10-K: Free, Structured and Barely Used
A 10-K is the annual report US listed companies file with the Securities and Exchange Commission, following a fixed item structure. That structure makes it directly comparable year to year, and the filing is free to read for every listed company.
How it works
Every US listed company files one within a set number of days of its financial year end — sixty for the largest, up to ninety for smaller ones. It is a legal requirement, not a marketing document.
The structure is prescribed and numbered. Item 1 is the business. Item 1A is risk factors. Item 7 is management’s discussion and analysis. Item 8 is the financial statements and notes.
That fixed structure is the feature that matters. Item 7 in this year’s filing sits next to Item 7 in last year’s, which makes a direct comparison possible in a way an unstructured document never allows.
Every one is free on the regulator’s own website, searchable by company, and downloadable in full. There is no subscription, no delay and no summarising intermediary.
The technique is comparison
Read one filing and you learn what a company says about itself. Compare two and you learn what changed. Most of the document is carried forward almost verbatim, which means the edits stand out sharply against the repetition.
Risk factors are the clearest example. Eighteen paragraphs identical to last year and two new ones is a company telling you, in language its lawyers approved, that something has changed. The new paragraphs are rarely mentioned anywhere else.
A text comparison tool does this in about a minute. Paste last year’s Item 1A and this year’s into any diff tool and the additions are highlighted automatically — which is the cheapest research technique described anywhere on this site.
Item 7 is management’s own account of the results. It is not audited, it is written to be read favourably, and it contains the specific explanations for movements that the statements only show as numbers. Reading it against the numbers is how you find out whether the explanations hold.
In practice: what to pull out of it
Segment data is the first thing worth extracting. Revenue and operating profit by division, in a note, disclosed because the standards require it rather than because the company wanted to. A press release almost never contains it.
Customer concentration is the second. Companies must disclose customers representing a significant share of revenue, and a business where one customer is a large fraction of sales is a different risk from one where nobody is more than a few percent.
Contractual obligations and off-balance-sheet arrangements are the third. Both are tabulated, both cover commitments that do not appear as liabilities, and both are where obligations hide.
And the legal proceedings item is the fourth. It is short, it is specific, and it names the disputes a company thinks are worth telling shareholders about.
And acting on any of it in the market costs 2% of a median bar’s range per round trip on this site’s shared price history.
Financial data is also filed in a machine-readable format alongside the document. Every listed company tags its statements so the figures can be extracted programmatically, and the regulator publishes bulk datasets of those tagged figures for every filer.
Which means a five-year series of any line item for any company is a download rather than a transcription job. Revenue, operating income, receivables, debt — all of it, structured, free, updated as filings arrive. That is a genuinely unusual state of affairs and it is a direct consequence of the disclosure regime rather than of any commercial data provider, which is why nobody advertises it.
What a 10-K is not
It is not a press release. It is a regulatory filing with a prescribed structure.
It is not fully audited. Item 8 is; the narrative items are not.
It is not the same as an annual report, though many companies wrap one around the other.
And it is not written to be persuasive, which is precisely why it is more useful than the documents that are.
When it fails
Length is the only real barrier, and it is a soft one. A hundred and forty pages is intimidating; the six that answer any specific question are findable in seconds because the structure is numbered.
The second failure is reading one filing in isolation. The value is in the comparison.
A third is treating Item 7 as fact. It is management’s interpretation of results they produced.
A fourth is missing the exhibits. Material contracts are filed as exhibits and are rarely summarised anywhere.
And a fifth is assuming a large company’s filing is more informative than a small one’s. Smaller companies often disclose customer concentration and dependencies that a diversified business never has to.
The original data
Of the 31,760 trading and investing videos in this site’s corpus, 0 have “10-K” in the title, 0 have
“SEC filing”, 0 have “annual report” and 0 have “proxy”. “Accounting” returns 3 videos at a median of
87,646 views and “cash flow” returns 17 at a median of 67,134. The relative strength index (“RSI”)
returns 844 at a median of 3,907. The counts are in research/corpus-coverage.json, produced by
site/measure_corpus.py.
Zero videos, in 31,760, about the document every US listed company is legally required to publish. That is not a complaint about content; it is the description of an opportunity. The filings are free, structured, comparable year to year, and read by almost nobody outside the profession — and the single technique that unlocks them is a text diff between two consecutive years, which takes a minute and surfaces exactly the paragraphs a company’s lawyers decided had to change.
Related
Annual report is the broader document this often sits inside. 10-Q is the quarterly equivalent, reviewed rather than audited. And notes to the accounts is where Item 8’s numbers are defined.
Diffing two years of the same filing is the single highest-value hour I spend on any company. Not reading it - diffing it. The changes are where the information is, and a text comparison tool does most of the work in about a minute.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.