Two Excellent Herb Greenberg Articles
I miss Herb Greenberg’s articles. If you didn’t know, he’s on summer vacation at the moment. I wanted to dissect the good, the bad and the ugly about the investment media out there in part because of heroes like him doing his part fighting for, and educating the un-informed masses.
I bookmarked 2 recent Greenberg articles and just re-read them tonight. Thought I’d share with you some of my thoughts about the good media out there! (Unless you think I’m always being critical, and cynical) The first must-read is an educational piece about how to not get blindsided by earnings reports. These quarterly dances can really get the best of investors who are not watching out for the following:
- What goes in, doesn’t come out
- Melting margins
- Signing up customers at any cost
- Quarter-end announcements
For more details on these suspicious events that can skew earnings reports. Be sure to check out Herb’s post. The ending sentence “When it comes to earnings, it’s quality, not quantity, that counts.” are truly words to live by for investors.
My next selection could also be my favourite Greenberg article for this year so far. Herb has never been shy to give his opinion, no matter how controversy the topic may be. That’s because he’s done alot of homework to arrive at the conclusion. While ranting over rambus, he takes a look back on one of his more controversial analysis. Here’s a few highlights.
[...] W.R. Hambrecht analyst Daniel Amir’s [...] was basing his ambitious valuation of $38, when the stock was $28, on a multiple of the expected award, which is a one-time event. (Since when do you put a multiple on one-time events?) [...]
Herb was eventually vindicated by recent rulings in Rambus’s lawsuit. But what caught my eye was the quick change in tune by the W.R. Hambrecht analyst.
On its business alone, before all of this legal fuss, even Amir pegged [Rambus]’s valuation at $10.
Did you need an instant replay? An analyst who valuated Rambus at $10 changed his tune drastically — pegging it at $38 when it was announced that Rambus was at the winning end of a lawsuit, potentially seeing some cash infusion. You heard right, but how many of us have also heard the story of the lottery winner who pissed away their new-found wealth within 5 - 10 years? It’s not how much cash they get but what they do with the cash that will determine the success of Rambus.
The kicker is that the analyst drastically sliced his stock prices estimates right after the recent new development in favour of Rambus’ legal opponent. Why do analysts even bother predicting valuation on events that haven’t happened? Don’t even get me started on those Google valuations! I wonder if W.R. Hambrect has any investment relations or position in Rambus? Hmmm.. the investment hype selling machine will keep rolling! First hype up the stock, because you are making a market for them, and backtrack when real doubts set in on your fantastic estimates. I’m just glad that none of my stocks are covered by that firm!
There you have it! Contrary to the notion that I focus on bringing you the bad and the ugly in investment / financial media, I’m even happier to highlight some of the good out there!
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