The importance of knowing how company raises money and what they use it for.
Ratio analysis relies on financial statements to study the past and develop a feel for a company's attractiveness.
Stock Investing Know-How
When an oil pipeline company suffers a spill, it shows up in the next financial report. But when a high-tech firm has its top product development team stolen by a competitor, you may never know, unless you work to find out. The real assets in today's growth companies are human ones.
"My assets walk out the door every night," says one high-tech CEO. "We have to be a good place to work so they'll come back the next morning."
Investing in Information Age companies calls for a new kind of due diligence from investors. You want to be confident that the companies you invest in have the best people and are taking every step possible to keep them.
Unfortunately, the balance sheets and quarterly reports we use today were developed to describe companies that consider "capital" limited to cash and capital equipment. They tally up the value of hard assets such as locomotives and rolling mills, not the value of gray matter in their employees' heads. Nowhere in a 10-K report do you find...
An investor over time attaches some validity to his or her initial price objective, meaning that modifying that expectation becomes difficult for reasons totally contained only between one’s ears.
But stocks go where they want to, despite what any participants think is justified and despite what investors might wish would happen. Investors unable or unwilling to let go of original price opinions are doomed to lose, either through...
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