[12/14/17 NEW] Corporate Financial Reporting : Facts or Fiction?

Everyone knows that accounting is boring, but at least it’s factual, people think. In a world of fake news and irresponsible social media, it’s good to have an information system which is fact-based. Well, I have news for you: corporate financial information is as far from factual as it gets. It’s a well-kept secret, but…

[11/29/17] Are U.S. Executives Myopic (Short-Term Oriented)? I don’t Think So

88% of executives and directors feel most pressured to demonstrate strong financial performance within two years or less. 65% of executives and directors say short-term pressure has increased over the past 5 years. 55% of executives and directors at companies without a strong long-term culture say their company would delay a new project to hit…

[11/15/17] Gaining an Edge Over Other Investors

Everyone tries to beat the market by predicting a company’s earnings next quarter, or year, or by depicting the companies whose earnings will beat analysts’ consensus estimates. But, as I have recently shown (in Financial Analysts Journal, Fourth Quarter 2017, and in a previous blog: “Earnings-Based Security Analysis No Longer Relevant? Posted 10/1/2017), even a…

[10/29/17] Everything You Know About How to Value a Stock Might Be Wrong

Investors are constantly poring over income statements from big companies to figure out whether they should buy or sell the business’s stock. But should they bother? In this week’s episode, Joe and Tracy talk to Feng Gu, a professor at SUNY Buffalo, and Baruch Lev, a professor at NYU’s Stern School of Business, about why…

[10/01/17] Earnings-Based Security Analysis No Longer Relevant?

Conventional earnings-based security analysis has lost much of its usefulness according to Feng Gu and Baruch Lev, who have published their findings on the topic in a recent issue of the Financial Analysts Journal. Feng Gu, professor of accounting at the School of Management, State University of New York, and Baruch Lev, professor of accounting and finance at the…

[09/10/17] Should You Read the Auditor’s Report?

I bet you don’t. This is the page in front of the income statement and balance sheet in the annual financial reports of companies, titled Report of Independent Registered Public Accounting Firm, which we all skip. And for good reasons. It contains a standard, bland statement full of hedges and caveats (“… internal controls over…

[08/12/17] If a Company Makes a Big Acquisition, Run for the Hills

Teva, the world largest generic drug company lost since the beginning of August 43% of its value. “Cheerful” news for all Teva’s shareholders heading for the August vacation. A distressing second quarter 2017 report and clouds on the horizon (increasing generic competition and price pressure in the U.S., revenue declines and patent challenges to its…

[07/24/17] On Fog, Bog and Slog – Don’t Waste Time On Reading Financial Reports

If you had ever thumbed through a corporate financial report—those quarterly and annual tomes which clog your mailbox or computer memory—you must have wondered about the numerous pictures of smiling people in these reports:  Isn’t anybody there taking business seriously? But pictures aside, there are lots of numbers and particularly words in these reports. What…

[07/06/17] SEC Thinks Investors Are Patsies

  (I am back from a European Lecture tour. Particularly gratifying was the launch of the Spanish translation of my recent book, The End of Accounting… The Chinese, Japanese, and Korean translations are on their way.) And now to the blog: “American Airlines Group removed certain ‘descriptive language’ from its financials at the behest of…

[5/22/17] The Disappearing Public Company

Is it a plague or a pandemic afflicting American stock exchanges, or something else decimates public companies? What are the reasons for the 50% drop in the number of public companies traded on U.S. exchanges? And, most importantly, should we worry about that? Answers below, but first several salient facts (courtesy Kathleen Kahle and Rene…

Should You Buy Amazon Shares Now?

The continuous rise in Amazon’s share price (see below from Yahoo!) raises in many investors’ minds the question: Should I buy Amazon now, or is it too late? Is there still room for growth of share price, or are all the growth expectations of Amazon “baked” already in its elevated share price? Traditional valuation indicators…