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

We Study Billionaires - The Investor’s Podcast Network

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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