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Finance and Financial Management

Series

2012

Chapter 06

Articles 1 - 3 of 3

Full-Text Articles in Business

Even The Best Investors Can't Time The Market, Steven D. Dolvin Jul 2012

Even The Best Investors Can't Time The Market, Steven D. Dolvin

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Warren Buffett is considered to be one of the greatest investors ever; however, even he is not perfect. In fact, his company (Berkshire Hathaway) is named after one of his failed investments. More recently, his timing on the purchase of GM stock has not worked so well. Fortunately, his holding period is generally very long, thus it could turn out to be a favorable investment over the long-term. See article here, Bloomberg.


Manipulating Earnings, Steven D. Dolvin May 2012

Manipulating Earnings, Steven D. Dolvin

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To cover recent losses associated with CDS trading (see earlier post), JP Morgan sold securities in which they had an unrecognized gain. While this move will make their earnings look less negative, the trades will actually hurt firm value as they will trigger taxable gains and reduce future earning power. Thus, for long-term investors, metrics such as cash flow may be better measures then earnings, which tend to be more short-term in nature, as well as more easy to manipulate. (See article here, Reuters.)


Hp Cuts Jobs, Stock Price Rises, Steven D. Dolvin May 2012

Hp Cuts Jobs, Stock Price Rises, Steven D. Dolvin

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HP announced on May 23 that it will cut 27,000 jobs (see article). In class I asked students what they thought happened to the stock price. Most thought the price would drop since this is a negative indicator. However, the stock price actually rose 2.2% from its prior day close, while the market was flat. The issue is efficiency (and margin). If HP can sell the same amount with fewer employees, earnings will be higher--which translates to higher growth (and therefore market value).