Don’t be misled by the carefully orchestrated game of earnings “beats” and “misses” played by Wall Street analysts. What truly matters is the underlying fundamentals of a business.
To better understand how Wall Street and corporate auditors influence the market through selective disclosure, and why high-integrity data is essential for investors, listen to our appearance on The Value Spotlight podcast.
Accounting earnings overlook a significant amount of what it takes to run a business. To get the most accurate picture of the economic health of a company, investors need to look at all the financial statements, including and most importantly the footnotes and MD&A.
Data in the financial statements is most meaningful when you consider the information in the footnotes. Ignoring material disclosures means relying on selectively presented data that can obscure more than it reveals.
That’s precisely why every financial statement includes the directive, “read the footnotes”!
The number of pages in 10Ks and 10Qs has ballooned from around 20 pages in mid 1990s to more than 250 pages on average now.
Why? It’s no coincidence…
Corporate America and Wall Street are trying to intimidate and discourage people from reading filings!
Yet, this complexity is no excuse for complacency. Rigorous, diligent analysis of full filings is what separates insightful investors and New Constructs from the rest.
Hype and momentum may fuel temporary gains, but they are unsustainable. There are no shortcuts. Success in investing rewards those willing to do the hard work.
For example, some of the most compelling opportunities can be found in the disconnect between economic earnings and accounting earnings. This distinction is critical – yet only meaningful if economic earnings are calculated accurately.
This signal is just one example of how genuine outperformance is built on data that goes beyond surface-level disclosures and includes critical details found in financial statement footnotes!
Lucky for you if you are reading this message, you’ve already found a resource that delivers proven-superior, footnote-level data and research at scale – empowering you to compete on more equal footing with Wall Street. To learn more, listen to our appearance on The Value Spotlight podcast.
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This article was originally published on May 29, 2025.
Disclosure: David Trainer, Kyle Guske II, and Hakan Salt receive no compensation to write about any specific stock, style, or theme.
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