What About the Chairman’s Letter?

The Chairman’s letter is a document in an SEC report that most people ignore. It is simply a message to the investors about what and how a business is doing.

There is much more to the letter than you may think. Reviewing the Chairman’s letter is one of the best strategies you can utilize to discover the direction that a business is heading. It all comes with firsthand knowledge of the business from the leader. When reading the letter, the Chairman should mention:

• The financial strengths and concerns within the business based on debt levels, cash flow, and other points.
• The challenges that the business is facing. These include problems relating to competition, issues within the business, or even the economy in general.
• Recent measures that have been undertaken to make the business more financially viable regardless of whether they entail expansion or cost-cutting measures.
• The consistency of the business’ strategy and if the strategy being used is slightly different from what it was a few years earlier.

The letter should be detailed and easy to understand. After all, the Chairman is the one whose job could be on the line depending on how well a business is performing.

Searching through SEC reports can be a challenge because they can be complicated and detailed. The more you review what is in an SEC report, the easier it will become for you to decide which company you could benefit from by making an investment.