August 5, 2010 (FinancialWire) (Investrend Forums Syndicate) (By Gary Vassalotti, LIFA) (Go to http://www.financialwire.net/?s=cmmtry for all recent commentaries.) — Editor’s note: For those who might be interested to get a step-by-step inside look at how analysts go about doing their work, independent equity analyst Gary Vassalotti embarks upon just such an explanation, using International Monetary Systems (ITNM.OB) as his subject company:

I was shopping at the mall recently, and if you knew me, you would know that is NOT my favorite past time. I shop like I write: get in, get what you need, and get out. While I was there, at the mall, looking for a deep socket at Sears, I noted that some stores had very few customers. They had employees, but not many customers. And I found it even more noteworthy that the empty stores tended to be those such as the more expensive clothing stores, while retailers such as Sears at least had a few shoppers browsing and buying items.

Even the food court was relatively empty.

So I started to note all the empty store fronts. Seven, in fact, and that was only on one floor and not even halfway down the mall itself.

Where are all the shoppers? Is this what’s called a “recovery”? Maybe so, for some.  But maybe not for all.

This exercise in window shopping is more than just a diversion, though. When an analyst looks at possible investments, he does more than read the balance sheet and visit the company's web page. Fundamental analysis can (and really should) include first-hand economic observation. And as subjective as that may be, it does color an analysts view and his or her outlook on estimates.

A good, positive outlook can mean estimating higher sales and earnings.

When I begin analyzing a company I start by first reading their 10-K — learning their basic business, looking to see where they make their earnings, and looking for trends — Did sales go up in the past few years? How about trends on expenses, or new product releases?

After learning how a company earns its living, I like to look at what they sell, specifically. That is, the physical product (if there is one) and/or I try to get an understanding of the services they offer. How do they look in comparison to the competition in quality, execution and general “curb appeal”?

As I have told some companies before, a good balance sheet is useless if the company's prime product isn’t attractive to potential customers. On the reverse side, a great product alone cannot save a company that has poor management. If you don't believe that, just look at the old Commodore Corporation and their Amiga computer line — it was years ahead of anything IBM or Apple had at the time, and they could not get their act together long enough to generate a critical sales level.

Both sides of the coin are critical to a successful company and a profitable investment.

And, so, there you have the beginning of my analysis processes. Over the next few weeks, I will walk you through my entire process, using International Monetary Systems (OTCBB: ITNM) as my subject, explaining what I look for in a company in order to generate an accurate and informed investment opinion.

Source: Investrend Weblogs (http://www.investrendweblogs.net/vassalotti/).

Other FinancialWire(tm) news about International Monetary is accessible via The FinancialWire(tm) search function (at http://www.financialwire.net/?s=itnmtcb), additional information and independent research on International Monetary is available via Investrend Syndications (at http://www.investrend.com/synd0006), and official information and company filings from International Monetary are accessible via the SEC website (at http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001097430).

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