Most of the time as dividend investors there is need to do research but little to do investigative reporting because profitable stocks are followed by analysts. The investment banks have somebody following the company as well as forecasting what it should do and then when the results come in – as an investor you can compare. The bulk of the research is done for you and if the company has been paying a dividend for a long time, there should be more than one analyst following the company. That being said, it is recognized the investment bank analyst is not necessarily working for you, his or her company wishes to gain fees from transactions with the company – issuing shares, bonds, refinance, bridge loans on takeovers friendly or non-friendly, offering opinions on values to sell assets, etc. There is a duo role, which is the reason why there are very few sell recommendations. However there are times when you need to do more research and a recent example is Valeant Pharmaceuticals – its stock a year ago set a high of $268 and now trades at $22. The once high flyer was the darling of the industry, raising over $ 30 billion in debt; raising prices as there was no tomorrow and using an increasing stock price to grow. Now the model is gone and the company is under a increasing microscope all its practices under review. What else did it go into the grey area? What is it true value?  How did everyone miss it for so many years?

If you want to do research, you might start with how do reporters do investigative reporting? One method is to review the books, the journalism students are given and one will similar to what Canadian students are given – Digging Deeper by Robert Cribbb, Dean Jobb, David McKie and Fred Vallance-Jones published by Oxford University Press, Oxford, England, 2006.  The 12 keys to successful investigations are:

1. Curiosity – why did that happen? who was responsible? how does it work? Curiosity is the engine that powers many other crucial parts of the investigation. it also keeps you going when obstacles and frustrations impede you along the way.

If you remember Watergate, after the burglars were caught and were in court, a senior member of the Justice department was there. The reporters asked why is he here? who does he represent? normally it connected to the White House.

In the movie The Contract with Morgan Freeman and John Cusack – the reporter asked why did the prisoner say Thank You to the Officer?

In the age of the internet where curiosity can take you anywhere, many people including me watch a movie rather than being really curios about anything.

2. Preparation  – think of your research as a job interview. You need to investigate the company – what is present in the marketplace (for all to see) and the 10k reports – for their SWAT analysis and how the company sees the world. The internet is great for preparation work.

3. Organization – there is no best except for if you need to quickly find any document or interview you need and understand its significance, as well as come to understand the bigger picture and develop a list of key points. If you stay organized throughout you will save hours or day when you reach the writing stage of your product.  One of the best methods is still chronologically. Mark everything down similar to being a lawyer.

4. Patience – its patience to research and write an investigative story. You are always waiting for something, whether it is a reluctant source to return your calls, public officials to respond to freedom of information requests or inspiration to hit.

5. Tenacity  – there will be many obstacles, but the key is sticking with it. Bureaucrats will fight to stop you from obtaining public documents. Key sources will be difficult to find or be reluctant to speak to you. Databases will seem impenetrable and unintelligible. Sometimes you will not have a clue how to nail down a crucial piece of information.

6. Resourcefulness – while much of the world seems to be open, people still like keeping secrets. You will need to use your initiative in deciding where to look. The creative use of the available resources allows you to assemble your information successfully.

7. Thoroughness and completeness – in your research you will go down many roads, some will be dead ends. some will lead you to other roads. You need to know enough to decide whether to keep digging or when you ask people who are not saying, if they are telling the whole truth or will ramble about something fact you are not aware of.

8. Attention and observation – you need to be on the look out for the unexpected or for any facts which contradict their hypothesis. What can you learn by observing both what is said and not said?

9. Open-mindedness – You want to be accurate and right. Constantly challenge your assumptions. Try just as hard to disprove your hypothesis as to prove it.

10. Care, caution and discretion – investigations look into the reputations of others, with this power comes great responsibility. Livelihoods and careers can be ended.

11. Skepticism – you need to maintain a healthy skepticism. You should not be cynical but facts and statements are checked and verified by others rather than just repeated.

12. Time – investigation takes time from doing other things, although if it is important to you, elements can be squeezed in here and there and invariably linked to other things you do.

Linking to dividend paying stocks, the great thing about the stock market is there are other options. If you do not like the stock for any reason, find an alternative. That however is easier said than done because similar to all things in life as humans we develop some form of attachment to our holdings. Whether it is places we have been in the past, homes, or investments. Typically as dividend holders you will own your shares as long as the company earns a profit and can pay a dividends – ideally rising them on a yearly basis. The time to sell is when the company is either taken over or it does something which you do not like – buys companies which you do not like or areas where you do not think it should be. Most of the time you will not do a great deal of investigative reporting because you can use diversification strategies and if the holding is too big – sell some. However from time to time if you are curious or have a theory – you can investigate it.

There are more questions than answers, till the next time – to raising questions.