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Photo of John Daly, Listcorp By John Daly, Listcorp

min read

How to use company announcements in share investing.

As you’re probably aware we’ve recently finished “reporting season” – when many companies update the market on their performance for the year.

For those who followed the action closely, you’re probably enjoying a well-earned rest given that 11,142 announcements hit the ASX during August.

One of the great challenges facing investors these days is dealing with the enormous and ever-growing volume of information produced daily by, and about, listed companies.

The number of announcements I’ve mentioned above is only a fraction of the total information produced during August about these companies. When we consider the news and views produced by stockbrokers, the business media and social media, there was many times this volume of information – some good, some bad and quite a lot of it just #fakenews!

Where to start
Cambridge University tells us that if you hear something “straight from the horse’s mouth”, you hear it “from the person who has direct personal knowledge of it”, and in our case, that’s clearly the companies themselves.  There’s simply no one better placed than a company to provide the most accurate news and information on its own progress.

Whenever considering information or advice, it is crucial to consider the motivation of the provider. While information may sound reasonable, we usually get a better understanding of its true value by considering “why” that person or organisation is providing it to us.

For ASX-listed companies, there are two main reasons they provide us with announcements:

  1. to communicate the progress of their businesses to existing shareholders; and
  2. to inform, and ideally attract, new shareholders;
  3. There is also a third and vitally important reason; they are legally compelled to do so.

To comply with the ASX’s rules, all companies are required to provide us with information that:

 “…a reasonable person would expect to have a material effect on the price or value of the entity’s securities”.

Let’s be clear, this is not an invitation by the ASX to just tell us when things are going well, or to “spin” news that isn’t so good into a nice story. It’s a clear directive that if not strictly adhered to is punishable by law.
So, what has to go into these announcements?

“…the announcement should contain a fair and balanced summary …and include any other material information that could affect an investor’s assessment of its impact on the price or value of the entity’s securities.”
But “when” do companies have to provide us with the type of information described above?

“…once it is or becomes aware…the entity must immediately tell ASX that information.”

This all, of course, stands in stark contrast to the constraints facing most other providers of information about companies.

While stockbrokers are also subject to the full force of the law when it comes to the research work they provide investors, the same cannot be said of the growing band of media commentators. Whether they be professional business media or social media commentators, the motivation to sell newspapers, subscriptions, on-line advertising or simply generate “likes”, may lead to a very different emphasis

How to stay on top of all the information
Through different services (such as those provided by Listcorp), you can select the specific companies you’re interested in and receive notifications when those companies release news – you can even specify if you want all announcements or only the “price-sensitive” ones, i.e. those containing the news more likely to have an impact on the share price of the company.

It’s also worth bearing in mind that the volume of information is quite seasonal. You can see in the graph below how the volume of announcements changes over the year (12 months to 15 September 2017):

Daley Annoucements volume chart

What about announcements that other investors are finding interesting?

The table below shows the 15 most popular announcements on our service so far this year, based on categories of company size:
 

Daley Popular annoucements table

Sorting the fact from the fiction
One thing we take for granted about libraries is the way in which the books are arranged. If we want a good story that most likely isn’t true, we head over to the fiction section. If we’re looking for facts, however, it’s the non-fiction section we need. We take it for granted, but this simple categorisation is enormously helpful.

Unfortunately for us, the huge volumes of investment information we can access today aren’t arranged quite so neatly. While there are, of course, many valuable opinions, they’re mixed up with huge volumes of information that is significantly less helpful.

So, while different investors will have their own preferences when it comes to their favourite providers of advice and opinions, you should always make sure the facts – as provided by the companies themselves – are at the core of your decision-making process.

About the author

John Daly is a former stockbroker and fund manager and is now the CEO of Listcorp. Listcorp is a new, free service designed to help private investors learn about the businesses listed on the stock exchange, through information provided by the listed companies themselves. Through powerful personalised tools, investors can discover and learn about all the companies listed on the ASX.

From ASX

Company Information allows you to search for latest announcements.

The views, opinions or recommendations of the author in this article are solely those of the author and do not in any way reflect the views, opinions, recommendations, of ASX Limited ABN 98 008 624 691 and its related bodies corporate ("ASX"). ASX makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions. To the extent permitted by law, ASX excludes all liability for any loss or damage arising in any way including by way of negligence.

© Copyright 2017 ASX Limited ABN 98 008 624 691. All rights reserved 2017.
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