Should You Invest in Multiclass Share Companies?

Last March, Under Armour (UA) issued a new, Class C, shares to all existing shareholders. All the company’s share has the same economic interest in the company, but Class C shares have no voting rights. UA has two other share classes: A shares with one vote, and B shares, owned by the company’s founder, having…

Buyers’ Remorse? The Tesla and SolarCity Merger

On Thursday, November 17, 2016, shareholders of Tesla Motors and SolarCity Corp. approved by a big margin Tesla’s $2.1 billion all-stock offer to acquire SolarCity and create one company under Elon Musk. Tesla’s stock reacted positively to the good news: share price rose 2.7%. Evidently, everybody was happy with the merger, despite the media skepticism….

Conservative Today, Aggressive Tomorrow

The Wall Street Journal (October 26, 2016) reported on Apple: “Profits, though down from 2015, were actually bolstered by a decrease in deferred revenue compared to a year ago. That’s because the decrease in deferred revenues increased operating margins and hence profits for 2016. … Deferred revenue is accounted for as a liability on a…

“The Dying Business of Picking stocks.” Really?

(Dear blog reader, I apologize for my silence the past three weeks. I was on an international book promotion tour. I am back.) The sensational blog heading is from a front-page article of the Wall Street Journal (October 18, 2016), followed by the following excerpts: “Investors are giving up on stock picking. Pension funds, endowments,…

Why Are They Fleeing Managed Funds?

($422 billion were redeemed during past five years from actively managed funds, going to passive vehicles) The stock market is doing fine, but investors are losing faith in active portfolio managers. How come? Simply, poor performance. “Only 9.5 percent of actively managed large-cap domestic equity funds beat the S&P 500 Index in the five years ending…

“Are Your Accounting Methods Holding Back Your Business?”

  IMAGE CREDIT: Getty Images “Generally accepted accounting principles (GAAP) have been the standard in financial reporting for decades. But has the business world evolved so much that GAAP rules have outlived their usefulness? At least one critic thinks so. That would be Baruch Lev, the Philip Bardes Professor of Accounting and Finance at New…

Financial Reports: Facts or Fiction?

During earnings seasons you surely compare companies’ reported EPS with analysts’ consensus estimate (or past EPS) and react to consensus misses or beats.  But is a 3-4 penny miss really meaningful? Does it indicate a performance deterioration that should worry you? In most cases, the answer is no. The key to understanding this is to…

The Rise of Intangibles and Fall of Accounting

  Look please at the Figure above, produced by two highly respected economists, Carol Corrado and Charles Hulten. The Figure traces the total U.S. private-sector investment in intangible assets (R&D, patents, brands, IT, business processes) by the top curve, and the investment in tangible assets (buildings, plant, machinery, inventories) by the bottom curve.  The constant…

Baruch Lev comments on the price Verizon paid for Yahoo!

“That means Verizon is paying around five times free cash flow, based on the $4.8 billion price,” says Baruch Lev, distinguished professor of accounting at New York University’s Stern School of Business. “That isn’t a high number. But I’m also assuming that almost all the cash flows excluding the dividends are going to Verizon. If…