Key point
Primary research is what you do; secondary research is what you read. Talking to five customers, attending one industry event, downloading the product, and walking three store locations is primary. Reading the 10-K, sell-side notes, and SEC filings is secondary. Both matter. Most edge comes from primary.
Compare
| Question type | Where to answer it | Cost vs lift |
|---|---|---|
| Is the financial disclosure consistent across filings? | Secondary — 10-K + 10-Q + proxy reconciliation | Low cost, foundational lift |
| Do customers actually love the product? | Primary — interviews, NPS data, app store reviews | Medium cost, high lift |
| What does management actually believe about the next quarter? | Primary — conference attendance, IR meetings, expert calls | High cost, situationally high lift |
| Has the auditor flagged anything unusual? | Secondary — auditor reports, comment letters | Low cost, occasionally decisive |
Key point
Worked example — Westmoor Optical diligence plan: (1) compare price tags in six Westmoor stores vs six Pearle stores in the same malls; (2) attend Vision Expo East and talk to three frame suppliers about Westmoor's negotiating posture; (3) book an exam through the Westmoor app to assess UX; (4) reconcile the "premium-segment growth" disclosure in 10-Q footnote 7 with syndicated POS data; (5) interview two former Westmoor store managers via LinkedIn for inventory-turn data.
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Key insight
Sit with the ideas.
An analyst's memo on Westmoor Optical ends with a section titled "Items for further diligence" listing five open questions. The portfolio manager should interpret this section as: