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

We Study Billionaires - The Investor’s Podcast Network

Stig Brodersen

Education, Investing, Business

4.6 • 3.6K Ratings

🗓️ 1 November 2024

⏱️ 63 minutes

🔗️ Recording | iTunes | RSS

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Summary

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. Enjoy ad-free episodes when you subscribe to our Premium Feed. NEW TO THE SHOW? Follow our official social media accounts: X (Twitter) | LinkedIn | Instagram | Facebook | TikTok. Check out our We Study Billionaires Starter Packs. Browse through all our episodes (complete with transcripts) here. Try our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts. SPONSORS Support our free podcast by supporting our sponsors: River 7-Eleven Toyota Connect Invest Public TastyTrade Fundrise Shopify American Express The Bitcoin Way ReMarkable Sound Advisory Facet SimpleMining Bluehost HELP US OUT! Help us reach new listeners by leaving us a rating and review on Spotify! It takes less than 30 seconds, and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it! Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

Transcript

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0:00.0	You're listening to TIP.
0:03.0	Many investors who analyze stocks take the numbers provided by the company at face value.
0:08.8	But there are times when this can be a massive investing mistake.
0:12.7	To help shed light on what the earnings provided by a company really means for us as investors,
0:18.0	I picked up this book called Quality of Earnings by Thornton O'Glove.
0:22.5	Thornton is a Wall Street veteran known for pioneering red flag deviation analysis.
0:28.4	This book is an indispensable guide to determining how much money a company is really making
0:34.0	to help us avoid making costly blunders.
0:37.0	During this episode, we'll cover why you shouldn't
0:39.1	trust your analyst or auditors, what to keep an eye on when reading an annual report,
0:44.7	red flags to look out for when analyzing a company's filings, how managers and accountants can
0:50.4	legally manipulate earnings per share however they see fit, the impact of dividends on your
0:56.0	returns as an investor, and much more. Increasing my understanding of accounting is a skill set
1:01.8	I've long wanted to fine-tune, and this book is certainly a step in the right direction.
1:07.2	So with that, let's dive right into today's episode covering quality of earnings by Thornton O'Glove.
1:15.6	Celebrating 10 years and more than 150 million downloads.
1:20.0	You are listening to the Investors Podcast Network.
1:22.8	Since 2014, we studied the financial markets and read the books that influence self-made
1:27.9	billionaires the most.
1:29.5	We keep you informed and prepared for the unexpected.
1:33.0	Now for your host, Clay Fink.
1:39.0	Hey, everybody, welcome to the Investors Podcast. I'm your host, Clay Fink. On today's episode,
	...

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