What investors need to know about US company reporting

Stockopedia recently expanded its coverage universe to include the USA. As part of that we produced a complete Guide to Getting Started in US Shares. You can read our introduction to the series here and take a look at the diversification benefits of investing in the US here. America has one of the most open and transparent stock markets in the world but the cultural nuances, unfamiliar terminology, reporting language and filing codes can still make it confusing to UK investors. So let’s have a closer look…

How to track US company reporting

Q) Where can US company reports be found?

The flow of market sensitive information in the UK is mostly handled by the London Stock Exchange via its “RNS” Regulatory News Service. In America, company reports can be found in one place through EDGAR (Electronic Data Gathering of Annual Returns). These are made available to all-comers by the SEC for free - frankly the UK has a lot to learn from the US.

TIP! Since Edgar was fully launched in 1996, the SEC has been pursuing the use of XBRL (an offshoot of XML computing language) as a way of digitising financial statements. XBRL will over time make financial reporting faster, and allow market participants to react more quickly to financial statement releases.

Q) How often do US companies report financial statements?

In the UK, companies are obligated by the Financial Conduct Authority (FCA) to report their financials at least twice a year as annual results and interim results. By contrast, the US Securities and Exchange Commission (SEC) requires corporations to report quarterly - every three months.

There are no fixed rules on when quarters must fall, but most companies have financial years that run from January to December. Quarterly reports are therefore frequently released in batches during ‘earnings season’ which starts roughly two weeks after the end of December, March, June and September.

TIP! Earnings season is a huge event in the US, far bigger than in the UK, and it gets wall-to-wall coverage in the financial media. Company executives can become heroes or villains on the back of their updates. The same goes for Wall Street's army of analysts, who rush to predict and digest the latest filings.

UK investors may already be familiar with quarterly reporting because some British companies produce financial results that meet US standards. Usually, these companies are either dual-listed in both the UK and US markets, or have issued American Depository Receipts (effectively $ denominated bundles of foreign listed shares).

Q) What are the key US company financial statements?

While in the UK we are used to company results in interim, preliminary and final results, the most important company filings in the US have rather arcane alphanumeric characters. Don't let that put you off - they are easily decoded as follows:

- 10-K filings - These are annual financials which must usually be filed no later than 60 days after its financial year-end.

- 10-Q filings - These are quarterly financials which must be filed within 40-45 days of each quarter-end. 3 per year.

- 8-K filings - US companies are also obliged to inform the SEC of other events like bankruptcies, acquisitions and board changes using an 8-K.

How to track company ownership changes

Q) How can I track insider deals in US companies?

Keep an eye out for Form 3 and Form 4. In the UK, the FCA insists that directors dealings (officially known as 'persons discharging managerial responsibility' (PDMRs) must disclose trades in their own company’s shares. It’s no different in the USA where the more loosely defined company insiders (directors, officers and 10% owners) have to disclose their initial ownership using Form 3 and disclose changes in their ownership (Form 4) by the end of the second business day following any transaction.

Q) How can I track major shareholder deals in US companies?

Look out for 13F and 13D filings. 13F filings are the key to finding out which institutional money managers own which stocks. Within 45 days of the end of each calendar quarter, funds that control more than $100m of investor cash must report their holdings data to the SEC. This information is freely available on the SEC website. The 13D form shows when any holder has taken a greater than 5% stake in a company.

TIP! Stockopedia's forthcoming SmartMoney upgrade will include Ownership, Insider and Short Selling data for US stock markets. Stay on the mailing list for more launch details.

Join Stockopedia on our journey to the US

Stockopedia’s new US investment research service offers the comprehensive tools that our users love - made available for 10,000 stocks across all US markets.

With the inclusion of the USA Edition at Stockopedia, subscribers are now able to apply our extensive range of StockRanks, StockReports and and Screening resources to over 19,000 stocks. We hope these tools will help you find the cheapest, best quality and fastest moving companies in the western world, compare the world’s biggest brands cross region and analyse the most outstanding global corporations. Please do check out the options available.

Get our detailed guide to everything UK investors need to know about American markets. If you want to invest in the most dynamic shares in the world, this 60 page eBook is for you.