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Stock Research & The Company Balance Sheet

If you are a seasoned investor then you are keenly aware of just how important the company balance sheet is. For some, a very quick look can easily determine whether they would consider investing at all in that company.

The day trader of course pays no attention to the company balance sheet as he or she is only in the stock for a short while. Yes yes, I get that, but here’s the flaw in the day trader’s plan.

If while day trading a certain stock that you haven’t thoroughly researched and in context I’m talking about the balance sheet, you could have serious issues. Let me explain.

As a day trader the stock share price starts to go against you, down by 10% and 20% and even 40% .. now what? Sell at a loss or wait for the comeback, if it ever does comeback.

A quick check of that balance sheet may have told you for the last 8 quarters the company has had a larger debt to carry every quarter and still have never actually generated any sales at all.

The debt comes from operations with no sales, existing loans and the dreaded dilution issue, where the company keeps doing private placements to raise money.

The lesson is, either read the balance sheet and get a sense of what you are investing in, or as a day trader, make sure you never stay in the stock for more than a few days tops.

Don’t get me wrong here, I am no expert when it comes to reading balance sheets, but I can spot growing debt and zero sales when I see it. And when in doubt but still interested in a company, just pick up the phone and call them.  

Stock Research the only site I know of that offers a comprehensive package of information on each of the stocks they cover in the mining and oil & gas sectors. I use to research a company by using 3 or 4 websites, not any more. With a free email subscription, Stock Research Portal will give you everything you need, segregated news releases, insider trades, and the all important company balance sheet.

About The Author:  Mike Perras is a former media executive and faculty of business professor. Today he is a freelance writer and also manages the Canadian Stock Alerts blog. It is updated weekdays in real time, and the primary focus is to find stocks with higher than usual trading volume. Mr. Perras doesn't advocate buying the stocks he mentions. Nothing in this article is either designed to meet readers personal financial situations, or intended or taken to be investment advice.