How many times has it happened? You read about a stock in a newspaper or wherever. And you think, "Hey -- maybe it's worth a buy." What stops you is the thought of doing all that research -- the kind of due diligence investors should always do before buying a stock.
If you're that kind of careful investor, here's some good news: Visit a dozen or so key Web sites and you can perform due diligence on a stock in just a few hours. Seriously. All the tools and research on these Web sites are free. Obviously, you still won't be on the same level as the professional analysts who watch the stock day in and day out. But trust me, you'll have it all over investors who dive into stocks without looking. And that little bit of extra knowledge can go a long way.
So let's pick a stock to use as an example -- say, specialty chipmaker
(ATML). A good place to start deconstructing Atmel's stock would be
I know: Yahoo! Finance is not exactly a well-kept secret on the Web. In fact, Yahoo! Finance is like a lot of other financial portals -- enter a quote and you get basic data on the stock like earnings estimates, recent news stories, rudimentary charting, historical quotes and detailed financials on the company. The big difference: Yahoo!'s pages download a lot faster than the competition's.
(To make sense of the company's numbers you find on Yahoo!, check out the
TheStreet.com. A good book on fundamental analysis is
Mastering Fundamental Analysis,
by Michael C. Thomsett).
Probably the most powerful Yahoo! link once you enter a stock quote is the Profile. The Profile link pulls up a brief description of the company, and once on that page, you'll find fast links such to places as the company's Web site, its latest
filings and funds that are holding the stock. Another link on the Profile page, Analyst Upgrade/Downgrade History, lets you know who's recently given the stock a thumbs up or down. Here I learn, for example, that
both downgraded Atmel in March. Bad news, perhaps. But bad news that's already been priced into the stock.
Now let's see what leading financial journalists have to say about Atmel. At
(as in valid idea, get it?), enter ATML under Media Buzz and you receive tight little synopses of recent articles about the stock. Many of these stories come from places like
or other financial Web sites along with some print magazines. It's a much wider selection of stories than a portal site such as Yahoo! Finance dispenses.
In Atmel's case, the stories capsulized at Validea.com seem to paint a rosier picture of the company's future than the brokerage ratings would suggest. A write-up in
magazine pronounced ATML a value play. Positive buzz also appeared in a March 7
Validea.com tracks the accuracy of each of the financial journalists it covers. Turns out that if you'd followed Greenberg's average picks, you would have made nearly 20% on your investments over six months' time.
What if you want still more news on ATML? You can, of course, do a plain old search at Yahoo!. Alternately, you can enter Atmel's ticker symbol into
search engine, which you'll find in the left column of every page on the site. The
search engine accesses
vast database of news stories and columns. So you get not only news, but also informed commentary on the stock.
Finally, if you do a search at
you'll be able to access articles from leading trade magazines and technical Web sites. The list will keep you busy for a while. Using
, I learned that back in January, an Atmel subsidiary created a transmitter/receiver on a single chip. That chip should help lower the cost of
(wireless networked) devices.
By the Numbers
But suppose news stories alone aren't enough to convince you to buy a stock. What you want are cold, hard numbers. Just how much is this stock going to be worth? At least three sites on the Web can help. At the stock analysis site
I learn that Atmel's fair value is nearly $30, more than three times its recent price of $9.30 per share. That's based on ValuEngine's modeling software, which was developed by
finance professor Zhiwu Chen.
But we want corroboration, so we go to
Enter ATML. Click on Evaluator. Then click on Intrinsic Value. Whaddaya know? Quicken also puts Atmel's value at $30. For yet another opinion, go to
Here you're told that Atmel's value is about $20 per share. The lower number is due to VectorVest's number-crunching software, which uses more strict criteria. In fact, the site makes recommendations based on die-hard value-investing principles.
Judge a Stock by the Company It Keeps
Stocks can have to-die-for valuations and a slew of pundits for fans, but their prices still may languish -- especially if the sector they're in is performing poorly.
is the best free site on the Web for dissecting sector performance. Working your way through the links from technology to the semiconductor sector, you can scroll through the entire list of chipmakers and look for patterns in how price and volume change over the course of the day. Atmel, it turns out, rose by more than 6.5% last Tuesday, April 10, on unusual volume -- and on a day when semis as a whole dropped by roughly 1.9%. So Atmel bucked the trend, which is a bullish technical sign.
ClearStation.com has other tools you can use to get a technical read on the stock. The technical analysis site
says Atmel will tend to underperform both in the short- and long-term. That's contrary to what the fundamental analysis sites -- such as VectorVest.com -- said. buysellorhold.com identified short-term support and resistance levels at $7.63 and $9.38. Some traders use support and resistance information to identify possible buy and sell points. Others place stop orders to automatically trade the stock near the support and resistance levels. Still, as technical indicators go, support and resistance are pretty basic stuff. What we're doing here, remember, is simply getting a good read on how a stock might perform. If you want to delve deeper into technical analysis, head to Web sites for more advanced users such as
Hard Right Edge
How Safe Is It?
Now that you've got analyst ratings, price targets from computer modeling software and an understanding of how Atmel's sector performs, there's one last major thing you should know before your work's done: What is the risk of holding this stock both short- and long-term?
gives you a read on the stock's volatility over a period you specify -- say six months or a year. Or you can specify a particular period, such as April 2 to April 6, that was especially volatile, so you can see how your stock performed when the going got tough.
Yes, you also could look at a simple graph of the stock over that period.
for example, lets you call up historical graphs of a stock. The difference is that RiskGrades.com shows you a stock's volatility in relation to the market. Using the site, you can determine whether a stock is apt to be more or less volatile than the market as a whole during the periods you're interested in. Turns out that according to RiskGrades, Atmel pretty much kept its cool, relative to the rest of the market.
So now you have enough information to fill a loose-leaf notebook on Atmel. Is the stock a buy? Should you sell it short? Trade options on it? Alas, it is the policy of this column
to make stock recommendations. So the choice must be yours. However, go through the due diligence steps outlined here, and you can rest assured that it will be an informed choice.