A Quote by Walter Schloss
Most look at earnings and earnings potential, well I can't get into that game.
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One of the big problems with growth investing is that we can't estimate earnings very well. I really want to buy growth at value prices. I always look at trailing earnings when I judge stocks.
They get, you know, whatever they want from their earnings, and their earnings go into their own company.
If you can follow only one bit of data, follow the earnings - assuming the company in question has earnings. I subscribe to the crusty notion that sooner or later earnings make or break an investment in equities. What the stock price does today, tomorrow, or next week is only a distraction.
A young financial writer once brought ridicule upon himself by stating that a certain company had nothing to commend it except excellent earnings. Well, there are companies whose earnings are excellent but whose stocks I would never recommend. In selecting investments, I attach prime importance to the men behind them. I'd rather buy brains and character than earnings. Earnings can be good one year and poor the next. But if you put your money into securities run by men combining conspicuous brains and unimpeachable character, the likelihood is that the financial results will prove satisfactory.
I think there's an awful lot of twaddle and bullshit on EVA. The whole game is to turn retained earnings into more earnings. EVA has ideas about cost of capital that make no sense. Of course, if a company generates high returns on capital and can maintain this over time, it will do well. But the mental system as a whole does not work.
Investors have been too willing to buy stocks with strong reported earnings, even if they do not understand how the earnings are produced.
Earnings don't move the overall market; it's the Federal Reserve Board... focus on the central banks, and focus on the movement of liquidity... most people in the market are looking for earnings and conventional measures. It's liquidity that moves markets.
It's nonsensical to derive a price/earnings ratio by dividing the known current price by unknown future earnings.
Accounting does not make corporate earnings or balance sheets more volatile. Accounting just increases the transparency of volatility in earnings.
It's an earnings-driven market. The big question is whether the flow of earnings can rescue the market from the twin dreadnoughts of higher oil and interest rates.
Calculate a stock's price/earnings ratio yourself, using Graham's formula of current price divided by average earnings over the past three years.
My goal is to buy a company at a low multiple to normal earnings power several years out and that the company earns good returns on capital at that level of normal earnings. A holding period of more than one year also works quite well as the factors are persistent in years 2 and 3.
It's an advantage for both parties to have the other. It also creates good stability of earnings. Our business mix means we have a diversified earnings stream, which is one of the things why we got through the tough times so successfully.
What we do is we test what works on Wall Street. And sometimes it is earnings momentum, and sometimes it's earnings surprises. Sometimes it's price-to-sales cash flow, and then we put together our stock selection models.
If we're concerned about volatility of earnings because we want some more stability in our lives, then let's create, instead of an unemployment insurance system, an earnings insurance system that will moderate the volatility for a certain period of time until we get back on our feet.
Of course, the discounting of future earnings should hurt all stocks. But it should hurt technology stocks more than others, because so many of them are valued at extremely high levels relative to their current earnings.
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