As millions of investors have discovered the hard way, companies sometimes distort the operating results that investors depend upon for accurate analysis. In Stock Profits, Michael C. Thomsett offers a new approach to fundamental analysis that reveals exactly what’s real —and what isn’t.
Thomsett shows you how to strip away misleading data that distorts a company’s true “core earnings,” growth curves, and business realities. Then, drawing on that information, he walks you through trend discovery, interpretation, and confirmation. You’ll learn powerful new ways to manage market risk by assessing a stock’s fundamental volatility. Whether you’re already using fundamental analysis, technical analysis, or a dartboard, Stock Profits can help you achieve higher, more consistent returns.
Includes step-by-step examples
Actual companies, start-to-finish case studies
Trend discovery: uncovering and interpreting emerging change
Discovering where your target company is really headed
Powerful new ways to identify growth potential
Uncovering and quantifying your best long-term market opportunities
Fundamental volatility analysis: redefining market risk
Understanding the real risk associated with any equity investment
I. THE TECHNIQUES.
1. Core Earnings Calculations: A Revised Approach.
Applying the Core Earnings Idea.
The Emergence of the Core Earnings Idea.
A Premise for Stock Selection: Accuracy in the Financials.
Examples of Core Earnings Adjustments.
Long-Term Direction in Corporate Valuation.
Accounting Problems and Stock Selection.
Fundamental Versus Technical Approaches.
2. Trend Discovery: Finding the Elements of Emerging Change.
The Trends that Affect Long-Term Value.
Balancing PE and Market Perceptions: Looking to the Future.
Distinctions: Investment Value and Current Market Value.
Applying PE Tests.
A Four-Part Approach to Analysis.
3. Trend Interpretation: Deciding What It Means.
Sales Trends: Identifying Core Revenue.
Sales by Operating Unit or Product.
Sales Interpretation with Changed Segment Mix.
Net Earnings Trends.
PE Ratio and Core PE Ratio.
4. Confirmation: A Powerful Analytical Technique.
The Dow Theory: Trends and Confirmation.
Confirmation as a Means for Identifying Primary Trends.
Confirmation to Test the Reliability of the Numbers.
Translating Confirming Indicators to Stock Selection Criteria.
Confirmation Applied to Market Price Trends.
5. Fundamental Volatility.
Expanding the Definition of Risk.
Redefining Market Risk.
Guidelines for Treatment of Exceptions.
Fundamentals as the Basis of Market Risk.
Positive and Negative Aspects of Fundamental Volatility.
Using Volatility to Pick Stocks.
II. THE TOOLS.
6. Investigation: Verifying the Financials.
The Question of Trust: Motives at the Corporate Level.
Healthy Suspicions: How Much Trust Can You Place in the Report?
The Revealing Nature of Investigation.
Trends as the Test of Accuracy: Investigative Techniques.
7. The Core Earnings Workbook: Finding the Numbers.
8. The Trend: Workbook: Breaking the Code.
9. Looking Ahead: The Core Roadmap.
The Concept of Corporate Governance.
Symptoms of Governance Quality: Investor Relations.
New Standards for Corporate Reporting.
Coordinating Governance with Core Earnings-Based Reporting.
Risk Tolerance Defined in Terms of Volatility.
Transferring Risk Management into Action.
Applying the Scientific Method.
Working for Reform: A Concluding Action List.