We Study Billionaires - The Investor’s Podcast Network

TIP672: Quality of Earnings: Uncovering Hidden Red Flags w/ Clay Finck

Nov 1, 2024

01:06:51

Many investors who analyze stocks take the numbers provided by the company at face value, but there are times when this can be a massive investing mistake.

To help shed light on what the earnings provided by a company really mean for us as investors, we reviewed the book — Quality of Earnings by Thornton O'Glove. Thornton is a Wall Street veteran known for pioneering red flag deviation analysis.

This book is an indispensable guide to determining how much money a company is really making to help us avoid making costly blunders.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

07:26 - Why you shouldn’t trust your analyst or the auditors.

15:13 - What to keep an eye on when reading an annual report.

22:35 - Red flags to look out for when analyzing a company’s filings.

31:13 - How managers and accountants can legally manipulate earnings per share, however they see fit.

34:06 - Tools we can use to help determine the quality of earnings for a company.

35:55 - How we can make use of accounting items like accounts receivable and inventory.

49:36 - The impact of dividends on your returns as an investor.

53:11 - The shortfalls of GAAP accounting.

And so much more!

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
Quality of Earnings book.
Quality of Earnings in M&A.
Related Episode: TIP667: Why Most Stocks Will Lose You Money w/ Hendrik Bessembinder, or watch the video.
Related Episode: TIP601: Junk to Gold by Billionaire Willis Johnson, or watch the video.
Related Episode: TIP656: Mastering Stock Selection with an Investment Checklist w/ Clay Finck, or watch the video.
Follow Clay on Twitter.
Check out all the books mentioned and discussed in our podcast episodes here.
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