Wednesday, September 7, 2011

How SEC’s Easy Data Access Helps Investors’ Understand a Business

“Never invest in a business that you cannot understand” -Warren Buffet

Historically, it was the financial professionals who had the easiest access to corporate data.  Today this has all changed, thanks to the SEC.  The SEC’s interactive disclosure standards have leveled the investment playing field and brought Buffet’s quote within the reach of every investor.  A stated objective of the SEC is:
“As more companies embrace interactive data, sophisticated analysis tools now used by financial professionals could become available to the average investor.” -

What is really implied by this objective?

Consider the following Valuation Tutor application screen that sits on top of the SEC’s interactive data: 
There are four major components to this screen.   The top Right Hand Side (RHS) provides the conceptual framework and analytical tools, designed to operate and transform interactive data into information.  The top Left Hand Side (LHS) is an online text that provides the concepts and operational steps required for working with the top RHS.  The bottom LHS and RHS provide immediate access to the interactive data itself.  Simply, enter the stock’s ticker and an amazing amount of data is suddenly available.  

For example, consider (AMZN).   By entering the stock ticker AMZN, Valuation Tutor immediately pulls in the following list of reports:

Suppose you want the latest 10-K which at the time of this blog was filed on the 28th January 2011 as illustrated above.  By selecting this report the following list is now available to an investor:

The above is only a partial list as you can see from the scroll bar there is a lot more that can be scrolled down to. 

Suppose you select the Consolidated Statement of Operations for Amazon.  This further provides access to the following:

Or similarly, you may be interested in comparing this with Amazon’s Cash Flow Statement.  You can pull these up side-by-side:

By clicking on View Excel Document in either window provides immediate access to this data in Excel for further processing.

Finally, to understand what Amazon’s business model and business strategy actually is you can further give yourself immediate access to the 10-K report itself.  This requires a couple of steps, click on  the menu item View Filings and select either SEC Filing Viewer on Right or SEC Filing Viewer Popup as illustrated below:

The popup is useful if you have the luxury of two screens but even on a single screen it is very powerful.  The Viewer appears as follows (I have entered AMZN as the ticker again):

In the above LHS the two tabs are Financial Report and Complete Filing.  The financial report is as described before but the Complete Filing now provides immediate access to the 10-K report by scrolling down as follows:

To read the 10-K, click on the hyperlink under the Document:

Finally, on the RHS of the screen is the tab Data Collector.  This can be used to design your own Excel Spreadsheet.  Instead of dumping out all fields you can be selective across statements.  Click on Financial Report in the LHS of the screen and bring up Amazon’s Consolidated Cash Flow Statement then click on Data Collector on the RHS and the screen appears as follows:

You can now decide what fields you want dumped into Excel by simply double clicking on a row in the LHS.  You can work across statements as well so that you are mixing and matching from the Balance Sheet, Income Statement and Cash Flow or other statements.  For an example, suppose I double click on Net Income, Net Cash used in Operating Activities, Investing Activities and Financing Activities then the following appears in the RHS:

Finally, click on Copy All and Paste into Excel to provide the following spreadsheet ready for use:

The original architects of the 1933/1934 Securities Acts could never have dreamed about the power they were unleashing with these acts.  So this is our interpretation of what the SEC meant in their following quote:
“As more companies embrace interactive data, sophisticated analysis tools now used by financial professionals could become available to the average investor.” 
In subsequent blogs we will discuss how to transform this data into information.


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