What is the biggest thing a CFA should look for when picking a stock that is NOT on the 3 financial statements?

Examples might include a new product, a new CEO, a catchy advertising campaign etc

A new product

insider ownership. Follow the money. Most of them sell to reduce exposure and isnt typically a red flag. But when they buy, and buy big relative to their wealth. historically speaking, its a money maker.

I assume that stock information (price, volatility, beta ?) is known ? That would be my first choice, if not.

My second choice, if yes, would be to know about the clients. An automotive company with 5 clients with cyclical exposure is a completely different animal than a luxury goods company with retails clients, or than a pharmaceutical company with 2 clients.

This. Always trust chefs who eat their own cooking.

Statistically insider buying is not as much of a signal overall as you would expect it to be. I have also seen lots of execs in leveraged companies buy stock and then get wiped out when the stock goes to zero. I do look at insider buying but you have to be careful how you apply it.

I would talk to their customers and get a sense of how loyal they are.

Insider ownership for sure for a non-F/S measure. But I don’t know what a “CFA” is. Maybe you’re referring to a CFA Charterholder?

This only applies in some industries. Much of the economy is commodity goods where loyalty means f’ all. And at the end of the day, companies with relatively strong operating margins can find ways to keep people loyal.

Return on Invested Capital

a successful acquisiton track record can add a lot of value assuming the acquisitve management is still there is a qualitative thing that often is overlooked.

price momentum obviously.

change in strategy, management, etc. can ignite a stock - see CP Rail

Even in commodity goods there can be customer loyalty. It is known. *nods*

What’s the best way to tell if they’re buying big relative to their wealth? Also, what’s the best way to tell if management’s compensation is substantially tied to the performance of the stock?

Also, what’s the best way to tell if management’s compensation is substantially tied to the performance of the stock?

^ This is in the proxy, which is available on the SEC website annually. Most companies list some performance triggers. It is usually a red flag if they do not provide at least some basic sense of how mgmt is compensated relative to performance.

Google the names of their management to find out of any of them are under indictment or some other stupid stuff. (I’m sure the LA Clippers financials don’t say anything about their owner/president/CEO or whatever he is.)

This is required to be disclosed in the SEC financial statements but surprisingly often isn’t. Or maybe that’s not surprising.

Pay for steak, not sizzle.


You want to find the nice girl who is a little bit overweight right now but who just got a gym membership and is saving her pennies for a boob job. Buy frumpy with motivation, sell hot. Most people want to buy hot and hope she gets even hotter but some of us know you just end up overpaying if you do that.

^ Never trust a girl that was once fat. Mean reversion.