[10/13/18 NEW] Beware! Estimates Dominate Financial Reports

Estimates Are Hazardous to Your Wealth Everyone knows that accounting is boring (not when I teach it, though), but, at least, people think it’s factual. No fake news. After all, accounting comes from counting―counting money, units of inventory, etc. All facts. Nothing further from the truth. Except for a few items on the balance sheet,…

[09/01/18] Scrap Quarterly Reporting

Summary I believe terminating quarterly reports is the right move, but for the wrong reasons. Forget managerial myopia. There is a much better reason to scrap quarterly reports: they aren’t useful anymore. These reports, and earnings in particular, have lost in recent years much of their relevance to investors, due to misguided accounting rules. Let…

[09/01/18] Why Trump is right about wanting to end quarterly earnings reports?

Article feature – Yahoo Finance – August 19, 2018: https://finance.yahoo.com/news/trump-right-wanting-end-quarterly-earnings-reports-135011336.html By Julia La Roche, Reporter President Donald Trump tweeted on Friday that he’s asked the Securities and Exchange Commission to look at moving quarterly reporting for publicly-traded companies to a six-month schedule. Trump later told reporters that the idea was raised by Pepsico’s (PEP) outgoing CEO Indra…

[08/01/18] Who Reads Financial Reports? Nobody!

For several years I have argued, based on comprehensive statistical evidence, that corporate financial reports―quarterly and annual statements―have lost most of their relevance and usefulness to investors. Corporate earnings, in particular, are no longer a reliable measure of enterprise value change, nor are they indicators of future performance and growth. In fact, as I have…

[07/13/18] Should You Invest in “Flips”?

These are public companies that were taken private (LBOs), and subsequently flipped back to the public market. There are quite a few of those―Dell most recently―and the misconceptions about those companies abound. As always, we’ll look at the evidence. But first to Dell. Dell was a highflier in the 1990s, rising fast with its innovative…

[06/15/18] The Endangered U.S. Public Company

There were 7,509 U.S. public firms in 1997, but 20 years later, in 2016, the number of stock exchange traded companies shrunk to 3,618; a 52% decline! Even more surprising, this disappearance act of public companies is unique to the U.S. In fact, the number of listed firms outside the U.S. increased practically every year….

[05/18/18] Customer Franchise―The Most Valuable Asset : Here Is How to Value It

“Subscribers Are the New, New Thing in Business” declared The Economist (April 11, 2018). The magazine says that “Subscription models are seen by many investors and executives as the holy grail, because they promise a recurring stream of revenue…. The attractions of subscription businesses are obvious. Firms can predict the future better and build deeper…

[04/15/18] The Unbearable Lightness of Earnings

Today’s Wall Street Journal (4/12/2018) published an article that caught my attention: “Next Up: The Forgotten Earnings Season.” The article opens: “Only once before have U.S. earnings expectations risen so far, or so fast, as they have this year. Yet, investors couldn’t care less as shares are down. The result is that Wall Street’s favorite…