EPS Killers and Amazonian Accounting
Investing insights you might have missed in January
Today’s post gives you another chance to read my investing articles from January. But first, a time sensitive reminder.
In case you hadn’t noticed, the era of free money is over. Fundamentals really matter again – and companies that juice their earnings are in for a pounding.
Because of this, it’s never been more crucial to detect aggressive accounting. If you are a professional analyst or serious private investor analyst, my Forensic Analysis Bootcamp is the best way to learn these skills.
Registrations for this Zoom-based training close on Sunday. As this is the first edition, you can join at the special launch price and save £500.
I am really enjoying doing the podcast interviews and this month, particularly so. I first met Chris Bloomstran on Zoom and we had a brilliant conversation. His Semper Augustus letter has become famous for his in depth analysis of Berkshire Hathaway. In this conversation, we didn’t get around to the Berkshire valuation, but we covered a lot of ground, including his interesting start in the industry, why he paces such store on analysing a company’s 10-K, the value of college student-run investment funds, why he writes such a long investor letter and his views on the outlook.
Now onto this month’s articles. All of these articles are free, but paying members get extra insights and handy resources for further research. A subscription costs less than the price of a pizza each month.
Is The Consensus Wrong?
In January, it’s natural to think about what will shape markets in the year ahead. This post shared some of the most interesting forecasts I’ve seen. Paying subs also got more on my own thoughts for the year ahead, including a huge investing trend that most analysts haven’t priced in yet.
Amazon’s $17 Billion Cash Flow Boost
This article was the first of a mini-series on Amazon. In this post, I showed you how a quick “adjustment for reality” cuts Amazon’s free cash flow number in Q3 by $17.7 billion. If you own or may go on to own any technology stocks, you should at least be aware of this trend.
Amazon’s $6bn Man
In my next post on Amazon, I showed how small (and completely legal) tweaks from CFOs can generate billions in extra reported cash flow. At a deeper level, I also show why Cash Flow Statements aren’t as reliable as many investors think. To complement this, paying subs also got an interesting piece of analysis on Amazon from Will Nutting’s premium newsletter.
Hidden EPS Killers
My latest post looked at something that could kill EPS numbers for companies with a certain financial profile. This risk has been looming for a while, and I’ve been talking about it since the first lockdown. Since then, a lot of the pieces have come together and 2023 looks like the year it will really hit. Spoiler: it isn’t anything to do with interest rates, recession or stock based comp.
As will be the trend in 2023, paying subs got a LOT of extra information here. This includes an extra risk that is even more ignored by most analysts.
What’s Coming Next
The focus will continue to be on how you can look at financial statements in a deeper and different way. Coming up we have the final episode of my Amazon mini-series, looking at the calculation of Free Cash Flow. For a parameter that is so widely quoted, it is badly misunderstood.
Other work in progress includes a review of a widely respected fund manager, whom I expect to have a more difficult time in the next decade; a look at the stratospheric rise of a conglomerate which looks a clear short; and revisiting a pick from a conference last year. As ever, ideas from readers are welcome – just reply to this mail; I answer every mail.
Also coming up is the start of my Forensic Analysis Bootcamp next Monday. As companies with aggressive accounting continue to unwind, learning these skills is the surest way to protect your returns in 2023. If you are a professional analyst, these skills will also boost the quality of your research and get you noticed.
If you’d like to join, please register before Sunday’s deadline.