Chapter 21

Ten (Or So) of the Best Online Resources for Investment Bankers

In This Chapter

Finding online resources for investment bankers

Understanding the roles of professional systems and websites

Locating government statistics important to financial markets

Tracking down important financial information

Let's face it. Investment bankers are armed with some of the best technology and financial tools available on the planet. Traders, underwriters, and investment bankers of all sorts are likely to have access to some high-powered information system on their desk. Just about any banker's desk would be bare without a Bloomberg or Reuters terminal, or access to professional online services like S&P Capital IQ.

But here's the rub: These high-end professional services are priced well beyond the means of the curious, regular investor who wants to peer into the world of investment banking. That doesn't mean all the information that investment bankers use is locked up behind the walls of premium priced services, though.

Investors who are curious about the data that matter most to investment bankers, but aren't prepared to pony up thousands of dollars a month to access high-end systems, can still get a glimpse. Several advanced financial websites provide access to many of the same pieces of data that investment bankers stay glued to regularly.

Bloomberg

Bloomberg is one of the world's leading providers of financial data. The company maintains data on just about any security, debt, or equity, that's been sold. Investment bankers use Bloomberg, running on a dedicated machine or on their existing PCs to monitor every move in the financial markets. But Bloomberg is not designed to be used by individual investors, as it's priced at levels only large firms can really afford.

But, for those interested to see what's inside these machines, Bloomberg operates a very powerful and capable website at www.bloomberg.com. The website provides a valuable slice of the data that's on its full-fledged system, including:

• Market data: If you want to get prices of just about any security that trades on the planet, Bloomberg.com will provide that to you. Not only can you find prices of all the stock market indexes, but investors can also get up to-date-prices on foreign markets, currencies, bonds, and futures contracts (financial contracts to buy or sell assets at a preset time in the future at a preset price).
• News: Markets can move very quickly based on developments in the capital markets. Bloomberg News highlights news that is relevant to the markets. News is organized into categories, including information about stocks, bonds, and currencies.
• Company-specific data: The full version of Bloomberg contains almost limitless data on companies, including just about any financial ratio you can imagine. A good portion of these data are also at Bloomberg.com. Many of the more common financial ratios, such as price-to-earnings, are calculated for you.
• Interest rates: Monitoring interest rates on securities sold by companies, governments, and cities is a critical element of investment banking. Securities are sold so they're competitive with other comparable securities, so monitoring rates is essential.

Reuters

Reuters and Bloomberg are archenemies and are constantly battling for desk space at the offices of the nation's investment bankers. But the two also have a strong rivalry online, which is a benefit for anyone interested in getting more data but not paying for premium professional services.

Reuters is perhaps best known as being a news service that covers all sorts of events, not just financial developments. But the website (www.reuters.com) also contains very valuable information for investors.

One of the website's strongest points is its excellent database of company-specific financial ratios. Not only does Reuters calculate the ratios, but it also compares a company's ratios to the industry and sector the company operates in.

If you want to get comfortable with financial ratios, but some of the formulas seem a bit onerous to calculate just from the financial statements, get started at Reuters.com. The ratios are a bit hard to find, but these steps should help. From www.reuters.com, enter the company's name in the Search News & Quotes box in the upper right-hand corner of the screen. Wait for the company's name and ticker symbol to appear in a pop-up menu that displays below the Search News & Quotes box and click the ticker symbol. Next, select the Financials tab and you'll be treated to a treasure-trove of data.

Standard & Poor's

S&P Capital IQ is a web-based tool that's a hit with investment bankers. This tool allows investment bankers to dig deeply into the financials of companies, see who the big players are, and monitor business transactions.

Separate from S&P Capital IQ, though, S&P operates www.standardandpoors.com. The site, which is largely free as long as you register, allows you to access some data that's collected by financial-data juggernaut, Standard & Poor's.

The website is especially strong in two key areas: debt credit ratings and index research. S&P is one of the largest providers of credit ratings on debt issued by companies and governments. If you register for the service, you can see how high, or low, various debt issues are rated. Knowing the credit rating of a company can be very important when comparing the interest rates on different securities.

Meanwhile, S&P is also one of the largest providers of stock market indexes through its S&P Dow Jones indices unit. At www.standardandpoors.com you can get all sorts of information about important market benchmarks like the S&P 500.

Renaissance Capital and IPOScoop.com

Initial public offerings are among the more important functions that investment bankers provide. Allowing young companies to sell stock for the first time, for instance, allows entrepreneurs to tap the capital markets.

But the IPO market is a very fickle one and investment bankers must monitor it closely to understand whether investors currently have an appetite for new companies. Two excellent online resources for all things IPO related are Renaissance Capital (www.renaissancecapital.com) and IPOScoop.com (www.iposcoop.com). Both of these websites provide tools to help you understand what kinds of companies are going public, how much money they're raising, the sort of multiples of earnings they're commanding, and what kinds of interest they're getting from investors.

Some examples of IPO data you can get from these sites include the following:

• IPO Calendar: The IPO calendar is the much-watched list of companies that are very close to selling stock in the IPO market. Both Renaissance Capital and IPOScoop.com gives a list of the companies that are expected to price, or sell shares to investors at the offering price, in the coming week.
• Performance data: IPOs are very cyclically driven. As soon as investors’ desire for new companies starts to open up a bit, investment bankers are eager to sell more shares to the public and bring more companies to market. Investment bankers watch closely how IPOs are doing in their trading on the secondary market compared with the offering price. When they're doing well, investment bankers bring out the deals.
• Market data: It's one thing to understand how individual IPOs are doing, but quite another to get a feel for the whole market. Renaissance Capital provides comprehensive data on the number of IPOs that are being conducted.

The Securities and Exchange Commission

Just as anyone who plays a sport knows, it's only possible to win if you know the rules. And when it comes to investment banking, the rules and the rule maker mostly come from one place: the Securities and Exchange Commission (SEC).

The website of the SEC (www.sec.gov) is a bonanza of financial and securities market data. You read about using the site's EDGAR system in Part I of this book. EDGAR is a free way to obtain all the financial statements filed by companies and other investors and borrowers.

But the SEC website has more information that's useful to individual investors. You can also use the site's search tool to find any rulings or settlements that came from the SEC. For instance, the site contains the details of the massive settlement against investment bankers for their research during the Internet boom.

Moody's

If you were going to lend money to someone, you'd probably want to have a decent idea ahead of time if the borrower was reliable. Rating the credit worthiness of borrowers is exactly what Moody's (www.moodys.com) does. The company employs armies of analysts who are supposed to dig into the financial records of borrowers to tell investors how likely those borrowers are to repay the loans.

Moody's provides most of its data and information to paying subscribers. But the website can be a useful resource because it provides, for free to registered users, broad trends on companies’ financial strength in addition to data on the macro economy.

For instance, registered users can look up companies that Moody's rates and see their credit ratings. Additionally, Moody's provides most of its broad economic information, charts and forecasts on the website.

FreeStockCharts.com

Understanding the pricing trends of securities is a good way for investment bankers to sense the mood of investors. And when it comes to tracking movements of stock prices, it's hard to beat a good old-fashioned stock chart.

Most financial websites provide stock charts. And the tools on S&P Capital IQ, Bloomberg, and Reuters professional services are tough to beat. But as far as web-based stock chart tools go, FreeStockCharts.com is tough to beat. The site provides powerful tools that allow users to quickly pull up stock charts. Another key feature of FreeStockCharts.com is the ability to download stock price data going back decades into a spreadsheet for further analysis. This function can allow investment bankers to perform historical ratio analysis on data.

Index Fund Advisors

Investment banks have a much longer history than many people appreciate. But the same could be said about various investments.

The Index Fund Advisors website (www.ifa.com) is kind of a history book of the annual of financial performance. It's mainly designed for individual investors looking for financial guidance. But investment bankers can find an impressive collection of historical data on stocks, bonds, and foreign market stocks by selecting the Calculators tab at the top of the page. Investors can see not only what the returns on stocks and bonds have been going back all the way to the 1920s, but also how risky they've been.

Morningstar

Morningstar is one of the leaders in providing analysis on mutual funds and other investments. The company offers its data in many forms, including premium-priced data services aimed mainly at professional financial advisors.

But the Morningstar website (www.morningstar.com) is also a valuable resource for investors looking to dig more into investments being pitched by investment bankers. One of the most powerful tools of the site is the ability to enter the name or symbol of any mutual fund and get a complete rundown of that fund.

For mutual funds, for instance, Morningstar shows you how the fund has performed over different time periods and how it has fared against the market and other similar funds. You can also see what the fund's biggest holdings are and what dividend it pays to investors.

Bureau of Labor Statistics

Investment bankers who only pay attention to the security they're trying to sell or the company they're trying to pitch are exposed to great risk.

Investment banking is highly sensitive to trends in the broad economy. During a soft economy, investment bankers find a muted appetite for many of their offerings. It's a bit of an occupational hazard.

That means tracking the broad economy is part of an investment banker's job, even if it's not in the job description. The Bureau of Labor Statistics website (www.bls.gov) is home to many of the key data points that investment bankers monitor.

There's nothing to stop you from jumping on the BLS site the second a piece of data is to be released and getting the number. But sometimes, that number in itself doesn't tell you much. It's important to look at how the piece of financial data changed and how that change diverges from analyst expectations.

For instance, more important than the overall unemployment rate is the change from the previous period. Similarly, investment bankers like to compare economic data points to what was expected. Briefing.com (www.briefing.com) is a helpful source for investors looking to know what economists were expecting from various indicators. Using the Briefing.com estimates will tell you if the numbers from the BLS are better, worse, or in line with expectations.

Department of Commerce

The U.S. Department of Commerce maintains a variety of data sources important to investment banking activities. A number of Commerce Bureaus are of upmost importance, including the following:

• Bureau of Economic Analysis (BEA; www.bea.gov): If you're looking for any data having to do with the economy, it's likely to be kept and tracked by the Bureau of Economic Analysis. You can find data on everything ranging from gross domestic product (GDP) to personal income and corporate profits. The BEA also maintains statistics on industries and geographic regions.
• Economics and Statistics Administration (ESA; www.esa.doc.gov): This portion of the Commerce Department is in charge of collecting and spreading national economic indicators. The unit generates a variety of economic reports including retail sales, international trade, and manufacturers’ shipments.
• Bureau of Industry and Security (BIS; www.bis.doc.gov): This bureau is in charge of examining business activities to make sure parties are adhering to treaties and that export controls are working. The site contains information about international commerce and proposed business rules.

Federal Reserve

Investment banks like to think they're all-powerful. And to some degree, they're right. After all, investment banks have a big hand in determining which businesses, cities, and other ventures get the money to expand and grow, while others don't.

But if there's a body that even investment banks defer to, it's the Federal Reserve. The nation's 12 Federal Reserve banks, and the Fed's leadership, are the overriding force that controls investment banking activities. The Fed is given the task of making decisions to increase or decrease the money supply with several goals. Specifically, the Fed is tasked with keeping employment up, prices stable, and long-term interest rates reasonable. When the Fed makes a move, it can have seismic effects on the investment banking world. Investment bankers would be foolish to ignore the Fed.

The Fed operates somewhat secretly, which isn't a big surprise, given the importance of its decisions. Even so, the Fed maintains a public website at www.federalreserve.org that contains limited information of value to those monitoring the government's moves.

The Fed's website maintains data on the issuance of commercial paper, which are short-term loans sold mainly by large companies. The Fed also provides data on interest rates and industrial production. You can see all the data provided by the Federal Reserve in one area of the website at www.federalreserve.gov/econresdata/statisticsdata.htm.

Trefis

The website of Trefis (www.trefis.com) was cooked up by several engineers from the Massachusetts Institute of Technology (MIT), who also have experience with financial markets.

The site's mission is straightforward. It tries to use financial analysis to show investors what is driving a company's stock price. The site culls financial data to break down what factors are driving a company's valuation.

Trefis is primarily designed for investors who are trying to figure out how much a hit product may help a company's stock. But the tool is useful enough to warrant an examination from the perspective of an investment banker.

To start using Trefis, enter the name or ticker symbol of a company you're interested in. Trefis displays a breakdown of all the areas that the company derives its market value from.