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The inspiration for bashing out this WheelieBlog came whilst I was reading an excellent article written by Philip Ryland in the Investors Chronicle from 16th August 2019 (the one with the Chameleon/Lizard thing on the cover) entitled ‘Debt by any other Name’ and starting on page 33.
If you have access to the magazine in whichever format, I suggest you have a good read of it and perhaps it is best to read my (hopefully simple) blog first and I also suggest reading these excellent Guest Blogs by Justin Scarborough which are particularly useful if you need to brush up on basic understanding of Accounts (this is to Part 2 and there is a link inside it at the top to Part 1): https://wheeliedealer.weebly.com/educational-blogs/guest-blog-from-justin-scarborough-finance-for-non-finance-people-part-2-company-valuation
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If you have not had the dubious pleasure of the first 2 bits of this Blog Series, then you should be able to locate them at the following Links:
http://wheeliedealer.weebly.com/educational-blogs/what-i-look-for-when-reading-a-results-statement-part-1-of-3 http://wheeliedealer.weebly.com/educational-blogs/what-i-look-for-when-reading-a-results-statement-part-2-of-3 This final Part of the Blogs is a bit different as it postulates (is that a word?) a technique for analysing a Stock and then has an example to show it in action. When reading any News item and in particular when looking through Results on Recovery Situations, a great way to understand the true relevance of the information is to separate bits that are Historic from bits that will impact in the Future. To a large extent I do this in my head in the Mornings when working through the RNS Statements and this is easier to do on Stocks which I know extremely well because I have held them a while and the changes in the Business leap out at me. The logic being that bits that are in the past are irrelevant really (ok, they do give some context but 9 times out of 10 they are unlikely to be repeated), and it is things that are likely to impact in the Future that really should be concerning us and getting our attention. I think this is a huge mistake a lot of People make - it is so easy to focus on past problems and totally overlook a significant change that is happening within the Business. I know this because I make this cognitive error all the time myself.
If you have not had the dubious pleasure of reading the first part of this Blog Series, then you should be able to locate it at the following Link:
http://wheeliedealer.weebly.com/educational-blogs/what-i-look-for-when-reading-a-results-statement-part-1-of-3 Financial Strength Debt and Cash are arguably the most important Numbers you can find in the Headlines - and you would be amazed how often the Debt Number is conveniently not included. I have even had Results Statements in recent Days where I have found no mention of the Debt level in the first few bits of the Results Update and I have had to scroll and scroll and scroll right down to the actual ‘Financial Review’ bit to find any mention of Debt - and of course you can be 100% certain that if I have had to do this then the Debt Mountain is chunky and the Debt has probably increased (if the Debt had improved, you can guarantee they would be bragging about it up front !!). Guest Blog from Justin Scarborough - Finance for Non-Finance People - Part 2 Company Valuation13/6/2018
This is the Second Part of an excellent Article on Accounting Basics produced by Justin (@justinscarboro2 ) and kindly offered for sharing on my Website. If you have not read Part 1 you can find it here:
http://wheeliedealer.weebly.com/blog/guest-blog-from-justin-scarborough-finance-for-non-finance-people-part-1-the-basics Oh, and while I think about it Part 1 had some excellent Reference Material in it so I have created a new Blog Category called ‘Accounting’ so if you click on that you should be able to find it quite fast in the future. This Second Bit covers Company Valuations in the main and I did some Blogs myself on this subject quite a while ago now and you can find those here: http://wheeliedealer.weebly.com/blog/valuation-valuation-valuation-bursting-for-a-pe-part-4-of-4 There are Links at the bottom of that one to the earlier 3 parts. Cheers, WD (P.S. - Thanks Justin, the feedback I have had from WD Readers has been really glowing on Part 1 and I expect we will get more such applause for this bit - Pete).
I am sure this is a Blog that Readers will find extremely useful, especially those who are fairly new to the Great Game and want to get their head around the whole ‘Accounting’ thing a bit more. This Blog arose after some conversations on Twitter and Justin (who has an Accounting background) said he had produced this a while ago and that if peeps wanted it then he would send it over to me and I could shove it on my Site - thanks Justin, you saved me writing a Blog this Week !!
You can find Justin on the Tweets as @justinscarboro2 and he is well worth following because he is very knowledgeable on the Stocks and I think until just a few years ago he was an Analyst in the Retail Sector and he has also worked in many Senior Roles in various Companies, most recently with Air Partner AIR. After reading it through I decided it was pretty involved and made the decision to chop it into 2 Parts - next Week I will published the bit on Company Valuation. I hope you enjoy it and huge thanks again to Justin for providing this excellent material. Cheers, WD. |
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