Stock Profits: Getting to the Core–New Fundamentals for a New Age
Stock Profits: Getting to the Core is designed to explain and demonstrate a new approach to fundamental analysis. The concept is based on the idea that by making core earnings adjustments, we can arrive at a real picture of a corporation’s operating profit or loss, the likely growth curve into the future, and the financial and operating strength and capitalization of the company.
The book has two sections. Part I is a summary of five specific and important techniques:
- Core earnings calculations. The adjustment from reported earnings to core earnings is critical in order to begin your analysis with valid and relevant information. The major adjustments are projected pension income (net of interest expense), earnings from discontinued operations, income from sale of capital assets, and other nonrecurring and extraordinary items.
- Trend discovery. The second technique suggested in this revised approach to fundamental analysis is the process of discovering trends (again, based on core-earnings-adjusted results). In the traditional approach to fundamental analysis, we tended to accept audited numbers and indicators at face value and to make decisions without questioning the data.
- Trend interpretation. Once we identify the nature of financial trends (and the need to adjust to core earnings), it also becomes possible to analyze companies on a realistic basis.
- Confirmation. The methods of confirming indicated trends add certainty to our forecasting, and this is at the heart of stock analysis.
- Fundamental volatility analysis. Chapter 5 proposes that market risk should be based not on price volatility, but on volatility in the fundamentals.
In Part II, these techniques are expanded upon with specific and detailed examples. Chapter 6 examines the importance of investigation, which sets up the crucial step-by-step analysis of several listed companies, found in Chapter 7. In Chapter 8, we expand upon the detailed examples by showing how the numbers are interpreted. Chapter 9 concludes with an example of how to isolate stocks down to a handful of potential investment candidates based on a combination of indicators: core earnings adjustments, price volatility, and dividend record.
- Core Earnings Calculations: A Revised Approach
- Trend Discovery: Finding the Elements of Emerging Change
- Trend Interpretation: Deciding What It Means
- Confirmation: A Powerful Analytical Technique
- Fundamental Volatility
- Investigation: Verifying the Financials
- The Core Earnings Workbook: Finding the Numbers
- The Trend: Workbook: Breaking the Code
- Looking Ahead: The Core Roadmap
Stock Profits: Getting to the Core--New Fundamentals for a New Age By Michael C. Thomsett pdf