The Ugly Truth About Netflix: Investors Beware
It is almost becoming an expected event every quarter: Netflix releases quarterly earnings amid much speculation about its future, and the price soars.
How to Value a Stock, Step 3: Economic Earnings
This article is the third in a four part series that walks readers through how to rate and value a stock. Our third step to gauge the value of a company is to determine its economic earnings.
GAAP Opinion versus Economic Fact
GAAP financial statements generally fail to meet equity investors’ analytical needs. We try to calculate something that does.
July’s Most DANGEROUS Stocks Available to the Public
New Constructs released July’s Most Dangerous Stocks report to the public today.
Off-Balance Sheet Debt – Invested Capital Adjustment
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.
Footnotes Adjustments for Earnings & Valuation Diligence
This article details the uniquely rigorous diligence behind each of our ratings on 3000 stocks, 7000 mutual funds and 400 ETFs. It contains reports on all the adjustments we make to convert GAAP data to economic earnings and derive true shareholder value in a discounted cash flow model.
Implied Interest For Operating Leases – NOPAT Adjustment
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.
Non-Operating Income Hidden in Operating Earnings – NOPAT Adjustment
Non-operating items in operating income are unusual gains 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 income items distort GAAP numbers by artificially raising operating earnings.
February’s Most DANGEROUS Stocks Available to the Public
New Constructs released February’s Most Dangerous Stocks report to the public today.
Top Stock Picks & Shorts: Moneylife Radio Interview w/ Chuck Jaffe
Listen in on my 15 minute interview describing the rigorous diligence New Constructs applies to every rating on the stocks, ETFs and mutual funds we cover.
Bank Of America (BAC): Very Dangerous Rating — for Ask Matt Readers
Bank Of America (BAC) gets our Very Dangerous rating because it has misleading earnings and a very expensive valuation. Here is my free report on BAC.
Registered Rep Interview on Economic vs Accounting Earnings
David A. Geracioti, Editor-In-Chief of Registered Rep magazine, recently invited me for an interview on why economic earnings matter when selecting stocks, mutual funds and ETFs.
Buy LRCX: More Value Than Meets the Eye
Most of my research and publishing tends to focus on companies manipulating accounting rules to make their reported earnings look better than the real economic cash flows of their business.
It is unfortunately rare that I find a company whose economic earnings are outpacing the reported accounting results and whose stock is cheap.
One such company is Lam Research (LRCX – very attractive rating). One of September’s most attractive stocks, LRCX offers investors hidden value.
Sell Baker Hughes Before The Stock Goes Up In Fumes
It is only a matter of time before oil and gas stocks stop moving with the price of oil and start reflecting their underlying economics.
When this happens, Baker Hughes (BHI – “very dangerous” rating) will be among the stocks that fall the hardest.
Nucor Corporation (NUE) — Dangerous Risk/Reward Rating for Ask Matt Readers
The valuation of NUE’s stock implies the company will grow its after-tax cash flow (NOPAT) by nearly 20% compounded annually for 20 years.
PowerShares Leads The “Most Attractive” ETFs
PowerShares Buyback Achievers (PKW) is the #1 “most attractive” ETF out of the 375+ ETFs we ranked according to our predictive rating system.
Sell Morgan Stanley Before It Sells You Down the River
When Morgan Stanley (MS) started in 1935, there were around fifteen employees. For 2010, the company reported 62,542 employees. Bigger is not always better. And for big, publicly-traded companies, big tends to be worse especially when it comes to financial reporting.
Buy Eli Lilly & Company (LLY) – Attractive and Safe Enough To Take Home To Mom
The risk/reward of this stock is quite compelling. Downside risk is low as the valuation already implies a permanent 54% decline in profits. How much worse can the valuation get? Upside reward potential is strong as the stock has to go over $77/share to trade at a value that implies the company’s profits will experience a 0% decline, still a no-growth scenario.
Stock Pick of the Week: Buy Apollo Group Inc cl A (APOL)- Very Attractive Rating
HIDDEN GEMS:
1. Our discounted cash flow analysis shows that APOL’s current valuation (stock price of $42.31) implies that the company’s profits will decline by 60% and never grow again.
2. Economic earnings are higher than reported accounting earnings.
3. Excess cash of $1,201mm or about 20% of its market cap
Tech and Pharma Stocks are Most Attractive for January
January’s Most Attractive Stocks are now available. Technology and Pharmaceutical stocks predominate compared to other sectors. One newcomer to the list, Seagate Technology (STX), is actually an old friend. STX made our subscribers a lot of money when the stock jumped on acquisition speculation last fall. After that jump, the stock was too expensive to…