Tim Galginaitis'  Instablog

In the performance of my job, I am required occasionally to read reports published by the Government Accountability Office [GAO]. If you're like me, you can find these reports as interesting as pastimes like whitewashing a fence (before you trick the neighborhood kids into doing it), and your mind wanders. The more I read, the more investment implications become evident. Even though the GAO's findings and recommendations are non-binding (and are often ignored), the "what-ifs" encountered while reading the reports offer a different perspective on the current and future economy. This makes these reports valuable to investors, but exceedingly difficult to process.

GAO Background

The GAO's website states that the US GAO is an "independent, nonpartisan agency that works for Congress." GAO investigates "how the federal government spends taxpayer dollars." Their mission is "to support the Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the benefit of the American people." Their work, while it is to "advise Congress and the heads of executive agencies," can lead to the drafting of new laws designed to implement the recommendations in published reports.

In addition to publishing these reports, the GAO handles all protests arising from the awarding of Government contracts. With bid protests becoming the new norm in a contracting industry beset with cut-throat competition, the outcomes of these decisions can determine the future prospects of the parties involved.

Why Should Investors Care?

While the GAO does not have direct policy inputs, its reports often portend future developments in the economy. As I wrote on an article about the US Postal Service, the GAO outlined the organization's perilous financial condition. Subsequent developments have reinforced these observations, including staff and service cuts, along with speculation of UPS (UPS) and FedEx (FDX) gaining business from the service's weakness.

Additionally, these reports can offer tremendous insight into the efficacy of government programs. The Troubled Asset Relief Program [TARP] has come under much scrutiny in the wake of the financial crisis. In January, the GAO released a report detailing the status of programs unwinding from TARP, as well as opportunities to increase communication and effectiveness of those programs. The reports can also give clues as to the direction government may take. The GAO releases reports on the status of the recovery, which become especially important in an election year, as they can shape the tone of presidential politics. GAO also identifies government agencies most vulnerable to waste, fraud and abuse. These reports - in addition to giving Rick Perry ideas to forget during a debate - can offer insight into where the government's priorities may shift.

What I Will Give Readers

I will take these rather obtuse documents and distill them as much as possible. In this way, you my loyal readers, will be able to get the relevant information and cut out all the fluff. I will also attempt to do much of the tedious background work to the issues mentioned. By doing this, I will be able to frame the reports within their proper context, with all necessary details.

I hope to chew through a number of GAO reports in the coming months. I invite you to comment on my plan to analyze these reports. I also invite feedback on any analysis I provide, so I can hone my analytical methods to be more effective, both for myself and for the readers of Seeking Alpha.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I work for a major US defense contractor. I will not write about reports or bid decisions to which my employer, a subsidiary, a competitor, or teammate is a party. I will not write about GAO reports concerning the Department of Defense, nor those reports mentioning my employer, a subsidiary, a competitor, or teammate.

Here's a question: how can people that work for a living (like me) find the time to research and track their stocks?  Between commuting, meetings, and brief-prepping, there's little time to do actual work!  So how do we find the time to analyze not only our currently-owned stocks, but stocks we might consider buying?

With a relatively simple, easy to understand system of course!

I therefore give the world my method for breaking down a stock in a relatively short period of time.  I call it - brace yourself - $TOCK Analysis.  Here's a breakdown:

$ - Valuation: what do the numbers say?
T - Technicals: what do the charts say?
O - Opportunities: what possible catalysts does this company see?
C - Caution: what's the possible downside?
K - Key Takeaway: what does all this information add up to mean?

If you have a good research portal (like Seeking Alpha or Yahoo Finance), then this method should only take about an hour to get a rough grasp on a stock.  If you already own the stock, it should give you an update as to where it stands in the overall market.  If you're looking to buy the stock, you should have enough information to determine whether to dig deep into the company before buying it.

I will write a few articles using this valuation method, just to test and see how it works.  As always, feedback is greatly appreciated and encouraged.

Thanks.

Disclosure: I am long AAPL, VZ.