You’re All a Bunch of Lazy Bums

And I like that. Get someone else who is more motivated to do the work for you and ideally for free. My kind of style. But like the bit on the guy who complained about the airline internet service being out 30secs after he discovered it was available, try not complain about any non-results.

Let’s review what we know so far:

1. Fundamentals are one of the major underpinnings for today’s stock prices. They are the original foundations of stock prices of yesteryear. The Boys and Girls Clubs of Wharton and Harvard graduate with stars in their eyes for such ideas.
2. Near terms earnings reality is more important than longer term earnings hope. The continued outperformance of near term earnings reality leads to multiples and “expensiveness” that can be projected onto the idea of long term hope. (IOC excluded)
3. Consensus is the manifestation of fundamental perception. Right or wrong, honest or corrupt, its existence is required to maintain the façade of a working stock market. The sell-side will never go away because of this requirement.
4. Consensus estimates are an average of sell-side estimates. Individual analysts create estimates from income statement and balance sheet models almost exclusively maintained in an Excel spreadsheet. About 25% of those folks also maintain cash flow models, also in Excel.
5. The mechanics of creating estimates and modifying Consensus are slow enough that interested retail investors are more than able to beat the bigger balance sheets at the game of fundamental analysis.

So if you do not already maintain your own models and are not willing to go through the effort of downloading the last models I linked (not talking to the – literally – two of you who have already done so…) in the previous post to at least see how it is done, don’t complain about lack of access or the big boys who “rule the world.” If you cannot put out the effort to drive the car given to you for free, your complaint about the dude driving 90mph down the Hutch falls on deaf ears.

There. Done. My axe is ground.

A quick trip back to the model I linked the other day. It has technical flaws linked to the lack of continuity between the balance sheet and cash flow. A change in one should be linked to a change in the other. Our model links the major effects of changes in inventory, receivables, payables and capex, and that is all good and correct. But the rest of the model simply straightlines historical data. It balances itself on the equity line in the balance sheet, and this works because of the straightlines. For those willing to go the extra mile in model development, I recommend starting with Benzinga’s “Financial Modeling.” It is not as basic as some folks complain and is more than adequate for our model and valuation work. Going any further into model development is only useful if you have exact and explicit information, such as might be available from and used by CFOs. Since we are not CFOs and presumably do not have access to CFO-level information, the models I linked earlier are more than enough to give the right amount of insight into near term earnings as reported by a company.

And we are lazy, too, so going beyond Benzinga is a bit of overkill for likely not enough extra edge. Shit, after all this, only two of you downloaded the models. This place is rife with my kind of laziness.

So I have a proposition. I drive and you yell at me from the backseat. Maybe you don’t want to yell at me, in which case you can slip me a note at [email protected]. And the model I will use but not share is far more developed than the one I linked. Bonus.

And we will start with something a bit more meaty than this LED substrate bit we did with KOPN, AXTI and RBCN. I have always wanted to learn about the telecom industry and have a sneaking suspicion something interesting may pop out when we look at the capex and infrastructure bit there. I know virtually nothing about the industry and therefore will rely on you, Gentle Reader, to keep me on the straight and narrow. I am not averse to criticism. The gentlemen of The PPT have already schooled me on the shipping business, something I knew nothing about but barreled headlong into as if I were an expert. I fully expect at least The Fly to yell at me once or thrice for being an idiot.

Off we go! Back in a few weeks armed with new ideas.

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