Why PE Ratios Are Not A Good Measure Of Value


We’ve pointed out the flaws in the price to earnings (PE) ratio many times before. Chief among these flaws is the fact that the accounting earnings used in the ratio are unreliable for many reasons:

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3 Ways Accounting Tricks Can Crash Your Portfolio


Buried in the footnotes and MD&A, you can find where reported expenses understate true costs, red flags for earnings manipulation and significant differences that need to be reconciled when comparing companies. If you want to understand the underlying economics of the company’s business, you have to understand its accounting policies.

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How an SEC Decision is Making it Easier for Chinese Companies to Commit Fraud

Chinese Companies

Recently, the SEC gave up trying to enforce its auditing rules in China. In this podcast, CEO David Trainer will explain how the SEC’s weakness on this key issue puts investors in Chinese companies in danger.

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David Trainer Explains How to Bypass the Risk-Reward Tradeoff

good inve

CEO David Trainer discusses how to manage risk to obtain high returns based on low market expectations.

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Barron’s Says New Constructs Provides The Best Accounting Analysis


Barron’s featured New Constructs for the eighth time this past weekend.

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Munger on Accountants: “Utterly failed us…and no sign of reversal of the failure”

The reason we focus on Economic Earnings as opposed to Accounting Earnings is because Accounting Earnings are subject to too much manipulation – as Charlie Munger states below. This problem is not going away anytime soon.

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Stock Pick of the Week: Buy International Business Machines (IBM)

HIDDEN GEM: Our detailed valuation model shows that IBM grew its “economic” profits more than it accounting profits during its last fiscal year. Economic profits rose by $1.15bn while accounting profits rose by $1.09bn.

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Finance 101

Finance is the process for making accounting data useful.

Per Accounting 101: accounting data by itself is not useful. Think of accounting data as the words used in the language of Finance. Just as with any language, words can be arranged to convey almost any meaning.

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