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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Uncle Frank who wrote (49252)	11/29/2001 1:22:26 PM
From: Wyätt Gwyön	of 54805

Can you suggest a way to improve my odds of finding those important measures? part of the problem is that you need to know where the cash is coming from. this is what fooled so many people who were impressed by cos like CSCO but didn't understand their cash flows. you need to see what is cash flow from continuing operations, but then some companies stick all kinds of financial crap in there (like tax credits from stock options) that i wouldn't consider operations. so one must peel back the layers of the onion. imagine you are a detective or prosecutor interviewing a suspect. do you think he is going to willfully say things that implicate himself? probably not. you need to peel away the layers, and the only way to do that is to know what games they play. it would be one helluva pollyanna world if companies published numbers that were true in the spirit of the law as opposed to the letter. so i think the first step, if one wants to gain some investigative competence, is to understand the principles of financial accounting and financial statements. i think that would help a lot as these statements are rather confusing to the layman, despite the plain-language movement. a lot of names come up at Amazon when you enter "financial statements" or "financial analysis". also, i think there's no better place to start than to look at how some ace "detectives" have examined the public statements of cos. in particular, i am impressed by the work of Robert Tracy. i have posted many links to such articles on sites like grantsinvestor. actually, Grant's Interest Rate Observer is imho another good source for this investigative accounting, although the subscription is fairly steep. Jim Grant is arguably the most eloquent financial writer ever.

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