Value Investing Isn’t Dead Yet, Just Wounded

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Value investing, which is often traced back to Ben Graham in the 1940s, is among the most influential trends in finance in recent decades. Value investing is based on the idea that lots of stocks are out of investors’ favor because of myriad of reasons, such as recent losses, management upheaval (think GE), product failures, etc. Investors […]

Machine Learning to the Rescue

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My previous blog post (“Beware! Estimates Dominate Financial Reports,” October 13, 2018) alerted you the hidden secret of accounting: Most balance sheet and income statement items are based on managerial subjective estimates and projections (like depreciation, asset write-offs, bad debts, expected gain on pension assets, etc.). The financial data that many investors are using literally “float on […]

Beware! Estimates Dominate Financial Reports

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Estimates Are Hazardous to Your Wealth. Everyone knows that accounting is boring (not when I teach it, though), but, at least, people think it’s factual. No fake news. After all, accounting comes from counting―counting money, units of inventory, etc. All facts. Nothing further from the truth. Except for a few items on the balance sheet, like cash […]

American Evolutions from Sears to Google

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Today’s story begins with the once-behemoth that is the American retail firm, Sears. In the last week of September Sears’ stock dipped below $1 a share, reducing the company’s market value below $100 million. Sears may still linger on a bit, but when a big firm falls into penny-stock territory, its outright liquidation is a […]

Who Reads Financial Reports? Nobody!

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For several years I have argued, based on comprehensive statistical evidence, that corporate financial reports―quarterly and annual statements―have lost most of their relevance and usefulness to investors. Corporate earnings, in particular, are no longer a reliable measure of enterprise value change, nor are they indicators of future performance and growth. In fact, as I have […]