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.

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.

What Makes a Good Investigative Story?

Investigative stories can be about any topic imaginable but some work better than others.

The under-reported story  – small things add up; if it happens to one is it happening to more?

An injustice – if you uncover a real injustice it will always be well read.

Corruption or crime – is it small or large? price fixing which will affect share prices?

A faulty system or process  – every company and government has processes  do they always work?

A human element – a good investigative story has people at its core. Think of the movie Erin Brockvich and the effect the investigation had on the power company stock and bonds.

Something new – a story about a public figure and a financial scandal. Something widely believed but never proven.

A story appropriate for your audience – if nobody reads your information nobody benefits from it.

Where do Good Ideas Come From?

The beat – for reporters they tend to develop expertise in the area they are assigned and through the usual suspects on the beat they need to talk to ideas appear.

Clippings – daily news or news headlines – what could be enhanced upon?

Tipsters  – everyone knows something about something and once in a while they want to tell someone. It can lead to something more and the verification begins.

A hunch – sometimes a question or detail will bug you. You wonder why something happened or how something works. The movie the Pelican Brief was about that.

Documents – reports need to be filed in the public. Looking at them red flags can come up.

Databases – looking through them you can find something which analysis will send you in a different direction.

Friends and neighbors – the causal comment will send you on a direction. Often it is somebody in the field and they say I am not allowed to comment.

Direct observation – looking around the places you go

Advocacy organizations – they have their biases but they also tend to have valid background information.

Reviewing and Auditing the Idea

A great many factors have to be considered before you devote substantial energy and time to an investigation. Think about it – are you prepared to devote weeks to it?

Develop the Plan

If the answer to the above is go ahead – start the work and stay organized. Start work in the general public and then move to people with more expertise than you have.

Sometimes you have to cut your losses and move on. Other times you can keep going but remember your ethics – do not lie, steal or misrepresent yourself.

Linking to dividend paying stocks, unlike the journalism world, the investment world revolves around money. If you are researching to get into the market, the best thing to do is follow some companies and buy when the shares go into the price you are comfortable with. If you own the stock and have concerns which would affect the stock price the easiest thing to do is sell out hopefully at a higher price and move to the sideline or to different alternative. You are often not stuck holding the position because on the stock market you have a liquidity or a ready market in your favor.Being curious is a great thing to have in life, but remember the markets work on money and unless you are shorting a stock, often times the best solution is sell and move on.

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