Hey Friends,
Uncertainty can be deemed risk in the realm of stock investing. With skyward inflation, concerns over the Fed’s management of interest rates, an exponentially growing (already astronomical national debt), the war in Russia/Ukraine (what will it be tomorrow?) and on and on — macro risk is eye-popping for the marketplace. […]
Hey Friends,
I’m not sure I remember a time where macro uncertainty was more pronounced. Such uncertainties include: […]
Hi friends. This week, I’ll share a back and forth with a friend who wrote me from Nigeria with a good question concerning investing in stocks of companies with negative equity on the balance sheet. The quoted portion of this post today can also be found in the commentary to one of my blog posts at this website from the fall of 2014. […]
I share a brief post with you today. A dear friend of mine wrote to me this week about corporate buybacks where stock repurchases are coming more and more at the expense of balance sheet health. It seems that risky leverage is the growing trend of our world today […]
Hey friends. I hope this last Saturday in February 2016 finds you well. Wow, 2016! Each year about this time I’m really struggling with getting adjusted to the new year number; I’m still working with 2015. About the time I’m completely adjusted to what year it is, it has rolled over to the next one. You don’t have that struggle, do you:) […]
The stock market is flying ever upward this week. On Tuesday, I did my third CSW seminar at Mississippi State’s Meridian Campus. That day, the Dow Jones Index was up well over 200 points early in the day, only to close down by over 100 points. Then the Fed spoke and all was well again. (hint of satire)
As you know well by now, I favor value stocks since I want to pay for value that already exists over paying for value that “might” be in the future. Default risk is the risk that matters most because if the company I’ve invested in goes under, my investment in that company will never recover. Value to me is defined by the balance sheet and represents a financially solid company that stands a great chance of weathering a financial storm or setback if that comes to pass, and live to see a better day. As described in my book, “Choose Stocks Wisely,” before focusing on the balance sheet health, I experienced some bad investments that failed to weather financial storms.
Value stocks have been out of favor for a spell now while companies with weaker balance sheets (building up debt to lever higher earnings per share) have driven the stock market. See my post from late spring which cited articles on the matter here. Yet, the balance sheet always matters and when excessively leveraged companies face an adverse change in the demand climate, watch out because leverage compounds the downside just as it does the upside.
Taking on excessive leverage greatly increases the risk of default if the industry/sector weather turns inclement. Just consider that amidst the current elevated market indices that energy stocks are not participating to say the […]
Whether one invests in common stocks or not, the relevance of a healthy balance sheet to the economic welfare of society is very significant. When growing profits by any means possible becomes a norm, the balance sheet of corporate America will reveal declining financial health and we all become threatened by the growing debt burden. […]
Harold, a dear friend, called me early this week and told me about GT Advanced Technologies (GTAT). The company’s stock closed at $11.05 per share on Friday, October 3, 2014 and declared bankruptcy following the weekend, on Monday, the 6th. The stock closed at .80 a share that Monday. Later this week, a good friend, Bill, e-mailed me and suggested I write about GTAT in this week’s post. Thanks to Bill for making the suggestion. […]
I see so many corporate balance sheets of large companies today, even companies that pay dividends, which reflect liabilities (obligations) that significantly exceed assets (resources). When you exclude any intangible assets (goodwill too) from the asset base, the liabilities are that much greater than the assets. Of course, this means that the companies reflect negative equity since assets less liabilities leave equity. Typically long term debt forms a large portion of the company obligations in these situations where liabilities are greater than assets.
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In a time where soaring debt levels threaten the health of nations, the value of a healthy balance sheet is more pronounced than ever. “Choose Stocks Wisely: A Formula That Produced Amazing Returns” focuses on the incredibly useful information provided by the corporate balance sheet relative to investing in individual common stocks.
