From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #2069 Reply-To: canslim Sender: owner-canslim-digest@lists.xmission.com Errors-To: owner-canslim-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes canslim-digest Sunday, January 20 2002 Volume 02 : Number 2069 In this issue: [CANSLIM] DFXI vs. JEC--Faulty handle? Re: [CANSLIM] Arthur Andersen AW: AW: [CANSLIM] Arthur Andersen AW: [CANSLIM] LNY cflo/ELTE: (was:Re: AW: [CANSLIM] Arthur Andersen) ---------------------------------------------------------------------- Date: Sun, 20 Jan 2002 07:50:53 -0600 From: "Katherine Malm" Subject: [CANSLIM] DFXI vs. JEC--Faulty handle? This is a multi-part message in MIME format. - ------=_NextPart_000_009E_01C1A187.2F9C16A0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable DFXI's chart has been bothering me for some time. An Investor's Corner = article dated 12/17/01 used JEC as an example of a "zig-zag" faulty = handle. What do you think, could DFXI have the same faulty handle?=20 http://WallStreet-LLC.com/pub/DFXI_011802.jpg http://WallStreet-LLC.com/pub/JEC_011802.jpg Katherine - ------=_NextPart_000_009E_01C1A187.2F9C16A0 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable

DFXI's chart has been bothering me for some time. An Investor's = Corner=20 article dated 12/17/01 used JEC as an example of a "zig-zag" faulty = handle. What=20 do you think, could DFXI have the same faulty handle?

http://WallStreet-= LLC.com/pub/DFXI_011802.jpg

http://WallStreet-L= LC.com/pub/JEC_011802.jpg

Katherine

- ------=_NextPart_000_009E_01C1A187.2F9C16A0-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Sun, 20 Jan 2002 08:05:49 -0600 (CST) From: "Robert Gammon" Subject: Re: [CANSLIM] Arthur Andersen On Sat, 19 Jan 2002 20:29:01 -0500, Tom Worley wrote: [snip] >I hope two things come out of this horror story: a flat >prohibition against using company stock in any 401K plan; and a legal >prohibition against any auditing firm having any other business relationship >with a firm they audit. Consult, or audit, but not both with the same or >related company. There were quite a few IBMers that got burned much the same way, although not quite to the same degree a few decades ago. Stock ownership by employees is often an important tool of management to keep the company intact, keeping the takeover artists at bay. Balancing these two forces will always be a delicate action. I don't expect to see an outright prohibition of stock ownership in 401(k)s. One possible compromise that I envision is a new requirement for 401(k) plan administrators. Under this proposal, the 401(k) plan administrators would be required to send periodic notices to employees whose stock holdings amounted to more than XX% of the employee's 401(k) plan value. ??Periodic?? == quarterly, monthly, weekly, daily, frequency COULD be made dependent on the percentage that the company stock represented of account value. A list of employees whose holdings are above the magic percentage number should be given to CEO/CFO. The wrinkle I already see is ISO grants. The value of these can often dwarf everything else the employee has, particularly as the value of the stock reaches a multiyear peak. I have seen fairly low level salaried employees ($60K-$90K salary) who manage to accumulate ISO grants worth several million dollars. Are these to be included in stock ownership calculations? ISO administrators are often different organizations from 401(k) administrators. Will employers be required to circulate ISO management ideas to employees? Perhaps. Will there be legislation requiring employees to liquidate ISO grants according to some fixed schedule? Doubtful. Robert _________________________________________________________ Do You Yahoo!? Get your free @yahoo.com address at http://mail.yahoo.com - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Sun, 20 Jan 2002 17:06:02 +0100 From: Andreas Himmelreich Subject: AW: AW: [CANSLIM] Arthur Andersen Jans, cash-flow can be below EPS, since in order to derive you must add non-cash expenses (e.g. appreciation of a mashinery park) minus non cash income (e.g. "Goodwill") minus cash expenses that are not calculated in the earnings (like the famous "one time" charges) plus cash income that are not calculated in the earnings (like "one time" income) The thing is that companies can very often choose totally legal if a cash income or cash expense reflects into EPS. The same for non cash income --> They can activate "Goodwill" or they can book it as EPS reflecting charges. So it gets dangerous if the Price Cash Flow Ratio is below the PE Ratio, because then the firms potentially uses the legal possiblity of choosing how to book their cash expenses in a way so they are not reflected in the earnings (e.g. a cash expense of the EPS Book) extensivly. Accountants refer this then as a unhealthy ballance sheet or "aggresive" reporting (Amazon is King here, they post an operative break even, which is useless because they have a negative Cash flow of a Dollar). You will not belive what you can reach legally with this "choosing posibilities". I worked as a controller of a Chamber of Comerce and Industry (which has slight different reporting laws, but still you could "choose" a lot). The people controlling us (the members) had no clue on what hit them, no idea of the money the chamber really made (in this case much more then we reported, because we wanted to give the impression, that we are poor, so they did not have the idea of paying less fees). If they had questions you simply answered in such a complicated way, so they gave up ... You can legally cook you earnings books, so you appear poorer or richer. I did not like this, so I decided to get another job ... Poorer is not very likely in these days due to the Raiders in the 1980s which bought poor looking companies that where acutally rich and sold them. Since this times everybody tries to look at least as rich as they are. I found 579 Firms where the PE is below the PCF Ratio http://moneycentral.msn.com/investor/invsub/finder/finderx.asp?Query=SV1 QF140Z05F215Z&Name=Search2&Tickers=25 NYCB is a good example: PE 21 PCF 62,5 So the PCF is a very good indicator on how much a firm uses the OFF BOOK cash expenses. CASH FLOW REPORTING CAN NOT BE COOCKED LEGALLY. Another good way is to look on the taxes they pay. If the earnings are high and they do not pay taxes, there is a problem (this counts not for Israel Companies, due to the fact that they give huge tax breaks to their firms, especially in the first years of business). See you Andreas > -----Ursprungliche Nachricht----- > Von: Spencer48@aol.com [SMTP:Spencer48@aol.com] > Gesendet am: Sunday, January 20, 2002 4:16 AM > An: canslim@lists.xmission.com > Betreff: Re: AW: [CANSLIM] Arthur Andersen > > Dave, Andreas and Tom: > > Andreas: How can cash-flow be below EPS, since in order to derive > cash-flow you must add non-cash expenses (like amortization expense, > and-possibly (see next paragraph as to why I am uncertain)-good-will expense) > > On Wednesday or Thursday's CNBC show with Lawerence Kudlow at 11PM EST, > the show revolved around the Enron scandal. I thought I heard mention that > the Supervisory Board relating to Accounting Practices was doing away with > the balance sheet entry "Goodwill", but I thought it had already been done > away with several years ago? > > In any event, what baffles me is that just about everyone on the > business news remarks on Enron's OFF BOOK ACCOUNTS, but I've heard no one on > any of these shows lambast anyone at Enron (or Anderson > who-putatively-audited them) who decided to go with off-book accounting. It > makes one wonder, how many public corporation have off-book entries? It also > makes one wonder if DGO, WON and IBD recognize these entries as legitimate-or > if they are even aware of them? I guess the bottom line is: How accurate is > an off-book entry, and does it accurately and legally reflect the > corporation's profit/loss statement, or is it instead a gambit a corporation > uses to circumvent investment law and SEC supervision? > > jans > > > In a message dated 1/19/2002 8:02:27 PM Eastern Standard Time, > judgejimmy@web.de writes: > > << ts not only Anderson or Enron, its also laws that give the possibiltiy > to give EPS numbers that are so far away from the cash flow number, that > the EPS number does not represent "a true and fair view" of the current > situation > of the firm. You can not pay bills with EPS number, you only can pay > for personel and material if you generate enough cash flow to cover your > costs > and to reach a profit margin and to take care of investments in you business. > > A very good way to see quickly if the EPS Reporting is fair or not --> > > Check if the Cash Flow is above or at least equal to the EPS numbers > reported. > If it is even below, than its always good to be really critical ... > > Cash Flow Price Ratio should be always below the PE Ratio. A good sign is > if the Cash Flow to Price Ratio is half the PE Ratio (thats my rule of > thumb). > > Even better, use free cash flow (the money that is not needed even after > investments charged), > but this is not provided by any service I know ... > > I always wondered, why the investment community does not pay attention to > the differences > between both numbers (PE and PCF Ratio). > But as far I can tell, a low Price Cash flow Ratio, which is well below the > PE Ratio is > very seldem taken into account by the market and very seldem is used as > "fuel" to > price up the stock price. > > So I only get really cautious if the PCF Ratio is not below the PE Ratio. > > But with Enron, I gues, even this would not have helped, due to the fact > that they just reported > wrong numbers... > > See you > > Andreas > > > > -----Ursprungliche Nachricht----- > > Von: Dave Cameron [SMTP:dfcameron@yahoo.com] > > Gesendet am: Sunday, January 20, 2002 1:07 AM > > An: canslim@lists.xmission.com > > Betreff: [CANSLIM] Arthur Andersen > > > > > > --- Tom Worley wrote: > > Tom writes: > > > > > Is it coincidence that Arthur Andersen is Enron's consultant / > > > advisor / auditor, and was also doing some of the same for Sunbeam? > > > (some Sunbeam execs just settled a shareholder class action lawsuit > > > for $15 million so they can concentrate on defending themselves > > > against fraud charges by the SEC). Sure, I'll pay you guys $15 > > > really big ones, but, hey, I'm still not admitting I did anything > > > wrong with the company financial reports. Maybe we should be buying > > > shares in companies making shredders?? This is the third big > > > financial scandal in recent years involving Andersen, and now > > > leading to cries from Congress for governmental regulation of > > > accounting firms. Great idea, let the politicians who rarely can > > > balance a budget, and invented the concept of off-book accounting, > > > regulate the accountants. > > > > This makes me wonder how "good" the earnings figures we get really > > are. It seems logical that given the number of firms that Arthur > > Andersen serves as the accountants/auditors, there have to be more > > out there that are fraudulent - and someone is benefiting. > > > > Furthermore, is it likely this behavior is unique to just Andersen? > > > > I don't mean to sound like a conspiracy type; but it does give me a > > dose of cynicism that we have to be even more diligent in our > > research. Enron was rarely, if ever, a CANSLIM stock, but the lesson > > is valuable nonetheless. > > > > I suspect the Enron situation could change some legislation. There > > are some big name trustee types demanding an investigation. I blame > > Andersen more than Enron. Andersen is "supposed" to be impartial; > > hence the auditing requirements. > > >> > > - > -To subscribe/unsubscribe, email "majordomo@xmission.com" > -In the email body, write "subscribe canslim" or > -"unsubscribe canslim". Do not use quotes in your email. - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Sun, 20 Jan 2002 17:12:20 +0100 From: Andreas Himmelreich Subject: AW: [CANSLIM] LNY The important part of my posting (since bold formating did not come through) --> ``Over the last five recessions, restaurants were the No. 1 performing sector starting at the recession-ending rally,'' Paul Westra, restaurant industry analyst, said in a research note. > -----Ursprungliche Nachricht----- > Von: Andreas Himmelreich [SMTP:judgejimmy@web.de] > Gesendet am: Sunday, January 20, 2002 2:47 AM > An: 'canslim@lists.xmission.com' > Betreff: AW: [CANSLIM] LNY > > RESEARCH ALERT-Robertson starts Landry's at ``strong buy'' > CHICAGO, Jan 18 (Reuters) - Robertson Stephens on Friday said it started > coverage of seafood restaurant operator Landry's Restaurants Inc. (NYSE:LNY > - news > ) with a ``strong buy'' rating and a $30 > 12-month price target, saying the firm is an emerging bellwether for the > restaurant industry. > > ``Over the last five recessions, restaurants were the No. 1 performing > sector starting at the recession-ending rally,'' Paul Westra, restaurant > industry analyst, said in a research note. > Landry's shares closed Thursday at $18.94 on the New York Stock Exchange. > > > > -----Ursprungliche Nachricht----- > > Von: Tom Worley [SMTP:stkguru@netside.net] > > Gesendet am: Sunday, January 20, 2002 2:31 AM > > An: canslim@lists.xmission.com > > Betreff: Re: [CANSLIM] LNY > > > > I see a lot of the restaurant stocks making new 12 month highs. A good > > indicator of economic recovery, IMO. > > > > Tom Worley > > stkguru@netside.net > > AIM: TexWorley > > ----- Original Message ----- > > From: "Andreas Himmelreich" > > To: > > Sent: Saturday, January 19, 2002 8:29 PM > > Subject: [CANSLIM] LNY > > > > > > > Nice BO for Friday ... > > > > > > - > > > -To subscribe/unsubscribe, email "majordomo@xmission.com" > > > -In the email body, write "subscribe canslim" or > > > -"unsubscribe canslim". Do not use quotes in your email. > > > > > > > > > > > > > > - > > -To subscribe/unsubscribe, email "majordomo@xmission.com" > > -In the email body, write "subscribe canslim" or > > -"unsubscribe canslim". Do not use quotes in your email. > > - > -To subscribe/unsubscribe, email "majordomo@xmission.com" > -In the email body, write "subscribe canslim" or > -"unsubscribe canslim". Do not use quotes in your email. - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Sun, 20 Jan 2002 10:13:01 -0600 From: "Katherine Malm" Subject: cflo/ELTE: (was:Re: AW: [CANSLIM] Arthur Andersen) This is a multi-part message in MIME format. - ------=_NextPart_000_00BE_01C1A19B.0AB32540 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable To add to Andreas' note. This is a great tie-in to the ELTE discussion. = If ELTE is aggressive about capitalizing expenses related to software = development, their EPS will look good but their cash flow will be lower = and tell the "real" story of money left after they pay for everything = year to year. An example of aggressive revenue reporting where EPS looked good (high = Rev's) but the cashflow told the story--MSTR (March 2000). They = aggressively reported deals as "revenues" even though they had no money = in hand. In this case, cash flow was again lower than EPS numbers. The = other way you can tell something is up is a high receivables number. A = quick check on ELTE shows receivables are 40% of revenues. This doesn't = necessarily mean they're "up" to anything, but should raise a yellow = flag when reviewing the financials or making comparisons year to year. Katherine ----- Original Message -----=20 From: Andreas Himmelreich=20 To: 'canslim@lists.xmission.com'=20 Sent: Sunday, January 20, 2002 10:06 AM Subject: AW: AW: [CANSLIM] Arthur Andersen Jans, cash-flow can be below EPS, since in order to derive you must add non-cash expenses (e.g. appreciation of a mashinery park) minus non cash income (e.g. "Goodwill") minus cash expenses that are not calculated in the earnings (like the=20 famous "one time" charges) plus cash income that are not calculated in the earnings (like "one = time"=20 income) The thing is that companies can very often choose totally legal if a = cash=20 income or cash expense reflects into EPS. The same for non cash income --> They can activate "Goodwill" or they = can=20 book it as EPS reflecting charges. So it gets dangerous if the Price Cash Flow Ratio is below the PE = Ratio,=20 because then the firms potentially uses the legal possiblity of choosing how to = book=20 their cash expenses in a way so they are not reflected in the earnings (e.g. a cash expense of the = EPS=20 Book) extensivly. Accountants refer this then as a unhealthy ballance sheet or = "aggresive"=20 reporting (Amazon is King here, they post an operative break even, which is useless because they have a negative Cash flow of = a=20 Dollar). You will not belive what you can reach legally with this "choosing=20 posibilities". I worked as a controller of a Chamber of Comerce and Industry (which = has=20 slight different reporting laws, but still you could "choose" a lot). The people controlling us (the members) had no clue on what hit them, = no=20 idea of the money the chamber really made (in this case much more then we reported, because we wanted to give the = impression,=20 that we are poor, so they did not have the idea of paying less fees). If they had questions you=20 simply answered in such a complicated way, so they gave up ... You can legally cook you earnings books, so you appear poorer or = richer. I=20 did not like this, so I decided to get another job ... Poorer is not very likely in these days due to the Raiders in the = 1980s=20 which bought poor looking companies that where acutally rich and sold them. Since this times everybody tries to = look=20 at least as rich as they are. I found 579 Firms where the PE is below the PCF Ratio = http://moneycentral.msn.com/investor/invsub/finder/finderx.asp?Query=3DSV= 1 =20 QF140Z05F215Z&Name=3DSearch2&Tickers=3D25 NYCB is a good example: PE 21 PCF 62,5 So the PCF is a very good indicator on how much a firm uses the OFF = BOOK=20 cash expenses. CASH FLOW REPORTING CAN NOT BE COOCKED LEGALLY. Another good way is to look on the taxes they pay. If the earnings are = high=20 and they do not pay taxes, there is a problem (this counts not for Israel Companies, due to the fact that they give huge = tax=20 breaks to their firms, especially in the first years of business). See you Andreas > -----Ursprungliche Nachricht----- > Von: Spencer48@aol.com [SMTP:Spencer48@aol.com] > Gesendet am: Sunday, January 20, 2002 4:16 AM > An: canslim@lists.xmission.com > Betreff: Re: AW: [CANSLIM] Arthur Andersen > > Dave, Andreas and Tom: > > Andreas: How can cash-flow be below EPS, since in order to = derive > cash-flow you must add non-cash expenses (like amortization expense, > and-possibly (see next paragraph as to why I am uncertain)-good-will = expense) > > On Wednesday or Thursday's CNBC show with Lawerence Kudlow at = 11PM=20 EST, > the show revolved around the Enron scandal. I thought I heard = mention=20 that > the Supervisory Board relating to Accounting Practices was doing = away=20 with > the balance sheet entry "Goodwill", but I thought it had already = been=20 done > away with several years ago? > > In any event, what baffles me is that just about everyone on = the > business news remarks on Enron's OFF BOOK ACCOUNTS, but I've heard = no one=20 on > any of these shows lambast anyone at Enron (or Anderson > who-putatively-audited them) who decided to go with off-book = accounting.=20 It > makes one wonder, how many public corporation have off-book entries? = It=20 also > makes one wonder if DGO, WON and IBD recognize these entries as=20 legitimate-or > if they are even aware of them? I guess the bottom line is: How=20 accurate is > an off-book entry, and does it accurately and legally reflect the > corporation's profit/loss statement, or is it instead a gambit a=20 corporation > uses to circumvent investment law and SEC supervision? > > jans > > > In a message dated 1/19/2002 8:02:27 PM Eastern Standard Time, > judgejimmy@web.de writes: > > << ts not only Anderson or Enron, its also laws that give the = possibiltiy > to give EPS numbers that are so far away from the cash flow number, = that > the EPS number does not represent "a true and fair view" of the = current > situation > of the firm. You can not pay bills with EPS number, you only can = pay > for personel and material if you generate enough cash flow to cover = your=20 > costs > and to reach a profit margin and to take care of investments in you = business. > > A very good way to see quickly if the EPS Reporting is fair or not = - --> > > Check if the Cash Flow is above or at least equal to the EPS = numbers > reported. > If it is even below, than its always good to be really critical ... > > Cash Flow Price Ratio should be always below the PE Ratio. A good = sign=20 is > if the Cash Flow to Price Ratio is half the PE Ratio (thats my rule = of > thumb). > > Even better, use free cash flow (the money that is not needed even = after=20 > investments charged), > but this is not provided by any service I know ... > > I always wondered, why the investment community does not pay = attention=20 to > the differences > between both numbers (PE and PCF Ratio). > But as far I can tell, a low Price Cash flow Ratio, which is well = below=20 the > PE Ratio is > very seldem taken into account by the market and very seldem is = used as > "fuel" to > price up the stock price. > > So I only get really cautious if the PCF Ratio is not below the PE=20 Ratio. > > But with Enron, I gues, even this would not have helped, due to the = fact=20 > that they just reported > wrong numbers... > > See you > > Andreas > > > > -----Ursprungliche Nachricht----- > > Von: Dave Cameron [SMTP:dfcameron@yahoo.com] > > Gesendet am: Sunday, January 20, 2002 1:07 AM > > An: canslim@lists.xmission.com > > Betreff: [CANSLIM] Arthur Andersen > > > > > > --- Tom Worley wrote: > > Tom writes: > > > > > Is it coincidence that Arthur Andersen is Enron's consultant / > > > advisor / auditor, and was also doing some of the same for = Sunbeam? > > > (some Sunbeam execs just settled a shareholder class action = lawsuit > > > for $15 million so they can concentrate on defending themselves > > > against fraud charges by the SEC). Sure, I'll pay you guys $15 > > > really big ones, but, hey, I'm still not admitting I did = anything > > > wrong with the company financial reports. Maybe we should be = buying > > > shares in companies making shredders?? This is the third big > > > financial scandal in recent years involving Andersen, and now > > > leading to cries from Congress for governmental regulation of > > > accounting firms. Great idea, let the politicians who rarely = can > > > balance a budget, and invented the concept of off-book = accounting, > > > regulate the accountants. > > > > This makes me wonder how "good" the earnings figures we get = really > > are. It seems logical that given the number of firms that Arthur > > Andersen serves as the accountants/auditors, there have to be = more > > out there that are fraudulent - and someone is benefiting. > > > > Furthermore, is it likely this behavior is unique to just = Andersen? > > > > I don't mean to sound like a conspiracy type; but it does give me = a > > dose of cynicism that we have to be even more diligent in our > > research. Enron was rarely, if ever, a CANSLIM stock, but the = lesson > > is valuable nonetheless. > > > > I suspect the Enron situation could change some legislation. = There > > are some big name trustee types demanding an investigation. I = blame > > Andersen more than Enron. Andersen is "supposed" to be = impartial; > > hence the auditing requirements. > > >> > > - > -To subscribe/unsubscribe, email "majordomo@xmission.com" > -In the email body, write "subscribe canslim" or > -"unsubscribe canslim". Do not use quotes in your email. - -To subscribe/unsubscribe, email "majordomo@xmission.com" -In the email body, write "subscribe canslim" or -"unsubscribe canslim". Do not use quotes in your email. - ------=_NextPart_000_00BE_01C1A19B.0AB32540 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable

To add to Andreas' note. This is a great tie-in to the ELTE = discussion. If=20 ELTE is aggressive about capitalizing expenses related to software = development,=20 their EPS will look good but their cash flow will be lower and tell the = "real"=20 story of money left after they pay for everything year to year.

An example of aggressive revenue reporting where EPS looked good = (high=20 Rev's) but the cashflow told the story--MSTR (March 2000). They = aggressively=20 reported deals as "revenues" even though they had no money in hand. In = this=20 case, cash flow was again lower than EPS numbers. The other way you can = tell=20 something is up is a high receivables number. A quick check on ELTE = shows=20 receivables are 40% of revenues. This doesn't necessarily mean they're = "up" to=20 anything, but should raise a yellow flag when reviewing the financials = or making=20 comparisons year to year.

Katherine

----- Original Message -----

From:=20 Andreas = Himmelreich

To: 'canslim@lists.xmission.com'= =20

Sent: Sunday, January 20, 2002 = 10:06=20 AM

Subject: AW: AW: [CANSLIM] = Arthur=20 Andersen

Jans,

cash-flow can be below EPS, since in order = to=20 derive you must

add non-cash expenses (e.g. appreciation of a = mashinery=20 park)
minus non cash income (e.g. "Goodwill")

minus cash = expenses=20 that are not calculated in the earnings (like the
famous "one = time"=20 charges)
plus cash income that are not calculated in the earnings = (like=20 "one time"
income)

The thing is that companies can very = often=20 choose totally legal if a cash
income or cash expense reflects = into=20 EPS.
The same for non cash income --> They can activate = "Goodwill" or=20 they can
book it as EPS reflecting charges.

So it gets = dangerous if=20 the Price Cash Flow Ratio is below the PE Ratio,
because = then
the firms=20 potentially uses the legal possiblity of choosing how to book =
their cash=20 expenses in a way
so they are not reflected in the earnings (e.g. a = cash=20 expense of the EPS
Book) extensivly.

Accountants refer this = then as=20 a unhealthy ballance sheet or "aggresive"
reporting (Amazon is = King here,=20 they post an operative
break even, which is useless because they = have a=20 negative Cash flow of a
Dollar).

You will not belive what = you can=20 reach legally with this "choosing
posibilities".

I worked = as a=20 controller of a Chamber of Comerce and Industry (which has
slight=20 different reporting laws, but still you could "choose" a lot).
The = people=20 controlling us (the members) had no clue on what hit them, no
idea = of the=20 money the chamber really made (in this
case much more then we = reported,=20 because we wanted to give the impression,
that we are poor, so = they
did=20 not have the idea of paying less fees). If they had questions you =
simply=20 answered in such a complicated way, so they gave up ...

You can = legally=20 cook you earnings books, so you appear poorer or richer. I
did not = like=20 this, so I decided to get another job ...
Poorer is not very likely = in=20 these days due to the Raiders in the 1980s
which bought poor = looking=20 companies that
where acutally rich and sold them. Since this times=20 everybody tries to look
at least as rich as they are.

I = found 579=20 Firms where the PE is below the PCF Ratio

http://moneycentral.msn.com/investor/invsub/finder/finderx.asp= ?Query=3DSV1 =20
QF140Z05F215Z&Name=3DSearch2&Tickers=3D25

NYCB = is a good=20 example:

PE 21
PCF 62,5

So the PCF is a very = good=20 indicator on how much a firm uses the OFF BOOK
cash = expenses.
CASH FLOW=20 REPORTING CAN NOT BE COOCKED LEGALLY.

Another good way is to = look on=20 the taxes they pay. If the earnings are high
and they do not pay = taxes,=20 there is a problem (this
counts not for Israel Companies, due to = the fact=20 that they give huge tax
breaks to their firms, especially in the = first=20 years of
business).

See you

Andreas

>=20 -----Ursprungliche Nachricht-----
> Von: Spencer48@aol.com=20 [SMTP:Spencer48@aol.com]
> Gesendet am: Sunday, January 20, 2002 = 4:16=20 AM
> An: canslim@lists.xmission.com=
>=20 Betreff: Re: AW: [CANSLIM] Arthur Andersen
>
> Dave, = Andreas and=20 Tom:
>
>      Andreas: How can = cash-flow=20 be below EPS, since in order to derive
> cash-flow you must add = non-cash=20 expenses (like amortization expense,
> and-possibly (see next = paragraph=20 as to why I am uncertain)-good-will=20
expense)
>
>      On = Wednesday or=20 Thursday's CNBC show with Lawerence Kudlow at 11PM
EST,
> = the show=20 revolved around the Enron scandal. I thought I heard mention=20
that
> the Supervisory Board relating to Accounting = Practices was=20 doing away
with
> the balance sheet entry "Goodwill", but I = thought=20 it had already been
done
> away with several years=20 ago?
>
>      In any event, what = baffles=20 me is that just about everyone on the
> business news remarks on = Enron's=20 OFF BOOK ACCOUNTS, but I've heard no one
on
> any of these = shows=20 lambast anyone at Enron (or Anderson
> who-putatively-audited = them) who=20 decided to go with off-book accounting.
It
> makes one = wonder,=20 how many public corporation have off-book entries? It =
also
>=20 makes one wonder if DGO, WON and IBD recognize these entries as=20
legitimate-or
> if they are even aware of them? I = guess the=20 bottom line is: How
accurate is
> an off-book entry, = and does=20 it accurately and legally reflect the
> corporation's = profit/loss=20 statement, or is it instead a gambit a
corporation
> uses to = circumvent investment law and SEC supervision?
>
>=20 jans
>
>
> In a message dated 1/19/2002 8:02:27 PM = Eastern=20 Standard Time,
> judgejimmy@web.de = writes:
>
>=20 << ts not only Anderson or Enron, its also laws that give the=20 possibiltiy
> to give EPS numbers that are so far away = from the=20 cash flow number, that
> the EPS number does not represent = "a true=20 and fair view" of the current
> situation
> of the = firm. You=20 can not pay bills with EPS number, you only can pay
> for = personel=20 and material if you generate enough cash flow to cover your
>=20 costs
> and to reach a profit margin and to take care of=20 investments in you
business.
>
> A very good way = to see=20 quickly if the EPS Reporting is fair or not = - -->
>
> Check=20 if the Cash Flow is above or at least equal to the EPS numbers
> = reported.
> If it is even below, than its always good to = be really=20 critical ...
>
> Cash Flow Price Ratio should be = always=20 below the PE Ratio. A good sign
is
> if the Cash Flow = to Price=20 Ratio is half the PE Ratio (thats my rule of
>=20 thumb).
>
> Even better, use free cash flow (the = money that=20 is not needed even after
> investments charged),
> = but this=20 is not provided by any service I know ...
>
> I = always=20 wondered, why the investment community does not pay attention =
to
>=20 the differences
> between both numbers (PE and PCF=20 Ratio).
> But as far I can tell, a low Price Cash flow = Ratio,=20 which is well below
the
> PE Ratio is
> very = seldem=20 taken into account by the market and very seldem is used as
> = "fuel"=20 to
> price up the stock price.
>
> So I = only get=20 really cautious if the PCF Ratio is not below the PE=20
Ratio.
>
> But with Enron, I gues, even this = would not=20 have helped, due to the fact
> that they just = reported
> =20 wrong numbers...
>
> See you
>
> =20 Andreas
>
>
> > -----Ursprungliche=20 Nachricht-----
> > Von: Dave Cameron=20 [SMTP:dfcameron@yahoo.com]
> > Gesendet am: Sunday, = January 20,=20 2002 1:07 AM
> > An: canslim@lists.xmission.com=
> =20 > Betreff: [CANSLIM] Arthur Andersen
> = >
> =20 >
> > --- Tom Worley <stkguru@netside.net>=20 wrote:
> > Tom writes:
> >
> = >=20 > Is it coincidence that Arthur Andersen is Enron's consultant=20 /
> > > advisor / auditor, and was also doing some = of the=20 same for Sunbeam?
> > > (some Sunbeam execs just = settled a=20 shareholder class action lawsuit
> > > for $15 = million so=20 they can concentrate on defending themselves
> > > = against=20 fraud charges by the SEC). Sure, I'll pay you guys $15
> = > >=20 really big ones, but, hey, I'm still not admitting I did=20 anything
> > > wrong with the company financial = reports.=20 Maybe we should be buying
> > > shares in companies = making=20 shredders?? This is the third big
> > > financial = scandal in=20 recent years involving Andersen, and now
> > > = leading to=20 cries from Congress for governmental regulation of
> > = >=20 accounting firms. Great idea, let the politicians who rarely = can
> =20 > > balance a budget, and invented the concept of off-book=20 accounting,
> > > regulate the = accountants.
> =20 >
> > This makes me wonder how "good" the earnings = figures=20 we get really
> > are. It seems logical that = given the=20 number of firms that Arthur
> > Andersen serves as the=20 accountants/auditors, there have to be more
> > out = there that=20 are fraudulent - and someone is benefiting.
> = >
> =20 > Furthermore, is it likely this behavior is unique to just=20 Andersen?
> >
> > I don't mean to sound = like a=20 conspiracy type; but it does give me a
> > dose of = cynicism=20 that we have to be even more diligent in our
> >=20 research. Enron was rarely, if ever, a CANSLIM stock, but the=20 lesson
> > is valuable nonetheless.
> =20 >
> > I suspect the Enron situation could change = some=20 legislation.   There
> > are some big name = trustee=20 types demanding an investigation.   I blame
> = >=20 Andersen more than Enron.    Andersen is "supposed" to = be=20 impartial;
> > hence the auditing = requirements.
> =20 > >>
>
> -
> -To = subscribe/unsubscribe, email=20 "majordomo@xmission.com"
>= ;=20 -In the email body, write "subscribe canslim" or
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