Don Steinmann's Investment Tip of the Week

Don Steinmann's
Investment Tip of the Week

All the Bad News

There is a real trap you can get into when looking at stocks. We have a tendency to want to see all the good news about the stocks we own. It’s a behavioral trait called confirmation bias. We own, or want to buy a stock, so we want to see all the good stuff. But of course, what you really need to know is the bad news. Is there something lurking of “Don’t do it, it’s a trick” variety?

There is a fairly easy way to find out. When companies put out their annual SEC 10-K filing, there is a section in there called “Risk Factors”. The company will do a pretty good job of laying out the bad things that can happen. It may include for example, lawsuits that the company is facing, profitability issues or potential problems with debt. It’s a must read for anyone owning individual stocks.

You can find the 10-K on the company’s website under Investor Relations.

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