Financial Shenanigans!

A contributor, the Mysterious Dr. M, generously donated this book to the library in the Value Vault–Financial Shenanigans by H. Schillit.  This is a great book to improve your accounting and analysis skills. It doesn’t get better than this.

Financial_Shenanigans

Thanks to Dr. M’s generosity!

13 responses to “Financial Shenanigans!

  1. I was wondering whether somebody could help me finding the publication of http://www.ritholtz.com/blog/2012/06/picture-guide-to-financial-markets-since-1800/?

    It is sell-side…but I always find long term graphs very interesting to get a broader picture. Thanks in advance!

  2. Muchas gracias! I like these kind of presentations (just like CS yearbooks etc.) since they often contain a couple of graphs that let you think further about one event, time series, etc..and they put things into perspective:)

  3. Hello Mr. John,

    Is a company that has plans to declare a share right offering higher than its market price undervalued?

    Example:

    Company A is currently trading below its par of $1. In a board meeting they have plans to declare a share right offering of $1 to raise capital. Company A’s stock price is currently trading at $.60. It has a book value of $1.80.

    Is the company undervalued?

    Thanks in advance.

    Curious

    • Dear Curious:

      You have a good name for an analyst/investor. As in almost every investment question………….it depends.

      Rights are a way for current shareholder to participate on a pro-rata basis so they don’t get diluted while the company can raise money. Rights are like fiat currency; it doesn’t mean that the rights are good value.

      In your example, the book value may be overstated. Look at Buffett’s example of the book value of Berkshire’s textile equipment–he had to pay to have the stuff carted away.

      Each case needs to be judged on its individual basis. If the $1.80 is cash to be distributed within a year, then yes, I would say 60 cents is a good price with a margin of safety.

      Thanks for the question.

  4. Thank you for your reply Mr. John.:)

  5. Mr. John? I am President for Life while controlling a poor, hot country. Dictatorships work best in resource laden countries where you can steal and give to a favored few to keep you ensconced in power. Woe is me if the money ever runs out.

  6. May I ask your thoughts regarding this stock?

    I was checking on a company yesterday and I found their accounting intriguing. They sold the 3 ha land to a dominant real estate company. The total selling price of the land was not disclosed but details regarding the changes in “cash and cash equivalent” and “advances from customer” account provided a hint.

    They disclosed that the significant increase of cash balance is due to the advance payment on the sale of a real estate which is 24% of the agreed price. It is stated that 554.5 million is the total advances made. Therefore, total consideration of the sale of land is 2.3 billion (554.5/24%).

    The intriguing part is that the transaction above is not recognized as revenues yet but according to their discussions under the cash and cash equivalents, they will recognize the sale this 2012 as revenues. Therefore, a sudden surge on their revenues of 2.3 billion is reasonably possible this year and according to my estimate, an EPS of 3.4.

    Do you think that the company’s stock price will surge if market will realize it? Currently they are operating at a loss and trading at a share price of 9.5. Yesterday they disclosed buying back 1 million of their own shares. In addition, they formed a joint venture company with the dominant real estate company for their 21 ha property. Is it a possible turn around story?

    Curious

    • Dear Curious:

      If you are asking me if a stock will surge then you are in a world of hurt. Value the company, buy with a margin of safety, and then wait. If you don’t know, then walk away. Do NOT ask me what I think, because I don’t know and never will.

      Do your own thinking. Never explain, never complain.–Winston Churchill. I don’t mean to be mean, but in twenty years, you will see the wisdom in working alone.

      Good luck.

  7. I understand. Thank you for your wisdom.

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