[02/13/18 NEW] Not the End of Accounting? And Time to Revisit Value Stocks?

I write today about two topics: Australian research claiming that financial information didn’t lose its relevance (in contrast with my The End of Accounting), and a possible shift in investors’ focus toward value stocks. Both important issues. Not the end of accounting? I am flooded by tweets about the recent research by Australian academics reporting…

[01/19/18] How to Analyze Winners and Losers In An Emerging Industry.

Investing In The Car Batteries Space Summary It’s very difficult for investors to differentiate among the various players in the batteries industry and assess their long-term potential. The winners in the fast-evolving batteries space will be those with superior technology, potentially disrupting other competitors. The growth of players in this industry crucially depends on new…

[12/20/17] Intangible assets are changing investment

WHEN you work as an equity analyst at an investment bank, your task is clear. It is to comb all the statements made by corporate executives, to scour the industry trends and arrive at an accurate forecast of the company’s profits. Achieve this and your clients will be happy and your bonus cheque will have…

[12/14/17] 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…