Researching stocks

Key takeaways

• Researching companies which align to your individual goals and objectives will likely mean you reach your desired return. 

• Research of companies could include not just financial information about the company, but also things like market analysis, competitors and the broader economic environment.  

• CMC Invest gives you comprehensive access to a range of tools and charting to help you make informed decisions on your portfolio.  

• With thousands of different investment options ranging from shares to ETFs, it can be daunting to know where to start.

• Whether you’re entirely new to investing or just after a refresher, we'll discuss how you could research different options for your portfolio.

Where to start

When researching options for your portfolio, there isn’t a one-size-fits-all approach. to getting started. You may end up following different techniques or looking at different information until finding the one that gives you the most valuable insights.  

To start off, it is worth understanding the main differences between ‘fundamental’ and ‘technical’ analysis.

Fundamental analysis: This is about the actual value of a company. You can determine this value by looking into the company’s financial health, growth prospects, competitive advantage and the overall economic environment. Some important pieces of information here include: financial statements, earnings reports, balance sheets and annual reports. 

Technical analysis: For the technical side of things, you can look into the company’s historical price movements and market activity. Some important pieces of information here include: charts, patterns and trading volumes, which can help investors predict how the stock price will move in future. 

Understanding a company

Here are some of the areas that investors might like to explore:

Financials - Think of a company's financials like the dashboard of a car. Instead of showing speed and fuel levels, financial statements display crucial metrics such as revenue, earnings, and debt. These indicators help investors understand how the company is progressing and if there are any performance issues that need attention. Just like a car dashboard, financial reports can sometimes flash warning lights, such as stagnant growth or high debt that signal potential problems. 

Management: Think of a company as a ship, with its management team, including the CEO and other top executives, as the captains. Good governance ensures that the company makes decisions that benefit all shareholders and adheres to laws and ethical standards. For investors, it's crucial to assess the skills and experience of a company's management team, as these factors greatly influence the company's direction and performance. 

Competitive analysis: Comparing a company against its closest competitors could provide some unique insights into its market position. You could analyse market share, product differentiation or unique selling propositions (USPs). Understanding how a company stands up against the others may help you better assess its strengths and weaknesses. 

Economic conditions: Broader economic conditions, both globally and domestically, can at times influence the trajectory of companies. Consider factors such as interest rates, inflation, geopolitical stability and consumer sentiment to understand how various external economic conditions might play a role. 

Understanding stock charts

As a visual representation of a stock’s recent performance, charts can give you some insights and help you make the most informed investment decisions.

You might like to think of stock charts as essentially being a ‘historical roadmap’. They include information on the stock’s performance over days, weeks, months and years. You could get valuable insights from these charts, including trends and price patterns.