One of my close friends a few weeks ago while attempting to read through the annual report for Bank of Nova Scotia (BNS) asked me a question about what information was important, what data to look over and how any investor makes sense of such a long document.
The truth is that each investor has their own unique approach to investing. Myself, as a dividend growth and value investor, look to specific things when making decisions about when to buy, sell or hold an equity position in any given stock. An investor interested in solely growth or only trends is going to examine numbers or qualitative factors that are different than mine.
No one investor probably examines the exact same factors all the time. An investor like Warren Buffett, even though his investing approach is publicly been documented for decades, will still look at things differently than others and this is likely what has factored into his success over such a long period of time.
When I look at stocks individually I often compare companies within the same industry in order to gauge relative trends in business growth and value. For the Canadian baks (RY, TD, BNS, BMO & CM) I have a master spreadsheet that tracks financial data as far back as 1984 in one case. Not dusting off old financial statements from archives in the mid 1980’s seems excessive but if a long-term investor wants to invest for the long-term its important to understand how trends are established and how companies behave in different business environments.
One example of this might be if we were to revisit the inflationary period of the 1980’s. How the banks behaved then likely will give insight into how they might perform now. I have data to show the relative value during that time period which may help me decide whether I want to add to a long-term position or mitigate risk by looking elsewhere.
That seems like a lot of work to my friend, who simply asked for a copy of the spreadsheet (not happening, lol) but it demonstrates what might be important to one investor is far too much work for another. Holding all five in equal proportions over the long-term may even turn out to be a better strategy than that one I choose.
I’ve included a PDF from my Bank of Nova Scotia (BNS) spreadsheet with data dating from 2005 until 2010. Some investors may understand why the data is collecting in a certain way where others may question why some information is included and other information is not. This demonstrates how each individual investor creates a preference or “comfort zone” with what information they collect. Some will want more and some will want less.