Re: [CANSLIM] Validity of Earnings Reports

From: Ian <ianstm@shaw.ca>
Subject: Re: [CANSLIM] Validity of Earnings Reports
Date: Tue, 16 Apr 2002 10:21:09 -0700
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"I preferred stocks showing consistent top and bottom line growth both sequentially and year to year"

Tom:

Isn't the 'requirement' for sequential growth a recent artifact of the tech bubble? It seems to me that both CANSLIM and growth investing had always allowed for business seasonality - as long as the y-o-y numbers were solidly up for each season, it was still considered a growth stock that could command a premium valuation. Do you think this has changed? Do you think that the 'blessed' stocks now demand sequential growth too?

Thanks,

Ian


  ----- Original Message ----- 
  From: Tom Worley 
  To: canslim@lists.xmission.com 
  Sent: Sunday, April 14, 2002 6:11 PM
  Subject: Re: [CANSLIM] Validity of Earnings Reports


  Ira, I don't think you can protect yourself from a company that is deliberately falsifying their financials, or using creative accounting to cover up real issues.
   
  you would have to not only have an accounting degree, but go in and do an independent audit, which is not practical.
   
  Best you can do is look for consistency (and inconsistencies) in the 10Q and 10K reports. Read Management's discussion. Question or dig deeper into anything that doesn't make logical sense. Look for any changes in accounting procedures from prior periods.
   
  Even before Enron, I preferred stocks showing consistent top and bottom line growth both sequentially and year to year. Now, that is even more important to me. If they are fudging, at least they are doing it consistently.
   
  Tom Worley
  stkguru@bellsouth.net
  AIM: TexWorley
  ----- Original Message ----- 
  From: Ira Post 
  To: canslim@lists.xmission.com 
  Sent: Sunday, April 14, 2002 9:06 PM
  Subject: [CANSLIM] Validity of Earnings Reports


  This has become a huge issue in the last year.  I'm bringing it up to this list because earnings growth is such an important part of CANSLIM.  What do you do to protect yourselves from companies that fudge their real earnings?

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<DIV><FONT size=2>"I preferred stocks showing consistent top and bottom line 
growth both sequentially and year to year"</FONT></DIV>
<DIV>&nbsp;</DIV>
<DIV><FONT size=2>Tom:</FONT></DIV>
<DIV>&nbsp;</DIV>
<DIV><FONT size=2>Isn't the 'requirement' for sequential growth a recent 
artifact of the tech bubble? It seems to me that both CANSLIM and growth 
investing had always allowed for business seasonality - as long as the y-o-y 
numbers were solidly up for each season, it was still considered a growth stock 
that could command a premium valuation. Do you think this has changed? Do you 
think that the 'blessed' stocks now demand sequential growth too?</FONT></DIV>
<DIV>&nbsp;</DIV>
<DIV><FONT size=2>Thanks,</FONT></DIV>
<DIV>&nbsp;</DIV>
<DIV><FONT size=2>Ian</FONT></DIV>
<DIV>&nbsp;</DIV>
<DIV>&nbsp;</DIV>
<BLOCKQUOTE 
style="BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-RIGHT: 0px">
  <DIV style="FONT: 10pt arial">----- Original Message ----- </DIV>
  <DIV 
  style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B> 
  <A href="mailto:stkguru@bellsouth.net" title=stkguru@bellsouth.net>Tom 
  Worley</A> </DIV>
  <DIV style="FONT: 10pt arial"><B>To:</B> <A 
  href="mailto:canslim@lists.xmission.com" 
  title=canslim@lists.xmission.com>canslim@lists.xmission.com</A> </DIV>
  <DIV style="FONT: 10pt arial"><B>Sent:</B> Sunday, April 14, 2002 6:11 
PM</DIV>
  <DIV style="FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] Validity of 
  Earnings Reports</DIV>
  <DIV><BR></DIV>
  <DIV><FONT face=Arial>Ira, I don't think you can protect yourself from a 
  company that is deliberately falsifying their financials, or using creative 
  accounting to cover up real issues.</FONT></DIV>
  <DIV><FONT face=Arial></FONT>&nbsp;</DIV>
  <DIV><FONT face=Arial>you would have to not only have an accounting degree, 
  but go in and do an independent audit, which is not practical.</FONT></DIV>
  <DIV><FONT face=Arial></FONT>&nbsp;</DIV>
  <DIV><FONT face=Arial>Best you can do is look for consistency (and 
  inconsistencies) in the 10Q and 10K reports. Read Management's discussion. 
  Question or dig deeper into anything that doesn't make logical sense. Look for 
  any changes in accounting procedures from prior periods.</FONT></DIV>
  <DIV><FONT face=Arial></FONT>&nbsp;</DIV>
  <DIV><FONT face=Arial>Even before Enron, I preferred stocks showing consistent 
  top and bottom line growth both sequentially and year to year. Now, that is 
  even more important to me. If they are fudging, at least they are doing it 
  consistently.</FONT></DIV>
  <DIV><FONT face=Arial></FONT>&nbsp;</DIV>
  <DIV>Tom Worley<BR><A 
  href="mailto:stkguru@bellsouth.net">stkguru@bellsouth.net</A><BR>AIM: 
  TexWorley</DIV>
  <DIV style="FONT: 10pt arial">----- Original Message ----- 
  <DIV style="BACKGROUND: #e4e4e4; font-color: black"><B>From:</B> <A 
  href="mailto:ip108@yahoo.com" title=ip108@yahoo.com>Ira Post</A> </DIV>
  <DIV><B>To:</B> <A href="mailto:canslim@lists.xmission.com" 
  title=canslim@lists.xmission.com>canslim@lists.xmission.com</A> </DIV>
  <DIV><B>Sent:</B> Sunday, April 14, 2002 9:06 PM</DIV>
  <DIV><B>Subject:</B> [CANSLIM] Validity of Earnings Reports</DIV></DIV>
  <DIV><BR></DIV>
  <DIV><FONT face=Arial size=2>This has become a huge issue in the last 
  year.&nbsp; I'm bringing it up to this list because earnings growth is such an 
  important part of CANSLIM.&nbsp; What do you do to protect yourselves from 
  companies that fudge their real 
earnings?</FONT></DIV></BLOCKQUOTE></BODY></HTML>

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