Representation crisis

Disclaimer: The views expressed here are mine and may change without notice. Past performance is not indicative of future results. All investments carry risk, including financial loss. This analysis is for educational purposes only and does not constitute investment advice or recommendations of any kind. Conduct your own research and seek professional advice before investing. Please see important disclaimers here and here.

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As I wrap up the current earning season, I find that my confidence in reported numbers doesn't increase. Inaccurate representation about current business operations and future prospects keep showing up in corporate earnings reports.

The Quality Of...

Disclaimer: The views expressed here are mine and may change without notice. Past performance is not indicative of future results. All investments carry risk, including financial loss. This analysis is for educational purposes only and does not constitute investment advice or recommendations of any kind. Conduct your own research and seek professional advice before investing. Please see important disclaimers here and here.

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Consider a company whose revenues are increasing, whose profits are increasing, and whose management is great. Can it be a bad investment candidate? It doesn't sound like it initially, but it could be a bad bet if the quality of key company tenets is not judged properly. Let’s examine this idea closely by evaluating a few business analysis items.

The Four-Legged Stool

"Is the company shareholder friendly? Does it pay a high dividend? Does it buy a lot of its shares?" I had been hearing such statements because some investors and others think returning cash is the most important tenet to judge a company and/or to make an investment. I am skeptical here. 

Bank of America: The Best of Large US Banks

Disclaimer: The views expressed here are mine and may change without notice. Past performance is not indicative of future results. All investments carry risk, including financial loss. This analysis is for educational purposes only and does not constitute investment advice or recommendations of any kind. Conduct your own research and seek professional advice before investing. Please see important disclaimers here and here.

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Banks buy and sell money which is a relatively simple business. However, we continue to see bank failures whether it was the savings and loan crisis of the 1980s or the 2009 financial crisis, to name two. The primary culprit has always been the asset side of the balance sheet, meaning, what does the bank DO with the money is of prime importance. Thus, assessing the lending-related downside risk for a bank is far more important than upside when assessing opportunities.

Verisign: The Lollapalooza Business Case Study

Disclaimer: The views expressed here are mine and may change without notice. Past performance is not indicative of future results. All investments carry risk, including financial loss. This analysis is for educational purposes only and does not constitute investment advice or recommendations of any kind. Conduct your own research and seek professional advice before investing. Please see important disclaimers here and here.

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"When several models combine, you get lollapalooza effects; this is when two, three, or four forces are all operating in the same direction." - Poor Charlie's Almanack 

This post is a write-up on a company I highly admire, and I believe business schools should teach Verisign (VRSN). It is a near-perfect example of extraordinary business success when multiple mental models are all working in the same direction. I could figure at least eight mental models in the case of VRSN.