Getting Started: Become a Pro at Personal Finance, Part 2

Before I so rudely went on vacation last week, I had promised a second part to becoming a personal finance pro. In this segment, I want to answer the elusive question of "What is work?" as in "Have you done your work on National Gift Wrap and Box Co.?"

Not too long ago, when I was on CNBC's "Squawk Box," Joe Kernen made light of the fact that I said, "I haven't done my work yet" on a stock he asked me about. Joe was always trying to stump me because I like to know and trade a lot of stocks. Know thyself. He teased me that "work" was one of those things that people always claim they do on Wall Street, but that there isn't much to it.

So let me tell you how I approach learning about a stock. Tonight, before I left for home, Matt "Work Is My Middle Name" Jacobs and I were talking about trying to learn some new wireless names. The first thing we like to do is look at First Call, a professional service that puts together all of the relevant research notes. (Multex has a similar product.) We usually like to print out all of the notes on a stock for the past six months. We study them. If we like them, then we order the financials, which include the most recent annual and quarterly reports.

I like to look at a chart of the stock on Bridge. If it seems interesting, we call the analysts themselves and ask them what they think. If so far everything checks out, we then call the investor relations department and ask if we can hear a playback of the most recent quarterly conference call. There is usually a playback or a printout somewhere.

If all of those checks work, we usually put a little stock on, sometimes as few as 2,500 shares, and then ask the company when it is speaking or appearing at a conference. We then wait until we see them to get bigger.

If we think it is really compelling, we might ask them to come see us when they are in New York or allow us to go see them at their offices. Without doing all of these things first, we know two things: If the stock goes up, we will sell it because we don't know enough to keep it on, and if a stock goes down, we will sell it because we don't know enough to buy more.

I know many of these chores are impossible for you to do at home. But I also know that up until the meet-and-greet portion of the winnowing, you could be right there with me. I would encourage you to do so if you are going to own a stock, because there is nothing like having the conviction that the work engenders when the times get tough or the stock gets roughed up.

What are you looking for in these materials? A clear-cut case that management knows what it is doing, has been doing it for some time and has been consistent in its goals and execution.

That's really all this game is about.

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