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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (57057)	3/22/2016 10:03:02 PM
From: geoffrey Wren	2 Recommendations Recommended By E_K_S MCsweet Read Replies (2) \| Respond to of 78748

I recall when Skilling called a persistent inquisitor an "asshole" on the earnings call. Now that turned out to be a sign of something bad. Seriously, some warning signs I have learned from (often the hard way) 1. sales that do not show up in cash received. A company can find ways of pushing inventory out the door, but it may just fill the channels and not really get cash to the company. I learned late in life that sales figures are one of the most flexible entries in accounting. Not with McDonalds maybe, but with many other companies such as Boeing. 2. More generally, look at cash flow. Companies usually do not fib about cash flow. 3. Sales drops attributed to one-off events. "Our biggest customer had a fire at its warehouse." Sales drops are always explained away. Sales drops are for real. 4. Emphasizing that some losses are "non-cash" losses. They buy a company for $100m, then write it down to $50m, and say it is a non-cash loss. That means management made a bone-headed purchase, but wants to pretend it is not significant that it has done so. these are but a few.

To: Spekulatius who wrote (57057)	3/23/2016 10:35:52 AM
From: bruwin	Respond to of 78748

Especially item (6), and especially where increased debt on the Balance Sheet is, more importantly, accompanied by increasing Interest Expense, i.e. Debt Expense, on the Income Statement, thereby reducing Top Line Revenue and its contribution to Retained Income on that Balance Sheet and thereby negatively affecting Book Value.