🧑‍🏫 Start building your investment case

Last week, we found out that Mastercard is an interesting stock.

Why? We didn’t find a reason to say ‘NO’ using 6 simple steps.

As a result, we want to look into the company more deeply.

Today you’ll learn how to gather the information you need to build a full investment case.

🧑‍🏫 Course: How to Analyze a Stock

This is the third article in the series ‘How to analyze a stock’.

In this course you’ll learn:

• How to find attractive stocks

• Where to find information about these companies

• How to determine whether a company is an attractive investment

The information you need

After you found a company that might be interesting, you should start gathering information to build your investment case.

In this article, we’ll solely use free resources to make sure that you can do this from home.

There are 6 resources we use to start writing our investment case:

1. The company’s Annual Report (10-K)

If you want to learn about a company, you start by reading its 10-K and Proxy Statement.

Reading these documents will be more insightful than reading very costly analyst reports (a subscription usually costs more than $10,000/year).

In this visual, you can find the basics of a 10-K:

Usually, it isn’t hard to find a company’s 10-K.

You can always find it via the Investor Relations section of the company’s website.

Most of the time, you can easily find a company’s 10-K via Google:

You don’t want to look for it yourself? Open the 10-K of Mastercard here:

After you’ve opened the 10-K, you can start building your investment case.

I always use the same approach and the more stocks you analyze, the better you’ll get at it.

The first thing I always do is convert the 10-K from a PDF to a Word document.

Why?

Each time we start writing an investment case, I just start with compiling a lot of loose information in a Word document.

When you’ve converted the 10-K to a Word document, you can start reading the report right away.

All information that is insightful can be kept in the Word document and all other information can be deleted.

By doing this, I usually keep roughly 20-30 pages out of an annual report of 100-200 pages and it takes 90 minutes on average.

Please note that in the beginning, it will take you more than 90 minutes to read a 10-K.

The more you do it, the faster you’ll get.

Here are the most interesting parts of Mastercard’s 10-K:

Please note that the first part of every 10-K ( ‘Business’ and ‘Risk Factors’) is by far the most interesting.

It’s where I spend roughly 75% of my time when reading a 10-K.

You can skim through the other parts.

Obviously, the Financial Statements (Balance Sheet, Income Statement, and Cash Flow Statement) are also very important, but we’ll look into them (again) in a further stage of the investment case.

Please note that a 10-K isn’t the only piece of essential information.

Let’s dig deeper as it will allow you to make better investment decisions.