We calculate invested capital in two mathematically equivalent ways: financing and operating approach. Figure 1 shows the basic calculations. On page 2, we share the complete calculations for specific companies.
In the search for safe investments in today’s volatile markets, investors should focus on companies that have a history of creating shareholder value, the ability to earn quality returns on capital, and an undervalued stock. This week’s Long Idea, Wells Fargo & Company (WFC) not only fits the description of a safe investment, but its shares are also greatly undervalued.
In this podcast, CEO David Trainer will explain why many of the big banks will not be as good investments now as they have been in the past.
David Trainer discusses why big banks are no longer an attractive investment.
Picking from the multitude of sector ETFs is a daunting task.
As regulators dole out punishments that fit the crimes, they are finally closing many of the illegal trading loopholes that have driven so much of Wall Street profits over the past decade.
Preferred stock is a hybrid instrument that carries no voting rights but has a senior claim on assets and cash flows to common stock. Dividends usually must be paid out to preferred stock owners before common stock owners can receive any money. In the event of liquidation, preferred shareholders also have priority.
Converting GAAP data into economic earnings should be part of every investor’s diligence process. Performing detailed analysis of footnotes and the MD&A is part of fulfilling fiduciary responsibilities.
Investors who ignore off-balance sheet debt are not holding companies accountable for all of the capital invested in their business. By adding back off-balance sheet debt to invested capital, one can get a true picture of the value that management is creating for shareholders. Diligence pays.
Reported assets don’t tell the whole story of the capital invested in a business. Accounting rules provide numerous loopholes that companies can exploit to hide issues and obscure the true amount of capital invested in a business over its life.
Without removing the tax impact of non-operating items, one still gets distorted picture of a company’s operating profitability.
Reported earnings don’t tell the whole story of a company’s profits. They are based on accounting rules designed for debt investors, not equity investors, and are manipulated by companies to manage earnings. Only economic earnings provide a complete and unadulterated measure of profitability.
Non-operating expenses are unusual charges that don’t appear on the income statement because they are bundled in other line items. Without careful footnotes research, investors would never know that these non-recurring expenses distort GAAP numbers by lowering operating earnings.
Finding the best ETFs is an increasingly difficult task as there are more and more to choose from every day.
The Large-cap Value style ranks second out of the twelve fund styles as detailed in my Style Rankings for ETFs and Mutual Funds report. It gets my Neutral rating, which is based on aggregation of ratings of 41 ETFs and 772 mutual funds in the Large-cap Value style as of May 1, 2013.
The large-cap blend style ranks first out of the twelve fund styles as detailed in my Style Rankings for ETFs and Mutual Funds report. It gets my Neutral rating, which is based on aggregation of ratings of 33 ETFs and 944 mutual funds in the large-cap blend style as of February 1st, 2013.
Finding the best ETFs is an increasingly difficult task in a world where a new ETF seems to be born every 10 seconds.
For the first time in many months, both Citigroup (C) and Bank Of America (BAC) are not on our Most Dangerous Stocks list as of the release of the August report.
The large-cap blend style ranks second out of the twelve fund styles as detailed in my style roadmap. It gets my Neutral rating, which is based on aggregation of ratings of 40 ETFs and 1127 mutual funds in the large-cap blend style as of July 17, 2012.
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