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3 Reasons Why Amazon’s “Cash Flow” Is A Trap

Tuesday, August 19th, 2014 6736910191_f79ab3a810

As a follow up to our Danger Zone article on May 20th, 2013, we review the “cash flow” thesis proffered by Jeff Bezos and Amazon (AMZN) bulls.

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Buy The Travelers Co (TRV) – Very Attractive Rating

Monday, November 22nd, 2010 Buy The Travelers Co (TRV) – Very Attractive Rating

HIDDEN GEMS:
1. About $29 million in non-operating expenses (after-tax) cause reported earnings to be understated.
2. Our dis¬counted cash flow analy¬sis shows that TRV’s cur¬rent val¬u¬a¬tion (stock price of $55.49) implies that the company’s profits will decline by 30% and never grow again.
3. The company grew its economic earn¬ings by $827mm during its last fiscal year.

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JDS Uniphase Cp (JDSU) — free report for Ask Matt, Dangerous Rating

Thursday, August 26th, 2010 JDS Uniphase Cp (JDSU) — free report for Ask Matt, Dangerous Rating

RED FLAG: Our analy­sis of the Finan­cial Foot­notes reveals: the com­pany has writ­ten off over $60bn in assets over the last twelve years. That is a big num­ber com­pared to the company’s mar­ket cap of roughly $2.2bn and its net assets of about $1.3bn. This results in economic earnings of -$5,346mm compared to Net Income of -$866mm during the last fiscal year. For details on what causes the dif­fer­ence between Eco­nomic Ver­sus Account­ing Prof­its, see Appen­dix 3 on page 10 of our free report on JDSU.

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McDonalds Corp (MCD) – free report for Ask Matt, Very Attractive Rating

Wednesday, August 25th, 2010 McDonalds Corp (MCD) – free report for Ask Matt, Very Attractive Rating

HIDDEN GEM: Our detailed val­u­a­tion model shows that MCD grew its “eco­nomic” prof­its more than it account­ing prof­its dur­ing its last fis­cal year. Eco­nomic prof­its rose by $272mm while account­ing prof­its rose by $238mm. For details on what causes the dif­fer­ence between Eco­nomic Ver­sus Account­ing Prof­its, see Appen­dix 3 on page 10 of our free report on MCD.

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Sandridge Energy (SD) – Free Report, for Ask Matt Readers, Highlighting a Major Red Flag in the Footnotes

Thursday, August 19th, 2010 Sandridge Energy (SD) – Free Report, for Ask Matt Readers, Highlighting a Major Red Flag in the Footnotes

Here is our free report on Sandridge Energy for Ask Matt readers. Our analysis of the Financial Footnotes reveals a major RED FLAG: the company has written off over $3.4bn in assets in just the last two years.

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Stock Pick of the Week: Buy International Business Machines (IBM)

Tuesday, August 17th, 2010 Stock Pick of the Week: Buy International Business Machines (IBM)

HIDDEN GEM: Our detailed valuation model shows that IBM grew its “economic” profits more than it accounting profits during its last fiscal year. Economic profits rose by $1.15bn while accounting profits rose by $1.09bn.

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Economic Versus Accounting Earnings

Thursday, August 5th, 2010 dreamstimefree_966040_thornBranch

Accounting data was not designed for equity investors, but for debt investors. “Earnings, earnings per share and earnings growth are misleading measures of corporate performance.”(from page 66 in The Quest For Value by Bennett Stewart, Harper Collins 1991.)

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Stock Pick of the Week: Sell/Short Yahoo (YHOO)

Tuesday, August 3rd, 2010 Stock Pick of the Week: Sell/Short Yahoo (YHOO)

Overall, the Risk/Reward of investing in Yahoo’s stock looks Very Dangerous to me. There is lots of downside risk given the Misleading Earnings and there is little upside reward given the already-rich expectations embedded in the stock price.

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Top Ranking for Stock Picking for New Constructs

Saturday, July 31st, 2010 dreamstimefree_4713503_calandarAnalysis

New Constructs stock-picking consistently ranks among the best of the nationally-recognized research firms.

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Stock Pick of the Week: Buy Xilinx (XLNX)

Tuesday, July 27th, 2010 Stock Pick of the Week: Buy Xilinx (XLNX)

HIDDEN GEM: Our detailed valuation model shows that XLNX grew its “economic” profits by nearly $14mm during its last fiscal year while it reported an $18mm decline in accounting profits.

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New Constructs Receives Patent on Research System

Thursday, July 22nd, 2010 dreamstimefree_73564_sculptor

The United States Patent and Trademark Office awarded us patent #7,752,090, titled: System and Method For Reversing Accounting Distortions and Calculating A True Value of a Business.

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Stock Pick of the week: Buy Myriad Genetics (MYGN)

Wednesday, July 14th, 2010 Stock Pick of the week: Buy Myriad Genetics (MYGN)

A newcomer to our Most Attractive Stocks for July, this small cap stock has an excellent risk/reward profile, which earns it our highest Rating: Very Attractive.

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No Double-Dip Recession In Sight, Just Slow(er) Growth

Tuesday, July 13th, 2010 No Double-Dip Recession In Sight, Just Slow(er) Growth

As highlighted in LPL Group excellent “Mid-Year Outlook for 2010″, the economy is moving from ‘recovery’ mode to ‘expansion’ mode, which is very different from moving from ‘recovery’ back to ‘recession’ – a prediction made by many attention-seeking alarmists these days. We are still growing, just not as fast.

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Charles Schwab Corp (SCHW) Neutral Risk/Reward Rating for Ask Matt Readers

Wednesday, July 7th, 2010 dreamstimefree_966040_thornBranch

Here is a free copy of our report on SCHW for Ask Matt readers. This report provides details behind Matt’s… Read more >>

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Investing vs Speculating

Monday, June 7th, 2010 Investing vs Speculating

The difference between Investing and Speculating is much larger than Wall Street would have you believe. In fact, they could not be too more different activities. Speculating is gambling. Investing is intelligent decision-making.

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GAP is Stock Pick of the Week – Hidden Gem

Friday, June 4th, 2010 GAP is Stock Pick of the Week – Hidden Gem

Hidden Gem – GPS: economic earnings are rising faster than reported accounting earnings b/c the company lowered the capital employed to run the business. GAAP earnings do not capture increase capital efficiency of the business.

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Sirius Satellite – A Dangerous Stock

Tuesday, June 1st, 2010 Sirius Satellite – A Dangerous Stock

TheStreet.com recently published three articles quoting me on SIRI. Andrea Tse called and, after reviewing our models on SIRI, I told her that the stock was Dangerous because:

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NYSE – Why it’s on the Most Dangerous List

Friday, May 28th, 2010 NYSE – Why it’s on the Most Dangerous List

There are two primary reasons a stock gets on our Most Dangerous List:

1. Misleading earnings: reported GAAP earnings are positive and rising while economic earnings are negative and declining
2. Expensive valuation: future cash flow expectations embedded in the current price are unusually high especially compared to historical performance.

Free copy of our report on NYX is in the Free Archive on www.newconstructs.com. Or just click here: NYX Company Valuation Report.

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Scoreboard

Wednesday, May 19th, 2010 Scoreboard

Even if you think my analytical methods are bunk, you will still appreciate the performance of New Constructs stock picking. To see how we’ve done…

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How to make money picking stocks

Wednesday, May 19th, 2010 How to make money picking stocks

Material changes in the present value of expected… Read more >> cash flows are the key driver of material changes in a stock

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