Financial Statement Analysis
Cost of capital is a tenuous concept. Charlie Munger amusingly calls it a “perfectly amazing mental malfunction.”
A key lesson from the "Enron of Germany": If you see something, say something.
GAAP sometimes misrepresents business reality. We can use that fact to generate some alpha.
Dishonest companies tend to leave five textual fingerprints in their communications that differ from those of more truthful firms.
You can find significant alpha in the mechanics that drive GAAP accounting.
Technology can give investment pros a huge advantage in evaluating the truthfulness of company communications.
The explanatory power of the financial information reported to investors for market valuation has plummeted in recent decades.
Low accounting comparability can be costly for both firms and managers.
Could the predictive models have anticipated NMC’s earnings manipulation and bankruptcy risk?
The complexities of accounting for intangible assets and goodwill are not conducive to a quick fix.