Channel Check

Channel checking is a way to see how well a company is doing. Investment researchers investigate a company's performance by looking at things other other than company itself. Instead, they look at things like suppliers and customers, in order to get a read on the main company's finances.

You work for an fund that wants to invest in a particular must-have gadget. You want to predict popularity of the gadget, but the company is very secretive. They don't give out specific details about individual products. So instead, you look at distribution and supply channels. You look at the finances of the company providing the screens for the gadget. Are sales rising there? If so, that could be a good sign for demand for the gadget. You contact retailers and see if they have any sales info about the product. How many units are the retailers selling? For how much? Are they selling out or are they stuck with excess invetnroy? Do they see much change during any particular season?

The process involves going to sources around the company to look for on-the-ground indicators.