1. RESEARCHING STOCKS… …THE OTHER 20% By Lynn Ostrem, VP Crow River Investment Club www.bivio.com/crowriver

2. First Things First: Find an interesting stock; Complete a preliminary SSG; Do a cursory review; Order an Investor’s Packet; Roll up your sleeves!

3. Completing a Preliminary SSG What do we mean by quality?

4. Looking for Quality in the SSG: Straight, upward graph lines; Double-digit historical sales & earnings; Most recent 4 quarters growing at or better than the 10-year average; Reasonable debt (NAIC says < 33%); Reasonable insider ownership; and Steady or climbing Pre-Tax Profit (2A).

5. The Cursory Review

6. Online Sources for a Quick Review: Multex Investor www.multexinvestor.com Quicken www.quicken.com Wall Street Research Net www.wsrn.com MSN Money Central http://moneycentral.msnhttp://moneycentral.msn. com

7. A Cursory Review using Multex Investor www.multexinvestor.com

8. Enter the ticker or company name and click GO!

9. Tour the items on the left column

10. News & Significant Developments: Check the News! Is it good? Is it bad? New products announcements? Recognition for outstanding service?! Check Significant Developments! How about product recalls? SEC investigations? Shareholder class action lawsuits? Executives leaving suddenly? If so, STOP right there!

11. News & Significant Developments: Bad news from Worldcom—weeks before the other shoe dropped. Save time – Check the news first!

12. Company Overview & Business Description: Quick Access to:  Company description & profile  Corporate website  Financials  Press releases  Investor relations  Contact information  Products & services

13. Officers & Directors: These are the people who run our companies!  Who are they?  What is their background?  How much are they paid?  How much stock do they own?

14. Highlights Report: The best is at the bottom!

15. Earnings Estimates: The first box will give us the analysts’ Long-Term Growth Rates. Do they meet our goals??

16. Compare your company to its industry, its sector, and the S&P! Ratio Comparison:

17. Advanced Strategies… For the Cursory Review

18. Insider Trading (Advanced): Officers receive options in lieu of compensation. Oftentimes, they sell those options. This is not a problem. You are looking for lots of people buying or selling for no apparent reason!

19. Insider Trading (Advanced): Simply match the options with the Sales. Analyze what’s left.

20. Postive Cash Flow (Advanced): The first sub-total is Cash from Operations. Is it positive?? If Net Income is positive, Cash should be, too!

21. Accts. Receivable & Inventory (Advanced): Neither should be growing faster than sales. If Accts. Receivable is growing faster…the company isn’t collecting its bills on a timely basis anymore! If Inventory is growing faster…its products or services aren’t selling as well. Both are Red Flags!

22. Accts. Receivable & Inventory (Advanced): Sales are on the Income Statement Accounts Receivable is on the Balance Sheet Inventory is on the Balance Sheet

23. Sales, Accts. Receivable & Inventory: From Home Depot’s financial statements on Multex: $16,277 - $14,282 div. $14,282 = 14% Receivables $1,235 - $1,082 div. by $1,082 = 14% Inventory $7,196 - $7,417 div by $7,417 = (3%)

24. If you like what you see… …Order that Investor’s Packet early!

25. Ordering the Packet Online: Most requests are handled under the “Contact Us” link found on the Investor Relations page.

26. Ordering the Packet Online: After you fill in your name and address, most companies will offer the following information:

27. Ordering the Packet Online: If they don’t have an order form online, email the Investor Relations and ask for the following: ……………………………… Annual Report Proxy Statement 10K (SEC Annual Report) Latest 10Q (SEC Quarterly Report) Analyst Reports Press Releases Magazine Articles

28. Ordering the Packet Offline: No Computer Access? Use Value Line. The Company’s phone number is located at the end of the Business Section. Just ask for the same information in the previous screen.

29. When to Expect the Packet: This is the company’s 1 st test! Keep track of when it arrives: 3-7 days is excellent 1-2 weeks is good (and typical) Over 2 weeks is a BAD omen! Their response time is a reflection of their feelings about shareholder value.

30. Performing an In-Depth Study… …The Tools

31. Using the Right Tools: Company Website Annual Report 10K (SEC Annual Filing) 10Q (SEC Quarterly Filing) Proxy Statement Analyst Reports News & Articles Conference Calls

32. Performing an In-depth Study… …What do we Look for?

33. Company Review: Business Model History Products & Services Customer Demographics Research & Development Quality of Management

34. Company Review: Business Model –Who are they? –Exactly how do they make money? –Do they dominate in certain markets? –Do they plan to? –Do they have international presence? –What percentage? Is it growing?

35. Example: Who are they?

36. Example: What is their market share? Stats from PepsiCo’s 2000 Annual Report:

37. Example: What is their market share? Stats from PepsiCo’s 2001 Annual Report:

38. Is their History relevant: From Intel’s 2001 Annual Report – a wonderful story about past industrial revolutions and how today’s technology compares! This is a must-read! Find it on their website.

39. Company Review: Products & Services –Can you describe their products and/or services? –Is there a wide range of products? Or small handful? –Are products highly visible to the public? –Or do they produce a high ratio of repeat business? Customer Demographics –Do they have a large customer base? –Or do a select few account for the majority of sales? –Are their products serving a diverse client base?

40. Example: Products & Services From International Speedway’s 2001 10K: Is this diversified??

41. Example: Customer Base From Lincare’s 2001 10K:

42. Company Review: Research & Development –Are there promising new products in development? –Are new products garnering market share? –What are they spending on R&D (7%-9% is good)? Quality of Management –Who’s managing the company? –What do we know about them? –Are they accomplishing their goals? –Are they over paid for what they accomplish?

43. Example: Research & Development From Pfizer’s 2001 Annual Report: –Compare sales to R&D Expenses

44. Example: Research & Development From Pfizer’s 2001 Annual Report: –Financial Review - Outlook

45. Example: Quality of Management From Mobile Mini’s 2001 Proxy Stmt. – (Schedule 14A in the SEC Documents) Watch for family members & those performing outside services. Here we have both!

46. Example: Quality of Management Check the Numbers – Sales, profit margins and control of debt. Read Letters to the Shareholders for several consecutive years – did they meet their goals?

47. Business Outlook – Industry: Uniqueness of the industry Level of competition Positive aspects affecting industry Negative aspects affecting industry Future outlook for the industry Future growth rate of the industry

48. Finding Industry Information: Annual Reports –See Glossy pages & Management’s Discussion SEC 10K Report –All companies must provide an overview of their industry Company Websites –Most companies’ websites will provide information on the industry, as well as links to other websites

49. Finding Industry Information: Search Engines – such as dogpile.com, about.com, yahoo.com or google.com

50. Finding Industry Information: Don’t forget Value Line’s Industry Page! They cover several statistics for competing companies in the Value Line universe.

51. Business Outlook – The Company: Positive influences on the company Negative influences on the company Primary drivers of future growth ……………………….. SEC 10K Letter to the Shareholder Press Releases …are the best!

52. Example: Influences & Drivers From Mobile Mini’s 2001 10K

53. Financial Analysis: Most Important: Keep it simple! Sales, Pre-Tax Profit & EPS – SSG! –Hint: Use the Pert Report Balance Sheet Items: –Debt, Accts. Receivable & Inventory

54. Compare to Competitors: Find Top Competitors: Value Line, Multex, Quicken, Hoovers, etc. Use financial websites such as Quicken or Multex Investor to compare to competitors, industry and the S&P 500. And don’t forget the Value Line Industry page. Again, limit your comparisons to items found on the SSG + balance sheet items

55. Example: Comparison on Quicken From Quicken’s Stock Evaluator:

56. Finding Growth Projections

57. Finding Growth Projections: From the worst to the best source: News commentators – CNN, CNBC, etc. Analyst Reports – Value Line, S&P, etc. Financial Websites – Zacks, Multex, etc. Annual Reports Company’s Press Releases Conference Calls Investor Relations

58. Example: Analyst Reports Value Line offers sales and EPS estimates out 3-5 years

59. Example: Financial Websites From Quicken’s Analyst Ratings Tab

60. Example: Annual Report From Pfizer’s 2001 Annual Report

61. Example: Company’s Press Release From a Press Release on Brinker’s website

62. Example: Company’s Press Release From a Press Release on Yahoo! Finance: 18% - 19% revenue growth 19% - 20% earnings growth 3% to 5% same-store growth

63. Example: Conference Calls Conference Calls –On company Website –or www.vcall.comwww.vcall.com

64. Example: Contact Investor Relations From Brinker’s Company Website:

65. Tying it all Together: 1. First, have a plan before you begin; 2. Use a highlighter when reading; 3. Copy information into a Word file; 4. Condense it into something simple; 5. Make sure your last paragraph contains an explanation of your SSG judgments; 6. Save your original in a 3-ring binder.

66. Finalizing for a Club Report: Presenting your Report to the Club?? –Make report no more than 3 pages; – Plus the Value Line company page; – Plus the Value Line industry page; – Plus, include really good articles; – Plus a completed SSG; and – Plus a Stock Comparison Guide.

67. Questions?? Thank you! Lynn Ostrem garbagecop@foxinternet.net

68. Finding Lynn’s Presentation and Research Guidelines: Crow River Investment Club Website: www.bivio.com/crowriver Click on Catch-All Corner: Look for “Researching Stocks–The Other 20%” and “Research Guidelines”