[04/17/20] In This Corona Quarter, Take Earnings Reports With A Grain Of Salt

Summary In the pre-coronavirus economic boom of 2012-2018, 50%-70% of all U.S. public companies reported regular annual losses. Obviously this loss frequency is a fiction that indicates a broken accounting measurement of earnings. If accounting estimates in normal periods are suspect, how tenuous are they in the current heightened uncertainty? Don’t take seriously the earnings…

[03/27/20] Value Investing In The Time Of COVID-19

Summary We have examined whether value investing tends to work during a crisis. In our study, we looked at both the 2007-2009 financial crisis and the recent stock market collapse. The results don’t bode well for value investing right now.   Co-authored by Anup Srivastava Many investors, institutional and individuals, are dumping stocks these days….

[02/06/20] How to Distinguish Between GAAP Losers and Real Losers

Summary To get an idea of the impact on corporate earnings of the massive expensing of intangibles, we added back to annual reported earnings R&D expenses, and one-third of SG&A. The results are quite surprising.   By Feng Gu and Baruch Lev* Would you believe that roughly 45% of U.S. public companies are reporting annual…

[11/14/19] Should You Ignore Non-GAAP Earnings?

You surely heard about WeWork—the real estate company providing shared workspaces—and its founder Adam Neumann’s misfortunes: IPO’s cancellation and in Neumann’s case—dismissal. Prominent among WeWork’s information disclosures raising the SEC’s and investors’ concerns was a non-GAAP earnings measure WeWork called “community-adjusted Ebitda” which magically flipped the company’s 2018 $1.9 billion GAAP loss to a $467…

[10/30/19] Baxter Needs a Remedy

Baxter International is a successful pharmaceutical company. It consistently reports sales and earnings growth, and its stock price beat easily the indexes in recent years, commanding a $40 billion market capitalization. What could go wrong? On October 24, 2019, Baxter announced its third quarter 2019 results: 5% sales growth (on constant currency basis), and operating…

[08/30/19] The Inconvenient Truth About Stakeholders

              You must have heard by now that on August 19, 2019, the U.S. Chamber of Commerce announced in double-page ads the death of shareholder value as the main corporate purpose. Endorsed by more than 180 CEOs, many of major companies, the Chamber announced the adoption of the stakeholders concept, by which the business…

[08/13/19] Kraft Heinz: How About Some More R&D

Summary Kraft Heinz keeps writing-off its old, tired brands. But where would the new products and brands come from? KH managers are famed for cost cutting. R&D should be the exception. Late last week, the Kraft Heinz (NASDAQ:KHC) Company served investors with another brands write-down: $1.22 billion. This, in the wake of a massive $15.4…

[07/30/19] Will Growth Stocks Continue to Perform and Value Stocks to Disappoint?

   If you wondered whether high valued growth stocks, including high tech and internet services providers, will continue to perform well, and low-valued stocks to disappoint, read the following article by me and colleagues (listed at article end) describing the results of our recent extensive research. Elephants Can’t Dance? Revisited Large firms seem better prepared…