The hottest Financial Analysis Substack posts right now

And their main takeaways
Category
Top Finance Topics

Don't be fooled by Wall Street analysts

Global Markets Investor • 0 implied HN points • 28 Dec 23
💰 Finance Investing Stock Market Forecasting Financial Analysis Economic Trends
  1. Wall Street analysts have consistently missed S&P 500 year-end targets by an average of 15.7% from 2018 to 2023.
  2. It's hard for even the most renowned financial firms to predict exact stock market values, showing the importance of personal research.
  3. Despite sophisticated analysis, Wall Street analysts often get S&P 500 projections wrong, emphasizing the value of independent thinking in investment decisions.

Financial Management: Modelling & Analysis

Logos • 0 implied HN points • 18 Aug 20
💰 Finance Financial Analysis Investment strategy Risk management Statistical Methods
  1. Only create financial models when necessary. If the decision is clear, don't waste time building a model just to check a box.
  2. Focus on the key variables that have the biggest impact. It's often just a couple of factors that make the most difference in the results.
  3. Use tools like Monte Carlo simulations and sensitivity analysis to understand risks and potential outcomes better. They can help you see how different situations might play out.

The Softbank-WeWork End Game: Savior Economics or Sunk Cost Problem?

Musings on Markets • 0 implied HN points • 15 Nov 19
💼 Business Investing Economics Corporate Governance Financial Analysis Valuation
  1. Softbank invested heavily in WeWork after a failed IPO, raising questions about whether they were rescuing a sinking ship or throwing good money after bad. Their decision highlights how past investments can warp future choices.
  2. Fair value accounting can give misleading pictures of a company's worth because it’s based on market prices rather than real value. This can lead companies to make poor decisions just to improve their accounting numbers.
  3. Investing isn't just about being smart; it's also about being humble. Investors who acknowledge their mistakes and learn from them tend to make better decisions, unlike those who get arrogant after a few wins.
Get a weekly roundup of the best Substack posts, by hacker news affinity:

January 2019 Data Update 7: Debt, neither poison nor nectar!

Musings on Markets • 0 implied HN points • 05 Feb 19
💰 Finance Debt Management Corporate Finance Investment strategy Financial Analysis
  1. Debt can be good or bad depending on the company's situation. It's important to know when it's helpful and when it can lead to problems.
  2. The recent US tax reforms made borrowing less attractive for companies. Many still increased their debt, possibly out of habit or uncertainty about future tax changes.
  3. Leases are now treated as debt in accounting, which changes how we view a company's financial health. This change can show companies as more leveraged than before.

The GE End Game: Bataan Death March or Turnaround Play?

Musings on Markets • 0 implied HN points • 14 Nov 18
💼 Business Corporate strategy Financial Analysis Market Trends Management Practices Investment strategy
  1. General Electric (GE) was once very valuable but has faced a sharp decline in recent years. It’s important to understand how a company changes over time and what can cause such a downfall.
  2. GE has the option to break up into smaller companies, reshape itself into a stable business, or try to regain its former glory. Each path has its own risks and potential rewards.
  3. The history of GE shows that being a large and complex company can create problems. Easy money from financial services can lead to significant troubles when economic conditions shift.

Uber's bad week: Doomsday Scenario or Business Reset?

Musings on Markets • 0 implied HN points • 21 Jun 17
💼 Business Corporate strategy Market Dynamics Investor Relations Financial Analysis
  1. Uber has had a lot of negative news recently, especially with leadership changes and controversies. But while these issues are serious, they might not completely doom the company.
  2. The company's unique business model has allowed Uber to grow rapidly without heavy investments in cars or drivers. However, competition and rising losses could limit its future profitability.
  3. Despite recent struggles, many customers and investors still support Uber because it offers convenience and value. The real challenge is finding a new CEO who can lead the company effectively moving forward.

January 2017 Data Update 8: The Dark and Light Sides of Debt

Musings on Markets • 0 implied HN points • 01 Feb 17
💰 Finance Corporate Finance Debt Management Investment strategy Risk Assessment Financial Analysis
  1. When companies decide how much debt to take on, it’s really important to think about both the good and the bad sides of debt. Debt can help a company save on taxes and keep managers in check, but it also increases the risk of financial problems.
  2. There are real benefits to using debt, like tax savings, but many people get distracted by myths about debt being better for returns. It's crucial to understand that higher debt can also raise costs, especially if companies run into trouble.
  3. Different industries handle debt in various ways. For example, companies in technology tend to use less debt, while capital-heavy industries, like trucking and telecom, often carry more. Understanding this can help investors see the bigger picture.

Myth 5.3: Growth is good, more growth is better!

Musings on Markets • 0 implied HN points • 30 Nov 16
💰 Finance Valuation Investing Corporate Finance Economic Growth Financial Analysis
  1. Growth isn't always good. It often comes with costs and needs to be carefully managed.
  2. The value of a company is more about how efficiently it can grow, not just how much it grows.
  3. When estimating future value, it's important to consider reinvestment and returns on investment, as they affect both cash flow and growth potential.

Family Feuds: The Promise and Peril of Family Group Companies!

Musings on Markets • 0 implied HN points • 17 Nov 16
💼 Business Corporate Governance Investment Strategies Financial Analysis Economic Development
  1. Family group companies can have strong connections that help them succeed, but relying too much on relationships can lead to cronyism and limit growth.
  2. These companies often use their internal capital to support other businesses in the group, which can be beneficial but may also lead to poor investment decisions.
  3. When families control companies, they can make long-term good choices, but this same control can lead to resistance to change and mismanagement.

Venture Capital: It is a pricing, not a value, game!

Musings on Markets • 0 implied HN points • 02 Oct 16
💼 Business Venture Capital Investing Financial Analysis Market Trends Startups
  1. Venture capitalists focus on pricing companies rather than determining their actual value. This means they often set prices based on what similar companies are fetching rather than deep financial analysis.
  2. The process of pricing in venture capital relies on small data samples and infrequent updates. This can lead to pricing errors and a greater amount of subjectivity in their valuations.
  3. Successful venture capitalists tend to be better at pricing and timing their investments. They can influence the companies they invest in and ensure they're well-positioned for profitable exits.

Icahn exits, Buffett enters, Whither Apple? Value and Price Effects of Big Name Investing

Musings on Markets • 0 implied HN points • 06 Jun 16
💰 Finance Investing Stock Market Valuation Financial Analysis Market Trends
  1. The entry or exit of famous investors, like Carl Icahn or Warren Buffett, can influence how people perceive the value of a stock. Their actions might suggest they have special insights about the company’s future.
  2. There are different types of investors, such as insiders, activists, traders, and value investors, and each one can impact stock prices and perceptions in different ways. Knowing who is buying or selling can help you understand the market dynamics better.
  3. It's important to trust your own investment judgment rather than just following what big name investors do. Confirmation bias can lead you to only see evidence that supports your beliefs, so staying true to your analysis is key.

Value and Taxes: Breaking down the Pfizer- Allergan Deal

Musings on Markets • 0 implied HN points • 18 Nov 15
💼 Business Corporate strategy Mergers Pharmaceuticals Taxation Financial Analysis
  1. Pfizer's interest in acquiring Allergan is partly about buying growth. However, overpaying for this growth could hurt Pfizer's value, and Allergan's fast growth doesn't guarantee it’s a good buy.
  2. The U.S. corporate tax system is criticized for being too high and inconsistent, pushing companies like Pfizer to consider moving their headquarters abroad to save on taxes.
  3. Many see Pfizer's acquisition as potentially immoral due to the tax avoidance angle. However, business leaders often prioritize shareholder value over patriotic concerns.

Putting a Price Tag on Scandal: Sturm und Drang at Volkswagen!

Musings on Markets • 0 implied HN points • 01 Oct 15
💼 Business Investment Strategies Financial Analysis Automotive Industry
  1. Volkswagen faces huge financial losses from a scandal where they cheated on emissions tests. This has led to a significant drop in their stock price.
  2. The company is likely to incur billions in legal penalties and costs for recalling cars. They have set aside $7.3 billion to cover these expenses, but fines could reach much higher.
  3. Despite the scandal, there are arguments that the market may have overreacted to Volkswagen's situation. Some see potential value in investing in the company due to its established market presence.

Narrative Resets: Revisiting a Tech Trio (Apple, Facebook and Twitter)

Musings on Markets • 0 implied HN points • 12 Aug 15
💼 Business Investing Valuation Tech Stocks Market Trends Financial Analysis
  1. Valuation is important: Understanding a company's worth helps you make smarter investment decisions. It's key to know when to buy or sell based on value, not just price movements.
  2. Flexibility in investment strategies: Don't stick to strict rules about which stocks to buy. Being open to investing in different sectors, even risky ones, can lead to good opportunities at the right price.
  3. Timing matters: Instead of just holding onto great companies forever, sell when their price goes too high compared to their value. Staying aware of market changes can help you maximize profits.

DCF Myth 2: A DCF is an exercise in modeling and number crunching!

Musings on Markets • 0 implied HN points • 08 Aug 15
💰 Finance Valuation Investing Corporate Finance Financial Analysis Market Dynamics
  1. Valuation is not just about numbers; it's about the story behind those numbers. A good valuation connects a company’s narrative to its financial data.
  2. In early-stage companies, the narrative drives value more than the numbers. As companies mature, the focus shifts to actual financial performance.
  3. Investors should look for significant changes in a company's narrative rather than just details like revenue or earnings per share. A strong story is essential for understanding a company's value.

Discounted Cashflow Valuations (DCF): Academic Exercise, Sales Pitch or Investor Tool?

Musings on Markets • 0 implied HN points • 01 Feb 15
💰 Finance Valuation Investing Financial Analysis Market Trends Risk Assessment
  1. Discounted cash flow (DCF) is a method to figure out what an asset is worth based on its expected future cash flows, adjusted for risk and time. It's more about the practice of valuation than complicated math.
  2. Many people find DCF intimidating because it's often overdone with unnecessary details or used as a sales tool. This can make it hard for others to trust or understand the process.
  3. Valuation is not perfect, and you'll probably make mistakes due to uncertainty. But that's okay; even experts struggle with predicting the future, and market values can change too.

Putting the D in the DCF: The Cost of Capital

Musings on Markets • 0 implied HN points • 19 Jan 15
💰 Finance Investment Corporate Finance Valuation Risk management Financial Analysis
  1. The cost of capital is really important in finance and there are three main ways to understand it: as a cost of raising money, as an opportunity cost, and as a discount rate for valuing businesses.
  2. When figuring out a company's cost of capital, you need to look at the risk of the business, the debt it has, and how much investors expect to earn. It’s a detailed process but crucial for making good financial decisions.
  3. It's easy to get caught up in small details about the cost of capital, but what's more important is to focus on the actual cash flows of the business. Getting those numbers right can make a bigger impact.

Focus Pocus: Is breaking up a cure for corporate attention deficit disorder?

Musings on Markets • 0 implied HN points • 07 Nov 14
💼 Business Corporate strategy Financial Analysis Market Trends Business valuation Investment strategy
  1. Companies sometimes break up to become more focused and nimble. This is thought to help them respond faster to market changes.
  2. Breaking up a company can make it easier to manage different parts that have different needs and growth potential. Each part can focus on what it does best.
  3. Investors may find it easier to value smaller companies, leading to better pricing. This could happen because investors use different metrics for different types of businesses.

HP's Break Up : Value Enhancement, Pricing Game or Management Hype?

Musings on Markets • 0 implied HN points • 30 Oct 14
💼 Business Corporate strategy Financial Analysis Management Valuation Market Dynamics
  1. HP's decision to break up into two companies is partly based on the idea that it can cut costs and improve value. However, there are doubts about whether these cost-cutting measures could have been done without a breakup.
  2. There is skepticism about whether splitting HP will actually lead to a significant price increase. The two new companies may still face the same challenges of low growth and declining profits.
  3. The motivation behind the breakup might not be about real value creation but about taking advantage of how investors view the separate parts. It's possible that management is hoping for better market pricing simply by splitting up.

Equity Risk Premiums (ERP) and Stocks: Bullish or Bearish Indicator

Musings on Markets • 0 implied HN points • 19 May 13
💰 Finance Investing Markets Risk management Financial Analysis Economic Indicators
  1. The equity risk premium (ERP) is the extra return investors want for taking risks by investing in stocks instead of safe investments like government bonds. Right now, the ERP is high, which some believe indicates good stock returns in the future.
  2. There are different ways to measure the ERP, including looking at historical returns, surveying investors, or calculating based on stock prices and future cash flows. Each method can give varying results about how investors view risks and returns.
  3. Low interest rates on government bonds have been a big reason for the high ERP lately. If interest rates rise, we might see the ERP drop, which could lead to changes in stock prices and the overall market.

Financial Alchemy: David Einhorn’s “value” play for Apple

Musings on Markets • 0 implied HN points • 08 Feb 13
💰 Finance Investing Stock Market Corporate Finance Value investing Financial Analysis
  1. Giving preferred stock to Apple shareholders won't really create any new value for the company since it doesn't change cash flows or risk. It's like trying to make something out of nothing.
  2. Issuing preferred stock might affect the stock price, but there are simpler ways for Apple to reassure investors about its cash, like increasing common dividends or doing stock buybacks.
  3. Many companies confuse price and value, which leads to misleading claims. It's important to be clear about whether an action will actually increase value or just the stock price.

Are you a value investor? Take the Apple test

Musings on Markets • 0 implied HN points • 28 Jan 13
💰 Finance Investing Stock Market Valuation Portfolio Management Financial Analysis
  1. There are three types of investors in Apple right now: those focused on market prices, those skeptical about the company's true value, and those who see it as a bargain. Each group has a different approach to investing.
  2. Value investors should be confident in their assessments and not let market trends sway their decisions. It's important to stick to your analysis, especially in uncertain times.
  3. When investing, think about buying a part of the company, not just stock. It's also wise to avoid getting too caught up in daily news and wait for the right moment, even if it's hard to predict.

Acquisition Hubris: Over confident CEOs and Compliant Boards

Musings on Markets • 0 implied HN points • 04 Dec 12
💼 Business Corporate Governance Mergers & Acquisitions Financial Analysis Business Ethics
  1. Overconfident CEOs often push for acquisitions without proper analysis, leading to potential value destruction for shareholders. It's important for decisions to be discussed and thoroughly vetted before proceeding.
  2. A compliant board of directors can fail to challenge a CEO's acquisition decisions, allowing unchecked authority that may result in bad deals. Good governance means the board should actively protect shareholder interests.
  3. Research shows that overconfident CEOs are more likely to pursue acquisitions, but those deals often receive negative reactions from the market. It's vital for investors to watch how boards function in these situations.

HP's Deal from Hell: The mark-it-up and write-it-down two-step

Musings on Markets • 0 implied HN points • 26 Nov 12
💼 Business Mergers Acquisitions Accounting Corporate Governance Financial Analysis
  1. HP had a huge loss of $8.8 billion from buying Autonomy, which was a large part of the money they spent. This was mostly due to dishonesty in Autonomy's accounting practices.
  2. The market was really surprised by HP's announcement of the loss, and their stock dropped quickly. Usually, companies' losses from bad deals aren't a shock to investors, but this was a standout case.
  3. Many people involved in the deal are blaming each other for the mess. This highlights the problems in making big mergers and how important it is to have trust in financial reporting.

Groupon Gloom: Deal of the day or Death Spiral?

Musings on Markets • 0 implied HN points • 25 Aug 12
💼 Business Investing Market Trends Stock Valuation Corporate strategy Financial Analysis
  1. A big drop in a stock price isn't always a good chance to buy. Sometimes it's just the market reacting to real problems with the company.
  2. Valuations of companies can change a lot over time. If a company's growth potential looks shaky or uncertain, its worth might drop significantly.
  3. For growth companies, it's important they can defend their market share. If they can't, they might struggle to make money and their stock could suffer.

Passive Value investing: Screening for bargains

Musings on Markets • 0 implied HN points • 12 Jun 12
💰 Finance Investing Stock Market Value investing Financial Analysis Portfolio Management
  1. Value investing helps you find cheap stocks by using specific criteria. You can look for things like low price-to-earnings ratios and high dividend yields to spot bargains.
  2. While screening for cheap stocks can be effective, it takes time and patience to see good returns. Often, the best results come over longer periods rather than right away.
  3. Using a structured approach is key to successful investing. Combine different screens and analyses to get a clearer picture of the stock's potential for growth and risk.

Google splits its stock and spits on its stockholders

Musings on Markets • 0 implied HN points • 13 Apr 12
💼 Business Corporate Governance Stock Market Investor Relations Financial Analysis Market Dynamics
  1. Stock splits don’t change a company's fundamental value; they just change how many shares you own. After a split, you might have more shares, but each one is worth less, so your overall value stays the same.
  2. Splitting a stock can affect how people view a company and how likely they are to invest. Some think splits show confidence in future growth, while others view them as a distraction from real issues.
  3. Google’s decision to create shares without voting rights shows a shift in control towards the founders. This move may concern shareholders as it limits their say in company decisions, which could lead to future controversies.

Do markets punish long term thinking? Amazon as a case study

Musings on Markets • 0 implied HN points • 17 Dec 11
💼 Business Market Trends Investment strategy Financial Analysis Long-term Planning
  1. Markets often reward short term gains over long term strategies. Amazon's focus on long term growth has sometimes led to negative market reactions, even though it created significant value over time.
  2. Amazon's stock price has fluctuated widely, showing that it has been both overvalued and undervalued at different times. This reflects the market's sometimes irrational perspective on the company's growth potential.
  3. While Amazon has seen substantial growth in market value, there's a caution that future growth may not be as easy or cost-effective, making it potentially overpriced despite having strong leadership.

From revenues to earnings: Operating, financing and capital expenses....

Musings on Markets • 0 implied HN points • 15 Jun 11
💼 Business Accounting Valuation Investment IPO Financial Analysis Finance Accounting Valuation Investment IPO
  1. Groupon reported high revenues but also significant operating losses, raising questions about their accounting practices. It's important to understand how companies measure their profits and expenses.
  2. Groupon claimed it would be profitable by using 'Adjusted CSOI,' which excludes customer acquisition costs. This approach may mislead investors about the company's true profitability.
  3. Reclassifying expenses can make a company's earnings look better, but it can also hide the real costs involved in growth. Evaluating a company's return on investment is key to understanding its value.

Is Skype worth $8.5 billion? An exercise in valuing young, growth companies

Musings on Markets • 0 implied HN points • 18 May 11
💼 Business Valuation Acquisitions Market Analysis Investment strategy Acquisitions Valuation Financial Analysis Investing
  1. Valuing a young company like Skype is tricky because there are many unknowns. The worth of such a company can depend on factors like future revenue growth and operating margins.
  2. When investing in young businesses, it's important to look for a large market and strong competition barriers. These can help the company grow and succeed in a tough marketplace.
  3. Young companies need good financial health and a capable team to survive. Companies with less debt and strong cash reserves have a better chance of making it long-term.

The Little Book of Valuation

Musings on Markets • 0 implied HN points • 03 May 11
💰 Finance Valuation Investment Investing Valuation Stocks Market Analysis Financial Education Stock Market Financial Analysis Trading Strategies
  1. Valuation can seem complicated, but it's actually quite simple. The goal is to empower investors to learn how to value different types of companies themselves.
  2. Understanding the key factors that drive a company's value is crucial. Identifying these value drivers helps investors create better investment strategies.
  3. The book is designed to be accessible and easy to read, focusing on practical tools rather than overwhelming details. It aims to make valuation understandable for all investors.

Alternatives to the CAPM: Wrapping up

Musings on Markets • 0 implied HN points • 30 Apr 11
💰 Finance Investment Risk management Valuation Market Analysis Financial Models Investment Risk Valuation Methods Financial Analysis Market Theory Equity Research
  1. Ignoring risk in investments is a big mistake. You need your own way to measure and manage risk because investments have different levels of risk.
  2. Using numbers is important for valuing companies, but don't forget the stories behind them. The results in numbers should reflect the company's real situation.
  3. Keep your methods simple. A straightforward approach, like CAPM, can be useful, and it's important to question and refine your risk assessment regularly.

Alternatives to the CAPM: Part 3: Connecting cost of debt to cost of equity

Musings on Markets • 0 implied HN points • 30 Apr 11
💰 Finance Capital Markets Investment Theory Risk management Corporate Finance Investment Risk management Capital Markets Financial Analysis Corporate Finance
  1. It's easier to figure out the cost of debt because you can see the interest rate when borrowing. This makes it a more straightforward number to use when looking at a company's finances.
  2. You can estimate the cost of equity by comparing it to the cost of debt and factoring in the volatility of both stocks and bonds. If the cost of debt is 8%, the cost of equity might be higher, like 12%, if stocks are riskier.
  3. This method works best for big companies with significant debt. However, it has limits because equity risk and bond risk are different, so care is needed in using this approach.

Buybacks and Stock Prices: Good or bad news?

Musings on Markets • 0 implied HN points • 25 Jan 11
💰 Finance Stock Markets Corporate Finance Investment strategy Valuation Methods Market Analysis Corporate Finance Stock Market Investment Strategies Financial Analysis Market Valuation
  1. Buybacks can increase stock prices if the market undervalues cash. If investors think the cash is wasted, buying back shares can make the stock more valuable.
  2. Companies with little debt that buy back shares can improve their value. However, if a firm is already in a strong position, a buyback might send negative signals about future growth.
  3. Mature companies often benefit more from buybacks because they might be seen as having poor returns on their investments. In contrast, fast-growing companies may harm their stock prices if they buy back shares.

Stock versus Flow: My thoughts

Musings on Markets • 0 implied HN points • 09 Apr 10
💰 Finance Investing Financial Analysis Corporate Finance Accounting Valuation Investing Accounting Corporate Finance Financial Analysis Valuation
  1. Balance sheets show a company's financial position at a specific time, but they can be misleading. Numbers like debt and cash can change significantly over time, making it hard to trust a single balance sheet.
  2. Flow statements, like the income and cash flow statements, show money coming in and going out over a period. These are generally more reliable for understanding a company's performance.
  3. To get a clearer picture of a company's financial health, look at quarterly balance sheets and current numbers instead of just year-end figures. This helps catch any manipulation or changes in financial status.

How do you measure profitability?

Musings on Markets • 0 implied HN points • 15 Mar 10
💰 Finance Profitability Investments Health care Financial Analysis Market Trends Profitability Investments Health care Market Analysis Financial Metrics
  1. Dollar profits can sound impressive, but they don't tell the whole story. A big profit number doesn’t mean much if it’s tiny compared to total revenue or investment.
  2. Profit margins provide insight by showing profits as a percentage of revenue. However, comparing margins between different businesses isn't easy due to varying pricing strategies.
  3. Returns on investment, like return on equity, give a clear view of how well a company uses its money. This measure helps to evaluate profitability across different industries.

Buybacks and Stock Prices..

Musings on Markets • 0 implied HN points • 20 Sep 09
💰 Finance Stock Market Corporate Finance Investment Strategies Financial Analysis Economic Trends
  1. Buybacks give companies a way to return cash to shareholders without the long-term commitment of dividends. They also help adjust financial leverage, especially if a company feels it has too little debt.
  2. When a company decides to buy back its stock, it's usually based on how the price compares to the company's perceived value. If they think the stock is worth more than its current price, they'll consider buying it back.
  3. Sometimes companies buy back stock just to follow what others in their industry are doing, which may not always be the best choice for their own financial health.

Buffett and Munger... Shock value!

Musings on Markets • 0 implied HN points • 02 May 09
💰 Finance Investing Market Theory Portfolio Management Financial Analysis Economic Trends Investing Market Theory Portfolio Management Investment strategy Financial Analysis
  1. Warren Buffett and Charlie Munger often challenge common investing practices, suggesting that many popular ideas are overly complex and not sensible. They believe that simplicity and common sense should guide investment decisions.
  2. Buffett argues against relying too much on complicated math in finance, indicating that it can lead to bad decisions. He feels that common sense should play a bigger role than high-level calculations.
  3. Both Buffett and Munger highlight that innovative ideas in finance can face resistance, often taking time to be accepted. They suggest that the solution is to keep generating new ideas rather than giving up.