Analyze A Common Size Balance Sheet, Income Statement and Other Financial Statements – Common Size Analysis  (Now Updated) thumbnail

What is the Difference Between a Common Size Balance Sheet and a Regular Balance Sheet?

 

Common Size Analysis of Financial Statements involves looking at the numbers on the financial statement as a percentage of a total rather than their absolute value. Typically investors will look at a company’s common size balance sheet and common size income statement.

This is helpful when not only looking at a single company’s financial statements, but also comparing multiple business of different sizes at one time. Let’s take a look at an example of a normal balance sheet and a common size balance sheet for several companies:

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This letter was originally our “Read of the Day” for today’s (November 30th) This Day in Stock Market History, but it was too good not to post here as well.

I did not know just how fast of growth Pixar had under Jobs. Just look at this timeline: [click to continue…]

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This was a study conducted by Standard and Poors about a year ago. A little dated, but our previous post (“86 Percent of Americans can not answer all of these questions – can you?“) from 2012 is a post that still brings in a lot of traffic years later. So I wanted to continue the financial literacy theme with a newer study and newer questions. This study questioned 150,000 people across 140 countries.

 

How many could get 3 of the following questions correct? World wide? Just 33% could answer. Americans were slightly better, but still a dismal 57% pass rate. Here are the questions, along with a detailed explanation of the answers. How well did you do? Miss a few? No worries, at the end we explain the answers in detail to ensure you understand the topic. [click to continue…]

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It’s earnings season again, which means you are probably staring at a company or two in your portfolio that have seen their share price take a dive after reporting “disappointing” earnings.

 

You are not alone.

 

Here was the news the other morning after Warren Buffett’s Berkshire Hathaway reported earnings:

 

brk_earnings

 

Sounds bad right? Profit (Net Income) is down by a sizeable margin year over year for Berkshire.

 

Does this mean it is time to say goodbye to the all-star investor?

 

From those headlines it may seem so. But there is a lot more to a company’s financials than that headline earnings number. (Read to the end and find out how Buffett really measures the success of his businesses.) [click to continue…]

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Buffett sat down with David Rubenstein the other day for a great interview:

Topics discussed include; How Buffett does most of his stock research, What Buffett wants to be known for, The key to happiness, and much, much more.
The interview is a must watch!

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This was in Monday’s Wall Street Journal, it depicts the average investment asset allocation by generation:

 

wsj-aa-among-generations

 

The title of the article was “The Biggest Mistake People Make – Decade by Decade

And if you can’t tell from the picture alone, Millennial’s (and every other generation’s) biggest mistake is playing it too safe – allocating 70% (!) of their money in cash. [click to continue…]

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Our newest addition to our Fund Spotlight Series. Here we are building off of our Ben Graham Value Screen Series, and making those screens investable with just a click with the help of Motif Investing.

This is a collection of companies that most recently have passed Graham’s stringent value investing screen.

Of the whole investing universe, less than 25 companies make the list. What would Ben Graham buy today? this is probably a good start: [click to continue…]

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After hearing one too many comments from rational economists talking heads about how Hillary Clinton will “destroy small business” (and the stock market) or Donald Trump would “destroy America” (and the stock market) I thought it would be interesting to see how the stock market performed under various presidents in history. Before looking below, lets do a quick test. Who would you consider to be among the top few Presidents since 1897 (when this info-graphic starts)? How about the bottom few?

As the election wears on and rhetoric heats up, I see more and more political bias affecting investor behavior. So before you sell all your stocks once you see Hillary or Trump get elected, look below:

 

How did your picks actually perform?

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Ben Graham Value Screens Image

 

This is a continuation of our “Ben Graham Value Screens” series, where we look at investment opportunities based on the criteria that Ben Graham used and that is outlined in his (excellent) biography, The Einstein of Money.

 

Here we present the results from 2 different screens. Ben Graham’s “Defensive Investor” screen and “Enterprising Investor” screen. [click to continue…]

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by Unknown photographer, bromide print, 1933

Keynes may be the most famous name in all of economics. The term “Keynesian Economics” still fills headlines today as global financiers look for ways to restart economic growth.

But what you may not have known is that the same Keynes that created Keynesian Economics, is also responsible for some of the earliest thoughts on value investing, diversification and behavioral finance. [click to continue…]

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John Oliver hits it out of the park with his segment the other night on retirement plans. Specifically he covers the effect of high fees, conflict of interests with your financial advisor and even gives some pretty good tips to get you on the right track. Check it out:

 

 

 

 

 

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Want to learn more about Health Savings Accounts? Read on below: [click to continue…]

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Quote of the Day

“Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.” – Warren Buffett

 

Today marks the anniversary of an event that would prove pivotal in America’s entrance into WW1 – The sinking of the Lusitania, which had immediate and long term implications to the U.S. stock market. Eventually the war would cause the stock market to close for 4 and a half months.

 

This Day in History

1901 – E.H. Harriman and J.P Morgan’s bidding war for Northern Pacific stock continues. The shares, trading at $110 a few days before vault as high as $149 before closing at $143. Source: Eyewitness to Wall Street

1915 – German submarines sink the Lusitania, the same ship that had brought $7 million in gold to help restore the U.S. financial system in 1907. As investors begin to doubt that the U.S. will be able to stay neutral stocks decline, The Dow Jones Industrial Average falls 4.5% and would decline 9% over the next 4 days. Source: It Was A Very Good Year

 

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Best May 7th in Dow Jones Industrial Average History [click to continue…]

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Quote of the Day

 

“Every once in a while, the market does something so stupid it takes your breath away.” – Jim Cramer

A fitting quote for a day in history that would start the meteoric rise of Northern Pacific Railroad stock. The stock traded around $117 on May 6th 1901, before advancing to $1,000 on May 9th.

 

This Day in History

 

1901 – E.H Harriman, who ran the Union Pacific railroad empire is led to believe that he has accumulated a majority position in Northern Pacific stock. But due to a technicality was still just short of majority. At this time, J.P. Morgan (also a railroad tycoon) has become privy to Harriman’s plan and begins buying shares to prevent Harriman from gaining a majority. The action over the next 3 days is some of the most spectacular in Wall Street’s history (Now known as the panic of 1901) as Northern Pacific stock, now trading at around $117 per share climbs to $1,000 by May 9th. Source: Eyewitness to Wall Street

 

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Best May 6th in Dow Jones Industrial Average History [click to continue…]

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Quote of the Day

 

Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.

–Warren Buffett

Buffett’s famous quote seems fitting on a day that would usher in one of the worst economic declines in American History – The Panic of 1893. The panic would result in 14,000 business failing (4,000 of those banks) and an unemployment rate of 20%. It would take the country more than 4 years to dig itself out of the depression.

 

This Day in History

1893 – The Panic of 1893 is underway as stocks suffer their worst intra-day decline in history, a record that would stand until 1929. 1 day after Nation Cordage declares bankruptcy, stocks start the day in what can only be described as a panic. General Electric shares fell from 80 to a low of 58 (nearly 28%!). But bargain hunters, bankers and possibly even foreign investors come to the rescue and the market recovers nearly as fast as it fell earlier. General Electric almost completely recoveres by the market close, closing at 78 1/2. Sources: New York Tribune May 6, 1893 page 1, and Panic Prosperity and Progress

 

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Photo courtesy of The Library of Congress

 

Best May 5th in Dow Jones Industrial Average History [click to continue…]

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This Day in History

 

1893 – National Cordage Company declares bankruptcy after a failed attempt to corner the hemp market.  At the time, National Cordage was the most traded stock and the selloff of shares quickly spread across the market. National Cordage was assumed to be a healthy, prosperous company, so it’s failure was a surprise to Wall Street. The stock opened at 39 but fell to 20 and the general market dropped in panic as well. General Electric fell from 88.5 to 79.5 (a decline of about 10%), Union Pacific railway fell equally, from 34 3/8 to 31 7/8. The fear would spread into the next day, May 5th 1893 which would become the worst day in stock market history, and remain so until 1929. Sources:  New York Tribune May 5, 1893 page 1, The Evening Star May 5 1893 page 1 and Panic, Prosperity and Progress

The Panic of 1893 would turn into one of the worst economic depressions in the nations history. 14,000 business would close and unemployment would rise to 20%. The depression would last 4 years before the country began to recover.

Best May 4th in Dow Jones Industrial Average History

1906 – Up 3.04% or 1.93 points.

Worst May 4th in Dow Jones Industrial Average History

1970 – Down 2.60%, or 19.07 points.

 

Image of the Day

Hard-Times-1893

The panic of 1893 would lead to massive strikes, marches on the capital, mass unemployment and stock market declines. The panic would produce what would become the worst economic depression in history, and remain so until 1929.

 

 

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Quote of the Day

 

“I can calculate the motions of the heavenly bodies, but not the madness of people.” – Iasac Newton

 

This Day in History

 

1720 – Iasac Newton sells his shares in South Sea Company for a profit of 100%, or about 7,000 pounds. However he couldn’t resist the urge to make more when soon after he would buy back into the South Sea Company Stock and eventually lose 20,000 pounds, leading Newton to state: “I can calculate the motions of the heavenly bodies, but not the madness of people.” – Source: Manias, Panics and Crashes

1933 –  U.S. stocks continue their rally after the U.S. officially abandons the gold standard the day before. After a rise of 9% on the 19th, April 20th the Dow rises another 5.8% – Source: It Was A Very Good Year

Best April 20th in Dow Jones Industrial Average History

1933 – Up 5.80%, or 5.66 points

 

Worst April 20th in Dow Jones Industrial Average History

2009 – Down 3.56% or 289.6 points

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Quote of the Day

 

“You…you…you. Well, uh…thank you very much. We appreciate it. Asshole.”

– Jeffrey Skilling on April 17th, 2001 – in response to analyst Richard Grubman after he asked why Enron does not produce a balance sheet or cash flow statement with their earnings.

 

This Day in Stock Market History

1991 – The Dow Jones Industrial Average closes about 3000 for the first time. Despite closing at 2999.75 on July 17th 1990, it took the market some time to finally close over the 3000 mark after fears about the Gulf War took the Dow down to 2365 in October 1990. It wasn’t until the spring of 1991 and the U.S. overwhelmingly defeating Saddam Hussein’s forces that the market would regain confidence to climb higher.  (Source: The Market’s Measure)

2001 – Jeffrey Skilling, CEO of Enron calls Richard Grubman an asshole on a public earnings conference call. [click to continue…]

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Ben Graham Value Screens Image

 

Looking for potential investments? With thousands of stocks to research, getting started can seem a bit overwhelming. Here are a couple screens (and the companies that made it through) using sets of criteria utilized by the “Dean of Wall Street” and “Godfather of Value Investing”, Ben Graham.

 

The significance of Ben Graham’s Wall Street career cannot be overstated. His investment partnership averaged 17% annual returns over its existence. He created and mentored some of the most successful investors ever to live and has been responsible for the education of more investors than almost anyone with his 2 best-selling investment books, The Intelligent Investor and Security Analysis. He had a very disciplined, rule-based approach to investing that focused on only one thing: A company’s intrinsic value.

 

The following comes from the book, “Einstein of Money”, a great biography of Ben Graham that is also focused on his investment work. Every other chapter breaks from the life story of Graham to detail a main concept in his investment philosophy. Whether it is his concept of Margin of Safety, Fundamental Analysis or advice on dealing with “Mr. Market”, the author does a great job mixing in the life of Benjamin Graham and the ideas behind his work. [click to continue…]

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Quote of the Day

“The great stock market bull seeks to condense the future into a few days, to discount the long march of history, and capture the present value of all of the future.”

– James Buchan (Source: Devil Take the Hindmost)

This Day in History

 

  • 1996 – Yahoo! Goes public with (at the time) the 3rd highest first day gain of any stock, 154%.  Yahoo! IPOs at $13 per share, and closes the day at $33, going as high as $43. Shares would reach as high as $118.75 in 2000, and as low as $8.11 in 2001.

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