During the years I worked as a buy-side equity analyst and an institutional portfolio manager, the first item I would always examine in an earnings report were the footnotes. That’s where all the truly juicy information appeared, and it never ceased to amaze me how many folks skipped right over them in the go-go-go days of the 1990s. Back then, reading the footnotes were relevant because it was possible to glean information other investors were ignoring. Today, only a professional investor with a career death wish would skip them.
Yet skipping the footnotes, and earnings reports in their entirety, is exactly what I would urge individual investors to do. Yes, you read that correctly. I think it’s a complete waste of time for individual investors to read 10-Qs, 10-Ks and other such earning reports for any reason other than genuine interest in a particular company’s operating performance. Note that I said operating performance, not the future movement of that company’s stock price. By the time Jane and Joe Public are reading these documents, the market has already incorporated any new information in them into stock prices. Thus, it’s too late to act on anything they might find.
Read the rest of the article on The Wall Street Journal.