February 8, 20180Comments

Tax Reform Losers: Companies with Deferred Tax Assets

Most public companies should benefit from the new tax law but some of the biggest losers will be companies with large deferred tax assets (DTAs).

by Sam McBride

October 5, 20161Comments

Ignore Clinton And Trump: The Fed Is A Sideshow

Endlessly debating the actions of the Fed, either by political candidates or financial talking heads, has become a sideshow that distracts from the real workings of the economy and the stock market.

by Sam McBride

November 18, 20140Comments

Stock Pick of the Week: The Travelers Companies (TRV)

How Much Attention Should You Pay During Earnings Season? While earnings season creates a stir in the financial media, smart investors understand that quarterly earnings reports provide relatively little information about

by Andre Rouillard

April 1, 20142Comments

Danger Zone: Value Investors

by David Trainer, Founder & CEO

August 23, 20130Comments

Discontinued Operations – Valuation Adjustment

There is one last adjustment we must make involving discontinued operations: adding net assets from discontinued operations to shareholder value. Because discontinued operations are parts of a company being held for sale, the value of the net assets from these discontinued operations approximate the cash the company will receive from the sale. This cash will then be available for distribution to shareholders.

by David Trainer, Founder & CEO

August 2, 201310Comments

Deferred Tax Assets and Liabilities – Invested Capital Adjustment

DTAs artificially raise reported assets and do not help generate operating profit while DTLs are like a source of interest-free financing. We remove the impact of DTAs and DTLs from our calculation of invested capital to ensure the more accurate measure of a firm’s return on invested capital (ROIC).

by David Trainer, Founder & CEO

July 22, 20130Comments

Asset Write-Downs – Invested Capital Adjustment

For debt investors, which GAAP was primarily designed for, write-downs are analytically helpful. They provide a more accurate assessment of the liquidation value of a company’s assets. For equity investors, on the other hand, write-downs are not helpful because they distort the return on invested capital (ROIC) of a company.

by David Trainer, Founder & CEO

July 9, 20132Comments

Discontinued Operations Removed from Invested Capital – Invested Capital Adjustment

Most investors would never know that discontinued operations distort GAAP numbers by over-stating assets on balance sheets and distorting the picture of a company’s ability to generate a return on that capital.

by David Trainer, Founder & CEO

June 21, 20134Comments

Income and Loss from Discontinued Operations – NOPAT Adjustment

We remove all income and losses from discontinued operations in calculating operating profit because this income/loss will not recur in the future, and we are looking for the true profitability of the continuing and core operations of a company.

by David Trainer, Founder & CEO

February 7, 20130Comments

Best & Worst ETFs and Mutual Funds: Large-cap Value Style

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 39 ETFs and 728 mutual funds in the large-cap value style as of February 5th, 2013.

by David Trainer, Founder & CEO

November 15, 20110Comments

Forensic Accounting Says Avoid Energy & Financial Stocks

As one financial scandal follows another, it seems the good guys are having a tougher time catching the bad guys. Recent revelations about MF Global’s ponzi scheme are another reminder of how our regulatory and oversight systems seem to let whales pass through their net.

by David Trainer, Founder & CEO

September 7, 20110Comments

Should Directors Ignore Those One-Time Items?

I do not think so. The question, however, is not so much about what directors ignore. You cannot ignore something about which you are unaware. The real issue is that most directors and investors are simply unaware of the many one-time items because they are buried deep in the annals of footnotes in annual reports or 10-K filings.

by David Trainer, Founder & CEO

December 2, 20101Comments

The Leak on WikiLeaks – Regulators Knew About Risks That Led to Financial Fallout

While I cannot predict what WikiLeaks will leak about some major banks, I have a hunch that one of the revelations might be from a special New Constructs report provided to the Senate Banking Committee’s Subcommittee on Securities, Insurance, and Investment.

by David Trainer, Founder & CEO