that "File/Save" operation again after each significant part of the note taking process.

      Then navigate down that web page to the area which provides a "Description" for that company.  Copy and paste that entire business summary into your NOTEPAD on the next line under the address information.  It's going to look "strange" running off the right side of your NOTEPAD so that you can't really see all of it at a glance, as you should be able to do.  So here's where *formatting* your notes begins to be important.  It gets even more important as you gather more information, so here's how I do it:  other than the ticker symbol at the top, each other important section of information begins with an "*" and extends only as far to the right as column 77 or earlier (keeps it all readable).  Every subsequent line, as with the Description, begins with four spaces and then continues with more of the information out to no further right than column 77.  Keeping it all neat and tidy as you develop a NOTEPAD file gets really important when you need to look at the same company's file later, regardless of whether it is qualified for "investing in" or not.
      After I've got those preliminary pieces built into my NOTEPAD, I copy the company web site information down to the very bottom of the file, so that I always know how to get to see what they're saying about themselves without having to find my "*addr " line to pick it out.  I also format the "*addr " line itself so that it is in the same format as the Description with commas between each of the relevant pieces of the original copied and pasted information, extending out no further than column 77, and with four spaces at the beginning of each subsequent line.  Trivial practices, I know, but when you get up into more than the first few NOTEPAD files about companies (I have more than 5,000), it begins to be very important to be able to *see* what they contain in a neat and tidy manner, so start off by doing it from the gitgo.
      Next piece of information which is important for many things begins by going back up to page choices and clicking on the "Holders" choice. On Yahoo it isn't a particularly reliable batch of information but it's better than not having it at all.  The "Breakdown" area most often shows a top two lines consisting of, for example,

      >  % of Shares Held by All Insider: 0.07%
      >  % of Shares Held by Institutions: 75.81%

In my NOTEPAD that gets recorded as

      >  *180704 Yahoo Major Holders shows Insiders 0.07% plus Institutions 75.81%
      >      totals 75.88% insider and elephant control, ELEPHANT STAMPEDE RISK

The "180704" was the date on which I gathered the information.  There are levels of CONTROL PROBLEMS involved in *who* owns a company which influence how the company acts towards its stockholders.  Below 70% total is generally "not a material decision factor".  At 70% up to not quite 90% it becomes "ELEPHANT STAMPEDE RISK" which means that the "big guys" have a tendency to stampede at the least little variation from what they "expected" the company to do causing wild impairments of the stock price.  At 90% or more it becomes "CONTROL PROBLEMS" which means that such gangs own soooo much of the company as to cause it to engage in damaging activities against other stockholders.  But the "Insiders" part is also important on its own.  Regardless of what the total might have been, when the Insider holdings are 20% or more, instead of "not a material decision factor" or whatever it might have been otherwise, the rest of that reads "but >20% insiders makes it CONTROL PROBLEMS" which is because, when the insiders own "too much" of a company, they tend to treat it as their own private kitty to gut and loot for purposes adverse to the cash paid public stockholders.  This information is never conclusive for qualifying or disqualifying any company, but it's important to know about in relation to other things that we'll get to later.

      Notice my formatting of *when* I did the search on Yahoo for the Holders information.  For a person, such as myself, who has to deal with a bazillion "dates", fussing with the "July 4, 2018" format for dates becomes quickly absurd and difficult to read.  So I translate *all* such things into YYMMDD format, two relevant digits for the year, two digits for the month, and two digits for the day, in that order. *When* things happen is often every bit as important as "what happened", and becomes especially important when I go back into a note file that I created some time ago so that I can quickly see "how far out of date" the information is.
      That done, go again to back to the page choice area and click on the "Historical Data" button.  When you get to that page, change the "Time Period" to "Max" and click the "Done" button.  Then change the "Frequency" menu to "Monthly" and click on "Apply".  What then shows is a history of the squiggles over whatever length of time Yahoo has the information in the price of the stock in the market.  For nearly every stock you might research, that information is going to show radical differences between the highest prices at which the stock has traded and the lowest prices for the very same shares of stock.  To most people it seems more sensible to buy when prices are fairly low and to sell when prices are fairly high, just as at the grocery store you would tend to buy or buy more when things are "on sale" and to hold off purchasing anything you can do without for at least awhile when prices are high. There are some fairly complicated analyses of those price patterns which actually do EXCLUDE a given stock from being "worth investing in" for many years into the future.  But in general that is a less important set of analyses than the underlying financial condition of the company which is what comes next.  So we'll leave that complicated analysis of BLOWOFF DANGER RATING for somewhat later after you've got the basic essential research process better in mind.  Make sure you save your NOTEPAD file before going on to the next step.
      The SEC EDGAR web site is probably the most important aspect of finding out *whether* a company is "worth investing in".  You had to have the basic identifiers from Yahoo before going here, but EDGAR is where they keep all of the financial reports that the company has been legally required to file with the Securities & Exchange Commission.  In the little box under "Fast Search" enter your ticker symbol.  On rare occasions, that might come up with an error message about "symbol not found" or it might come up with a wildly different company name than the one you're looking for.  In that event, go back to the main access page and copy in most of the company name in the Company Name box to get to the filings list.  If that doesn't work (which it doesn't for some things which actually aren't stocks required to file reports), enter the ticker symbol and the word "stock" into the URL line (the Google search engine) and it will direct you to a listing of who the ticker symbol might actually be with a "MarketWatch" URL usually being the best way to get at its strange name.  But in the vast majority of cases, just the ticker symbol is going to get you to the right list of filings on the SEC web site.  When something turns out to be not even a *stock*, such as a debt instrument, you may want to set aside the NOTE FILE and find a different ticker symbol to analyze.
      Even at the top of the SEC filings page there is "some" information that can be helpful for understanding what one is getting involved with.  For many companies, they "used to be" known by some other name.  It shows on the left hand side of the top of the page as "formerly" with the applicable dates when they were going by those names.  Down in the area just above your usually lengthy "Business Summary" and below your *addr line, enter a line such as "*970728 formerly known as" whatever the earlier *different* version of their name may have been.  You'd be amazed, when you run into such things, the wild variations in what *business* companies have been in which are revealed in their former names.  It won't EXCLUDE anything to know that, but it may shed some light on other factors which crop up later.  Also double check that the address shown in the right hand part of that blue box at the top of the filings page corresponds at least mostly to what you got from Yahoo.  If there are major differences, include them in your NOTEPAD under the original *addr line.

      Okay "here comes the hard part" but it's also the essential aspect of knowing *whether* the company is "worth investing in".  The most relevant Forms, shown in the Filings column, are 10-Q, 10-K, and DEF14A. Those are the forms in which the company managers are required to reveal what they've actually been doing with stockholders money and some of what they intend to be doing.  If and only if you *want* me to review how far you've gotten with your NOTE FILE, you can email to me a copy of it.  So long as you're clearly learning, I'm likely to review and respond.
      Yes I know this is all ultra Beau Ring.  Let me assure you it is a whole lot *less* boring than having your useful money taken away from you due to you *not* knowing what is actually going on with a stock or business in which you "invested" your money.  There are still going to be losers, even after you do all the necessary research, but there typically are going to be fewer even if not less serious losses on the SMALL part of your total resources that you put into any one thing.  I look at BORING as being akin to *drilling* through available information to get what is actually useful.
    Most important of all, if you have any questions about any of the terms that I used in talking about this note gathering process, many of which may not have been immediately clear to you as to what they mean, ask them now via
email to me if you haven't already done so.
    Bob Grumbine    :-)##                      Onward to Lesson2                    back to Bob Grumbine's Central Blogging Site