Investment Club: How to Research Your Stocks

Sept. 28, 2006 — -- Potential investors can research the company they want to put their money into on their computers at home.

Here are some tips on researching companies for investment.

We'll use Cheerios as an example.

First, start off by figuring out who owns the company.

Hoovers' Web site can really help you uncover some very basic information about almost every product that's sold in America.

The first thing that you want to know about Cheerios is who owns the company. (It's owned by General Mills.)

You need to find out whether this is a company that you can invest in -- if it is a company that has gone public.

On the front page of Hoovers' Web site, you will see a ticker that tells you right away whether a company is public.

Ask yourself, what does the company do?

Click on General Mills. One of the first things that you see is an overview of the company, which tells you about all the brands that General Mills owns.

Find out who runs the company.

This is really important. People matter. First, I see the chairman and CEO, and his name is Stephen Sanger. He's a longtime employee of General Mills, and that says he knows a lot about the business. That's reassuring.

Now that you know who runs the company, find out how the company has done.

Go to Morningstar.com. Sometimes you have to pay to subscribe, so everything you may want to know is not free.

A lot of it is free, though.

The first thing you will see on the General Mills page is the current stock price.

Here's the info you should look for. How has it done, for example, over the last five years?

General Mills' stock has been doing really well. Now that's something that actually might give you pause because you want to buy low, not high.

Find out whom the company competes against?

Yahoo! Finance is another great site.

Click on competitors, and you will see a page that shows a chart indicating that General Mills competes against Dannon, Kellogg and Kraft.

The site has a bunch of information devoted to the food industry.

You can read the headlines and see whether anything interests you. It's just a great way again to get more information about the company.