A

• accountants
  • changes in and disagreements with, 62, 222–223, 234
  • profiting from fundamental analysis, 23
  • 10-Ks, 62, 222–223, 234
• accounting scandals, 53, 61, 324–325, 363
• accounts payable, 103, 107, 121
• accounts payable turnover, 142–143
• accounts receivable
  • cash flows from operating activities, 121
  • defined, 101
  • quick ratio, 144
  • swelling, 325
• accounts receivable turnover, 141–142, 311, 356
• accrual accounting, 34, 126, 326
• activist shareholders, 160
• Adelphia, 358
• ADP (Automatic Data Processing), 259–260
• agency dilemma, 159–160
• AIG (American International Group), 226
• Alcatel, 54
• Alcoa, 58
• Alphabet, 57, 103, 151, 233, 240
• alternative energy stocks, 51
• Altman’s Z-score, 353–354
• Altria, 232
• Amazon, 118, 131, 294–295
• AMC Entertainment, 264
• American Express, 47
• American International Group (AIG), 226
• amortization
  • cash flows from operating activities, 119–120
  • earnings before, 129–130
• analyst conference calls, 238–242
  • accessing, 241–242
  • earnings guidance, 239–240
  • purpose of, 239
  • what to look for, 240–241
• analysts’ reports, 250–256
  • benefits of, 250–251
  • broker research, 252–253
  • independent research, 253
  • obtaining, 256
  • skepticism of, 250
  • types of, 254
  • what to look for, 254–256
• annual reports, 62–63, 215–235, 356. See also 10-Ks
  • beautiful reports, 63
  • defined, 47, 217
  • obtaining, 63, 216
  • release of, 63
  • 10-K vs., 217–218
• annual reviews, 218
• AOL, 113
• Apple, 47
• arm’s length, 157
• Aron, Adam, 264
• Arthur Andersen, 164, 234
• as reported P-E, 149
• ask price, 52
• asset impairments, 121
• asset turnover, 185–186
• assets, 100–102
  • common-size analysis, 106
  • current assets, 100–101, 353–354
  • defined, 15, 33, 99
  • intangible assets, 99, 101, 119, 326
  • long-term assets, 101
  • not appearing on balance sheet, 226
  • relationship between liabilities, equity and, 33–34
  • tangible assets, 99, 326
  • total, 101–102, 353–354
• AT&T, 54
• audit committees, 160–162
• auditors, 164–165
  • fees, 164–165
  • shareholder vote on, 171
  • 10-Ks, 62, 223, 234–235
• Automatic Data Processing (ADP), 259–260
• average daily volume, 338–339

B

• balance sheets, 15, 97–114
  • analyzing, 106–111
  • assets, 99–102
  • dilution, 111–114
  • liabilities, 99, 102–104
  • overview, 33–34
  • shareholders’ equity, 99–100, 104–105
• Bank of America, 47
• base year, 109, 303–304
• Bear Stearns, 327
• Berkshire Hathaway, 44–46, 63, 240, 248, 269, 361
• beta (beta coefficient), 207–208, 338–339
• bid price, 52
• big-bath restatements, 326
• Bing, 246
• Blodget, Henry, 252
• Bloomberg, 293
• Blue Coat Systems, 17
• boards of directors, 157, 160–164. See also management team
  • activist shareholders, 160
  • biographies, 161
  • committees, 160–162
  • compensation, 157, 163–164
  • composition of, 157
  • conflicts of interest, 157, 163
  • corporate governance, 159–160
  • independence of board members, 161
  • meeting attendance rate, 162
  • proxy statements, 160
  • as shareholders, 157, 165
• Boeing, 315
• Bogle, John, 40
• boilerplate, 220
• bond yields, 206–207
• bonds
  • defined, 67
  • putting price tag on, 31
• bonuses, 64, 114, 166–167
• book of business, 239
• book value
  • calculating, 320
  • defined, 269
  • price relative to, 42
  • price-to-book ratio, 145–146, 181, 188, 311, 320–321, 355
• boutique research firms, 253
• brokerage accounts, 363
• bubbles and manias, 318–323
  • inflated price-to-earnings ratios, 319
  • lack of earnings, 323
  • sagging dividend yields, 319–320
  • skyrocketing price-to-book ratios, 320–321
  • technical analysis, 334
  • from unlikely places, 322
• Buffett, Warren, 11–12, 38, 44–47, 63, 177, 198, 200, 248, 265, 269, 310, 343, 361, 365
• building permits, 276
• business cycle
  • defined, 178
  • industries, 282–286
  • phases of, 273–274
• business model, 282, 357
• buybacks (stock buybacks)
  • cash flows from financing activities, 125
  • information on, 221
  • reducing danger of dilution, 113–114
  • tracking, 307–308

C

• CAGR (compound annual growth rate), 299–300
• call options
  • defined, 341
  • price levels, 341–342
  • put-to-call ratio, 342
• Campbell Soup, 86–89
• candlestick charts, 331–332
• Capital Asset Pricing Model (CAPM), 207–209, 338
• capital expenditures (cap ex), 123–124, 130, 132, 200–201, 204
• capital structure, 107–108, 110, 327
• capital-intensive businesses, 135, 271
• capitalist system, 121, 273, 282
• cash
  • analyzing, 352–353
  • balance sheets, 100
  • quick ratio, 144
• cash equivalents, 100–101, 109, 144, 181
• cash flow, 15, 116–125. See also discounted cash flow analysis; statements of cash flows
  • from financing activities, 118, 124–125
  • free cash flow, 129–132, 200–201, 203–204
  • from investing activities, 118, 123–124
  • from operating activities, 118–123, 182, 352
  • stable, 181
• cash-burn analysis, 130–132
• cash-flow statements. See statements of cash flows
• Caterpillar, 90
• CDSs (credit default swaps), 226
• CFRA, 253, 255–256
• channel checks, 255, 263
• channel stuffing, 117–118
• Charles Schwab, 256
• Chicago Board Options Exchange
  • put-to-call ratios, 342
  • Volatility Index (Vix), 343
• chronic restaters, 326
• Ciena, 17
• Cisco Systems, 137–145, 182, 187
• Citigroup, 240
• Coca-Cola, 47, 108–110, 218–220, 230–231, 240, 248
• COGS. See cost of goods sold
• common stock
  • defined, 355
  • shareholders’ equity, 104–105
• common-size analysis
  • balance sheets, 106–108
  • income statements, 87–88
• company growth
  • intermediate-term growth, 203, 205
  • long-term growth, 203, 206, 255
  • PEG ratio, 151
• comparables, 220
• compensation
  • executive compensation, 64, 114, 157, 163–170
  • stock-based compensation expense, 120
• compensation committees, 160
• competition, 22, 292, 358
• compound annual growth rate (CAGR), 299–300
• CompUSA, 307
• Conference Board Leading Economic Index, 276–277
• conflicts of interest
  • analysts’ reports, 252–253
  • boards of directors, 157, 163
• ConocoPhillips, 361
• constant dividend model, 193–194
• consumer discretionary sector, 284
• consumer expectations, 276
• contraction phase, 273–274
• conviction. See volume
• corporate culture, 281
• corporate governance
  • boards of directors, 159–160
  • investing in individual companies, 316
  • poor, 187
  • proxy statements, 156, 159–160, 223
  • 10-Ks, 223
• cost of capital. See discount rate
• cost of goods sold (COGS)
  • accounts payable vs., 121
  • common-size analysis, 87
  • defined, 79
  • gross profit margin, 90
  • inventory turnover, 142–143, 291
  • operating profit margin, 91
  • raw materials costs, 293
• coverage universe, 252
• COVID-19 pandemic, 45, 114, 190, 195, 228, 267–268, 274, 277, 303, 334, 346, 361
• credit default swaps (CDSs), 226
• credit-rating agencies
  • credit ratings, 258–259
  • reports, 257–262
• Crypto.com, 358
• Culp, Lawrence, 167, 169–171
• current assets (short-term assets), 100–101
  • accounts receivable, 101
  • Altman’s Z-score, 353–354
  • cash, 100
  • cash equivalents, 100–101
  • defined, 100
  • inventories, 101
  • marketable securities, 101
  • prepaid expenses, 101
• current liabilities, 102–103
  • accounts payable, 103
  • Altman’s Z-score, 353–354
  • current portion of long-term debt, 103
  • defined, 102
  • short-term debt, 103
• current P-E, 149
• current portion of long-term debt, 103
• current ratio, 111, 136, 178
• cyclical companies, 85, 271, 285

D

• Damodaran Online spreadsheet templates, 213
• dates of record, 192
• day traders, 38, 322
• days to cover, 339
• DCF analysis. See discounted cash flow analysis
• debt
  • cash flows from financing activities, 125
  • companies with excessive, 48, 52
  • credit-rating agencies’ reports, 260–261
  • current portion of long-term debt, 103
  • debt-to-equity ratio, 143–144, 179
  • defined, 25
  • increasing, 327
  • long-term debt, 52, 103, 125, 179–180
  • low debt loads, 178–179
  • overall economy’s effect on ability to service, 270
  • repayment timeline, 228–229
  • short-term debt, 103, 125
• debt-to-equity ratio, 143–144, 179
• default
  • credit ratings, 258
  • defined, 67
  • liquidity, 178
  • long-term debt, 103
  • rising risk of, 188
• deferred income taxes, 103, 120
• Deloitte, 165
• Delta Air Lines, 346–347
• depreciation
  • cash flows from operating activities, 119–120
  • defined, 80
  • earnings before depreciation, 129–130
  • property, plant and equipment, 101
• diluted earnings per share, 93–94, 113, 149, 186, 193
• dilution, 111–114
  • buybacks, 113–114
  • defined, 93, 112
  • employee stock options, 112–113
  • motivations for, 112
• direct costs, 79, 86–91, 164
• discontinued operations, losses on sales of, 121
• discount rate (cost of capital), 206–209
  • bond yields, 206–207
  • Capital Asset Pricing Model, 207–209
  • defined, 203, 255
• discounted cash flow (DCF) analysis, 177, 187, 197–214, 272, 338, 366
  • analysts’ reports, 251
  • benefits of, 198
  • components of, 200–209
  • discounting cash flows, 210–212
  • forecasting cash flows, 209–210
  • intermediate-term growth, 203, 205
  • limitations of, 214
  • long-term growth, 203, 206
  • market value vs. intrinsic value, 199–200, 212
  • present value, 201–202, 210–211
  • websites for, 213–214
• disruptions, 54, 282, 299
• diversification, 315, 364
  • breakdown of revenue into units, 82
  • concentrated positions vs., 29–30
  • index investing, 27
• divestitures
  • cash flows from investing activities, 123
  • gains on, 120
• dividend payout ratio, 147, 193
• dividend yield, 146–147
  • calculating, 190–191
  • sagging, 319–320
• dividends
  • affordability of, 192–193
  • analyzing, 356
  • annualizing, 191
  • calculating dividend yield, 190–191
  • cash flows from financing activities, 125
  • cuts and suspensions of, 190, 192–193
  • dates, 192
  • defined, 72, 190
  • dividend histories, 72
  • dividend policies, 193–194
  • not guaranteed, 194–195
  • signals to buy, 177
• Dodd, David, 47–48
• dot-com and tech-stock booms, 16, 40, 50–51, 54, 113, 131–132, 177, 299, 302, 322, 325
• Dow Jones Industrial Average, 27, 58
• downgrading, 259, 261
• dual-class stock structure, 103
• due diligence, 38
• durable consumer goods, 271

E

• earnings
  • defined, 23
  • lack of, 323
  • low quality, 326–327
  • managing, 126
• earnings acceleration, 346
• earnings before interest and taxes (EBIT), 79
  • Altman’s Z-score, 354
  • interest coverage ratio, 145
  • return on assets, 184
  • return on invested capital, 139
• earnings before interest, taxes, depreciation and amortization (EBITDA), 129–130
• earnings before taxes (EBT), 229
• earnings estimates, 94–96
• earnings expectations. See investor expectations
• earnings guidance, 59, 239–240
• earnings per share (EPS), 92–93
  • basic, 93
  • calculating, 92–93
  • diluted, 93–94, 113, 149, 186, 193
  • earnings estimates, 95
• earnings press releases, 58–59
  • analyst conference calls, 238
  • components of, 59
  • defined, 58
  • statements of cash flows vs., 118
• earnings season, 57–58, 126
• earnings yield, 147–148, 177, 186
• Eastman Kodak, 283
• EBIT. See earnings before interest and taxes
• EBITDA (earnings before interest, taxes, depreciation and amortization), 129–130
• EBT (earnings before taxes), 229
• economic analysis, 45
• EDGAR (Electronic Data Gathering, Analysis and Retrieval) database, 69–70, 157–158, 216, 218, 266, 309
• effective tax rate, 229
• efficiency ratios, 136, 141–143
  • accounts payable turnover, 142–143
  • accounts receivable turnover, 141–142, 311, 356
  • inventory turnover, 142, 291
• efficient market theory, 32

• 8-Ks, 58–59, 234

• Enron, 61, 116, 129, 163–164, 223, 234, 264, 358
• environmental, social, and governance (ESG), 157
• EPS. See earnings per share
• Equilar Executive Factbook, 166
• equity. See shareholders’ equity
• equity awards, 167
• equity capital, 66
• Estimize, 96, 265
• Ethan Allen, 63
• exchange-traded funds (ETFs), 24, 146, 289, 315
• ex-dividend dates, 192
• executive compensation, 64, 157, 163–170
  • bonuses, 64, 114, 166–167
  • employee compensation vs., 170
  • equity awards, 167
  • perks, 168–169
  • restricted stock, 169
  • salary, 167
  • stock options, 169
• expansion phase, 273
• expected market return, 207–208
• eXtensive Business Reporting Language (XBRL) format, 70–71
• ExxonMobil, 135

F

• Facebook, 180, 316
• Fama, Eugene, 41–42
• Fannie Mae, 224
• Fastow, Andrew, 163
• Federal Reserve, 270–272, 275
• Felton, James, 264
• FIFO (first in, first out), 228
• financial condition ratios, 136, 143–145
  • current ratio, 111, 136, 178
  • debt-to-equity ratio, 143–144, 179
  • interest coverage ratio, 145, 179, 188
  • quick ratio, 144
• financial controls and procedures, 61, 223, 234
• financial crisis of 2008 and 2009. See housing bubble and credit crunch
• financial health. See balance sheets; staying power
• Financial Industry Regulatory Authority (FINRA), 206–207, 261–262
• financial performance, 12, 22
• financial ratios, 15–16, 34–35, 45, 133–153. See also names of specific ratios
  • benefits of, 134
  • deteriorating, 187
  • efficiency ratios, 136, 141–143
  • financial condition ratios, 111, 136, 143–145
  • liquidity ratios, 35
  • management effectiveness ratios, 35, 136–140
  • operating performance ratios, 35
  • overview, 34
  • profitability ratios (profit margins), 89–93, 136
  • revenue-to-employee ratio, 134–135
  • valuation ratios, 35, 136, 145–148
• financial resources, 13
• financial statements, 8, 21, 32–35, 45. See also names of specific financial statements
  • balance sheets, 33–34, 97–114
  • in earnings press releases, 59
  • income statements, 33, 77–96
  • proxy statements, 155–172
  • restatements, 224–225, 232–233, 305, 326
  • statements of cash flows, 34, 115–132
  • 10-Ks, 222–223
  • 10-Qs, 60
• financing activities
  • cash flows from, 118, 124–125
  • overview, 66–67
  • through borrowing, 67
  • through investors, 66
• FINRA (Financial Industry Regulatory Authority), 206–207, 261–262
• Finviz, 311
• first in, first out (FIFO), 228
• fiscal years, 58
• footnotes, 225–229, 293
  • assets and liabilities that aren’t on balance sheet, 226
  • in financial statements, 103
  • pension liabilities, 226–228
  • 10-Qs, 60
• Ford, 10–11, 190–194, 240, 283–284, 291
• Form 4, 309
• forward P-E, 149
• forward-looking information, 230, 239

• 14As. See proxy statements

• Freddie Mac, 163–164
• free cash flow, 129–132, 200–201, 203–204
  • calculating, 130
  • cash-burn analysis, 130–132
  • defined, 129
  • EBITDA, 129–130
• French, Kenneth, 41–42
• fundamental analysis, 77–1, 22, 37–54, 67–68. See also financial statements; fundamentals
  • benefits of, 9–10
  • blindly following other investors, 47
  • Buffet’s techniques, 45–47
  • difficulty level of, 29
  • economic analysis, 45
  • effect of overall economy on, 270–271
  • financial ratios, 34–35, 45
  • goals of, 8, 22–23, 29, 39–44
  • horse-race betting analogy, 21
  • ideas and concepts behind, 11–14, 21–22
  • index investing vs., 26–27
  • industry analysis, 45, 254, 281–295
  • investment dangers and disasters, 313–327
  • limitations of, 359–368
  • profitability of, 31–32
  • risks of, 29–30
  • signals to buy, 16, 176–186
  • signals to sell, 16, 187–195
  • speculation vs., 48
  • technical analysis, 27–28, 41–42, 329–347
  • third-party analysis, 249–266
  • “three factors,” 42
  • timing of buying/selling, 48–54, 360
  • top-down analysis, 267–277
  • trend analysis, 176, 183, 297–312
  • what to look for, 351–358
  • who can perform, 23–24
• fundamentals
  • accounting and math, 65–68
  • Buffet’s techniques, 45–47
  • data, 12
  • financial resources, 13
  • following the money, 24–25
  • macro trends, 13
  • management team, 13
  • obtaining data, 68–74
  • perils of ignoring, 16–17
  • reports, 55–68, 215–235
  • valuation, 13

G

• GAAP (Generally Accepted Accounting Principles), 80
• gains on divestitures, 120
• GameStop, 17, 50–51, 262, 320–322, 340
• GDP (gross domestic product), 275
• General Accounting Office, 81
• General Electric (GE), 69, 72–74, 82, 162, 165, 167–172, 218, 224, 233, 259, 365
• General Motors (GM), 10–11, 82, 290–291
• Generally Accepted Accounting Principles (GAAP), 80
• Global Industry Classification Standard (GICS), 283–285
• going concerns, 35, 235
  • auditor’s opinion, 62
  • risk of default, 188
• golden parachutes, 172
• goodwill, 101
• Google, 57, 105, 151, 233, 240, 246
• Google Finance, 311
• government statistics, 274–275
• Graham, Benjamin, 44, 47–48
• gross domestic product (GDP), 275
• gross profit (gross margin), 90, 219
• gross profit percent, 90
• growth stocks and investors
  • index investing, 41
  • performance of, 355
  • price-to-book ratio, 146
  • slowing growth, 54
  • value stocks vs., 39, 189

H

• Halpin, James, 307
• head and shoulders pattern, 333
• Hershey Food, 102, 104–108
• Hewlett-Packard HP 12C financial calculator, 202–203, 211, 300, 368
• high-low-close charts, 331
• high-quality earnings, 127
• historical trend analysis. See trend analysis
• housing bubble and credit crunch (financial crisis of 2008 and 2009), 8, 16, 20, 50, 54, 160, 172, 177, 220, 270, 327, 364–365

I

• IBM (International Business Machines), 81–85
• Icahn, Carl, 160, 265
• idea reports, 254
• IFA Index Calculator, 368
• Illumina, 23
• income investing, 21, 147, 194
• income statements, 14, 77–96
  • components of, 79–80
  • investor expectations, 94–96
  • overview, 33
  • profit margins, 89–93
  • revenue, 79–89
  • variation in, 78
• independent research, 253
• index funds and investing, 26–27, 38, 41–42, 177, 315
• index of supplier deliveries, 277
• index-number analysis, 108–110, 303–304
• indirect costs and expenses, 25, 79, 86, 91, 357
• industries
  • classification of, 283–285
  • defined, 283
• industry analysis, 45, 254, 281–295
  • adding to fundamental approach, 290–295
  • effect of industry on company value, 282–286
  • sectors, 286–289
• industry groups, 283–285
• industry shifts, 54
• industry-specific financial measures, 292
• inflation
  • defined, 43
  • discounted cash flow analysis, 201
  • government statistics, 275
  • inventories, 228
• InfoSpace, 17
• initial public offerings (IPOs), 57, 66, 224, 316–317
• insider trading, 266, 306–310
  • buybacks, 307–308
  • legal vs. illegal, 306
  • management as investors, 306–307
  • selling, 309
  • tracking, 309
• intangibles, 99, 101, 119, 326
• intended federal funds rate, 275
• interest coverage ratio, 145, 179, 188
• interest expense
  • credit ratings, 261
  • defined, 79
  • earnings before, 79, 129–130, 139, 145, 184, 354
• interest rates, 271–273, 275
• interest-rate spread, 276
• intermediate-term growth, 203, 205
• International Business Machines (IBM), 81–85
• intrinsic value
  • benefits of, 199–200
  • defined, 46, 199
  • market value vs., 199, 212
  • overvaluation, 333
  • value investing, 48
• inventories
  • accounts payable turnover, 143
  • cash flows from operating activities, 121–122
  • changes to accounting method, 228
  • defined, 101
• inventory turnover, 142, 291
• investing activities
  • capacity, 66
  • cash flows from, 118, 123–124
  • overview, 65–66
  • return on investment, 66
• investment banking arms, 252
• investment return, 40
• investor expectations (earnings expectations), 94–96
  • chronically missing, 188
  • comparing actual financial results with, 94–95
  • earnings estimates, 94–96
  • expected market return, 207–208
  • importance of, 94
  • managing earnings to meet, 126
• investor relations, 72
• IPOs (initial public offerings), 57, 66, 224, 316–317
• iShares, 146

J

• JDS Uniphase, 17
• Jif, 113
• J.M. Smucker, 113
• Johnson & Johnson, 259

K

• Kim, Jongchai, 264
• KJE Computer Solutions Business Valuation tool, 213
• Kmart, 113
• Kozlowski, Dennis, 158

L

• large barriers to entry, 298
• last in, first out (LIFO), 228
• leading economic indicators, 275–277
  • Conference Board Leading Economic Index, 276–277
  • stock market, 277
• Lehman Bros., 111, 220, 327
• leverage
  • defined, 108
  • increasing, 327
  • reducing, 112
• liabilities, 102–104
  • common-size analysis, 106
  • current liabilities, 102–103, 353–354
  • defined, 15, 33, 99
  • long-term liabilities, 103
  • not appearing on balance sheet, 226
  • pension liabilities, 226–228
  • relationship between assets, equity and, 33–34
  • total, 353–354
• liability claims, 53
• LIFO (last in, first out), 228
• LikeFolio, 265
• Lilienfeld-Toal, Ulf von, 307
• line charts, 331
• liquidation, 10–11, 67, 326
• liquidity
  • short-term liquidity, 110–111
  • staying power, 178
• liquidity ratios, 35
• litigation and legal proceedings, 53, 221, 231–232
• long-term assets, 101
• long-term debt, 103, 179–180
  • current portion of, 103
  • defined, 52
  • statements of cash flows, 125
• long-term growth, 203, 206, 255
• long-term liabilities, 103
• Lucent, 54

M

• M&As. See mergers and acquisitions
• Mackey, John, 264
• macro trends, 13, 62
• maintenance reports, 254
• management effectiveness ratios, 136–140
  • return on assets, 136, 183–185, 311
  • return on equity, 136, 138–139
  • return on invested capital, 35, 136, 139–140, 183
• management team. See also boards of directors; executive compensation
  • analyst conference calls, 240–241
  • analyzing, 46, 355
  • boards of directors, 157, 160–164
  • comments in earnings press releases, 59
  • evidence of skill, 176, 183–186
  • experience of, 156
  • insider trading, 306–307, 309
  • overview, 13
  • questionable management, 187
  • shareholders’ meetings, 247–248
  • skepticism of executives’ claims in media, 245–246
  • 10-Ks, 60, 221–223
• management’s discussion and analysis (MD&A), 60–61, 222, 229–231
• managing earnings, 126
• manias. See bubbles and manias
• manufacturers’ new orders, 276
• manufacturing hours, average weekly, 277
• margin of safety, 46, 48, 200
• market for registrant’s common equity, 221
• market risk
  • price movements, 42
  • quantitative and qualitative disclosures about, 222
• market share, 282, 294–295
• market value (market capitalization), 150, 312
  • calculating, 41
  • components of, 49
  • defined, 41, 199
  • intrinsic value vs., 199, 212
  • shares of smaller companies measured by, 42
  • stock splits, 73
• marketable securities, 101, 109
• MarketSmith, 311
• MasterCard, 49–50, 136, 150–151
• material and non-public information, 23
• MD&A (management’s discussion and analysis), 60–61, 222, 229–231
• media reports, 243–246
  • credit-rating agencies’ reports, 260
  • information provided by, 244–245
  • skepticism of executives’ claims, 245–246
  • what to look for, 245
• meme stocks and investors, 8, 17, 50–51, 177, 262, 320–321
• mergers and acquisitions (M&As)
  • cash flows from investing activities, 123
  • dilution, 112–113
  • logical, 113
• Merrill Lynch, 252
• Meta Platforms, 180
• Microsoft, 90–92, 259
• Microsoft Excel
  • analyzing XBRL data, 71
  • present value, 202
  • spreadsheet help and tutorials, 29
• Milton Hershey School Trust, 103
• momentum investors, 38, 183, 345–347
• Mondelez International, 119, 122, 124–125, 127–128
• Moneychimp Cash Flow Calculator, 213
• Moody’s, 47, 258–260
• Morningstar, 266, 312, 345
• moving average analysis, 28, 304–306, 336–337
• MSCI, 283
• MSN Money, 70, 256, 312, 338, 343
• multiples. See valuation ratios
• Musk, Elon, 51, 167, 170

N

• Nasdaq, 56, 310, 339
• National Bureau of Economic Research (NBER), 274, 277
• NBCUniversal, 172
• net income (net profit; net margin), 88–89, 116
  • calculating, 88
  • defined, 80
  • overview, 92
  • quality of earnings, 352
  • return on assets, 184
  • return on equity, 138
  • revenue vs., 88
• net loss, 92
• net worth, 98–99
• New Constructs, 213, 256
• new products, 245, 347
• New York Stock Exchange (NYSE), 56
• New York University, 150
• Nike, 58
• nominating committees, 160
• noncyclical companies, 285
• number of shares outstanding, 41, 49–50, 71, 112
  • cash per share, 181
  • discounted cash flow analysis, 203–205
  • earnings per share, 92–93
  • market value, 199, 212
  • price-to-book ratio, 146
• NYSE (New York Stock Exchange), 56

O

• one-time charges, 326
• online resources
  • analysts’ reports, 256
  • Berkshire Hathaway annual reports, 47
  • big investors’ Twitter accounts, 265
  • charting service, 345
  • Cheat Sheet (companion to book), 3
  • commodity prices, 293
  • Conference Board Leading Economic Index, 277
  • credit-rating agencies’ reports, 260
  • current ratios, 111
  • discounted cash flow analysis, 213–214
  • executive compensation, 166, 169
  • General Electric, 72
  • government statistics, 275
  • Hewlett-Packard HP 12C financial calculator manual, 203
  • IFA Index Calculator, 368
  • industry data and financial ratios, 291
  • Microsoft Excel spreadsheet help and tutorials, 29
  • MSN Money, 70
  • National Bureau of Economic Research, 274
  • price-to-earnings ratio calculation, 150
  • put-to-call ratios, 342
  • S&P Dividend Aristocrat list, 195
  • SEC EDGAR database, 69
  • sector performance data, 287–288
  • social investing, 264–265
  • sports facility naming rights, 358
  • stock message boards, 264
  • stock screening tools, 311–312
  • tracking insider trading, 310
  • Trade Reporting and Compliance Engine, 206, 261
  • Vix, 343
  • Yahoo! Finance, 70, 73, 95, 208, 242, 288
• open interest, 342
• open market purchases, 170
• operating activities
  • cash flows from, 118–123, 182, 352
  • defined, 65
• operating expenses, 79
  • administrative expenses, 79
  • marketing expenses, 79
  • research and development, 79
• operating income, 149, 299–302, 304–305
• operating P-E, 149
• operating performance ratios, 35
• operating profit (operating margin)
  • overview, 91–92
  • saturation, 357
• operating profit percent, 90
• option chain, 341
• options, 340–343
  • defined, 341
  • diluted earnings per share, 93–94
  • dilution, 112–113
  • excesses, 158
  • executive compensation, 169
  • price levels, 341–342
  • put-to-call ratio, 342
  • types of, 341
  • Vix, 343
• Oracle, 299–306
• OTC Bulletin Board, 57
• OTC Pink (Pink Sheets), 57, 246
• overboarding, 160, 172
• overvaluation, 29, 48, 51, 148–149, 151–152, 176, 187–188, 194, 257, 308, 326, 333, 340, 366
• ownership
  • buying business vs. trading stocks, 11–12
  • investing as owner, not trader, 46
  • proxy statements, 157
• Oxford City Football Club, 246

P

• P&G (Procter & Gamble), 113, 204–205, 207–210, 212
• Palm Computing, 40
• passive investing, 12–13, 16, 53
• payable dates, 192
• P-E ratio. See price-to-earnings ratio
• peak phase, 273
• PEG ratio, 151, 183, 188, 319
• penny stocks, 57
• pension liabilities, 226–228
• Per Se, 23
• percentage changes
  • calculating, 67–68
  • company growth, 83–84
  • defined, 67
• perks, 168–169
• per-share price, 49–50, 73, 136, 150
• Pfizer, 259
• Philip Morris USA, 231–232
• Pink Sheets (OTC Pink), 57, 246
• PP&E. See property, plant and equipment
• preferred stock
  • defined, 93
  • shareholders’ equity, 104
• prepaid expenses, 101
• present value, 201–202, 206, 210–211, 300
• price-to-book ratio, 145–146, 181, 311
  • growth stocks, 355
  • inflated, 188
  • skyrocketing, 320–321
• price-to-earnings (P-E) ratio, 35, 145, 148–153, 177, 197, 311
  • benefits of, 149–150
  • calculating, 148–150
  • comparing company financials to industry, 290
  • earnings yield, 186
  • of entire market, 152–153
  • inflated, 189, 319
  • overvaluation, 188
  • PEG ratio, 151, 183, 188, 319
  • reciprocal, 186
  • S&P Dow Jones Indices, 287–288
  • technical analysis, 345
  • variations of, 148–149
• PricewaterhouseCoopers, 235
• pro forma earnings, 95–96
• Procter & Gamble (P&G), 113, 204–205, 207–210, 212
• profit margins (profitability ratios), 89–93, 136
  • defined, 89–90
  • earnings per share, 92–93
  • gross profit, 90
  • net income, 92
  • operating profit, 91–92
  • return on assets, 185
• profitability, 14. See also income statements
• property, plant and equipment (PP&E), 101
  • investments in, 123
  • 10-Ks, 220
  • updating and upgrading, 123
• prospectuses, 317
• proxy statements (14As), 64, 155–172
  • auditors, 164–165, 171
  • boards of directors, 157, 160–164
  • corporate governance, 156, 159–160, 223
  • defined, 64, 156
  • executive compensation, 64, 157, 163–170
  • information gained from, 64, 156–157
  • obtaining, 157–158
  • other shareholders, 157, 165, 170–172
• PSINet, 358
• public comments and statements, 237–248
  • analyst conference calls, 238–242
  • media reports, 243–246
  • shareholders’ meetings, 247–248
• publicly-traded companies
  • defined, 7–8
  • transparency, 56–57
• PurchasePro, 325
• put options
  • defined, 341
  • price levels, 341–342
  • put-to-call ratio, 342
• put-to-call ratio, 342

Q

• qualified auditor’s opinions, 62
• quality of earnings, 314, 352
• quantitative research firms, 253
• quick ratio, 144

R

• RadioShack, 235
• raw materials costs, 293
• Ready Ratios, 111, 291
• real money supply, 276
• real-estate investment trusts (REITs), 193
• recessions, 268–269, 271, 273–274, 277, 360
• recovery phase, 274
• Reddit, 38, 50, 265, 340
• regional economic activity, 275
• Regulation Fair Disclosure (Regulation FD), 241, 243
• REITs (real-estate investment trusts), 193
• related-person transactions (related-party transactions), 163
• Relative Strength Index (RSI), 343
• resistance levels, 332
• restatements, 224–225, 232–233, 305, 326
• restricted stock, 93, 167, 169
• retained earnings
  • Altman’s Z-score, 353–354
  • shareholders’ equity, 99, 105
• retirement accounts, 363
• return on assets, 136, 183–185, 311
• return on equity (ROE), 136, 138–139, 183, 311, 327
• return on invested capital (ROIC), 35, 136, 139–140, 183
• return on portfolio, measuring, 366–367
• revenue, 79–89
  • accounts receivable turnover, 141
  • Altman’s Z-score, 354
  • breakdown into units, 81–82
  • company growth, 82–85
  • defined, 79
  • direct costs, 79, 86–89
  • improper revenue recognition, 81
  • information gained from, 80
  • international vs. domestic, 86
  • net income, 88–89
• revenue growth, 83–85, 89, 129, 356
  • decelerating, 187
  • fast-growing companies, 311
  • swelling accounts receivable, 325
• revenue recognition, 81, 325
• revenue-to-employee ratio, 134–135
• reverse stock splits, 73–74
• risk
  • changing appetite for, 188
  • credit-rating agencies’ reports, 259
  • discounted cash flow analysis, 201
  • market risk, 42, 222
  • measuring portfolio’s risk, 367–368
  • rising risk of default, 188
  • specific risk, 314–315
  • systematic risk, 314–315
  • 10-Ks, 62, 220, 222, 230–231
• risk-free rate, 207–208
• Ritter, Jay, 317
• Robinhood, 317
• ROE (return on equity), 136, 138–139, 183, 311, 327
• ROIC (return on invested capital), 35, 136, 139–140, 183
• RSI (Relative Strength Index), 343
• Ruenzi, Stefan, 307
• Russell 3000, 45

S

• S&P. See Standard & Poor’s
• Sarbanes–Oxley Act of 2002, 61, 223
• saturation, 357
• say on pay votes, 172
• Sears, 113
• SEC. See Securities and Exchange Commission
• secondary market, 66
• Sector SPDRs, 288
• sectors, 283–285
  • business cycle and performance of, 286
  • exchange-traded funds, 289
  • fundamentals of, 286–288
  • stock performance of, 288, 335
• Securities and Exchange Commission (SEC)
  • analysts’ reports, 252
  • disagreements, 220
  • EDGAR database, 69–70, 157–158, 216, 218, 266, 309
  • executive compensation, 169
  • Form 4, 309
  • fraud, 246, 325
  • pro forma earnings, 96
  • proxy statements, 64, 157–158
  • Regulation FD, 241, 243
  • 10-Qs, 60
  • 13F-HRs, 266
• securities class-action lawsuits, 323–324
• Security Analysis, 28
• selective disclosure, 56
• shareholder proposals, 64, 157, 165, 171–172
• shareholders’ equity, 104–105
  • additional paid in capital, 105
  • Altman’s Z-score, 354
  • calculating, 99–100
  • common stock, 104–105
  • common-size analysis, 106
  • defined, 25, 33, 99
  • low debt loads, 179
  • preferred stock, 104
  • price-to-book ratio, 146
  • relationship between assets, liabilities and, 33–34
  • retained earnings, 105
  • return on equity, 138
  • total, 105
  • treasury stock, 105
• shareholders’ meetings, 247–248
  • fun, 248
  • general script for, 247–248
• short interest, 339–340
• short selling, 321, 339–340
• short squeezes, 340
• short-term assets. See current assets
• short-term capital gains, 53
• short-term debt, 103, 125
• short-term liquidity, 110–111
• Silicon Investor, 264
• sin stock, 232
• size of companies
  • measuring, 41–42
  • revenue and, 80
  • shares of smaller companies measured by market value, 42
• Snap, 103
• SolarCity, 51–52
• special-purpose acquisition companies (SPACs), 224–225
• specific risk, 314–315
• speculation and speculators, 38, 48
• speculative returns, 40, 44
• spread, 52
• Standard & Poor’s 500, 27, 44–45, 111, 114, 127–128, 148, 152–153, 177
  • buybacks, 307–308
  • COVID-19 recession, 268–270
  • Dividend Aristocrats list, 195
  • dividend yield, 320
  • dividends, 192, 195
  • executive compensation, 163–164, 167
  • financial crisis of 2008 and 2009, 269
  • leading economic indicators, 277
  • long-term debt, 179–180
• Standard & Poor’s (S&P)
  • credit ratings, 258–260
  • Dow Jones Indices, 287–288
  • GICS, 283
• standard deviation, 315, 367–368
• statements of cash flows, 115–132
  • benefits of, 117
  • cash flows from financing activities, 118, 124–125
  • cash flows from investing activities, 118, 123–124
  • cash flows from operating activities, 118–123
  • components of, 118
  • earnings vs. cash flow, 126
  • free cash flow, 129–132
  • importance of cash flow, 116
  • low-quality earnings, 326–327
  • monitoring cash flow, 126–128
  • overview, 34
• staying power (financial health), 21, 35. See also balance sheets
  • cash per share, 181
  • current ratio, 136, 178
  • liquidity, 178
  • low debt loads, 178–179
  • stable cash flows, 181
  • Tier 1 and Tier 2 capital, 293
• stock buybacks. See buybacks
• stock message boards, 262–264
• stock price charts, 27, 330–332
  • types of, 331–332
  • what to look for, 332
• stock prices, 277
• stock screening, 310–312, 364
  • benefits of, 310
  • building screens, 311–312
  • categories of, 311
• stock splits, 72–74
  • defined, 72
  • obtaining data, 73–74
  • reverse, 73–74
• stock-based compensation expense, 120
• Stocktwits, 265
• story stocks, 51–52
• strike price, 341–342
• subindustries, 283–285
• Sun Microsystems, 17
• suppliers, 22, 102–103, 118, 126, 142, 220, 255
• support levels, 332
• systematic risk, 314–315

T

• T. Rowe Price, 180
• Take-Two Interactive, 316–317
• tangible assets, 99, 326
• Target, 294–295
• taxes
  • auditing firms, 165
  • deferred income taxes, 103, 120
  • earnings before interest and, 79
  • effective tax rate, 229
  • income statements, 79
  • investing in individual companies, 362
  • short-term capital gains, 53
  • taxable accounts, 363
• TD Ameritrade, 256
• technical analysis, 38, 41–42, 329–347
  • fundamental analysis vs., 27–28, 333
  • historical prices, 335–336
  • opposition to, 330
  • options, 340–343
  • stock price charts, 330–332
  • stock prices as early-warning system, 335
  • terminology, 333
  • tools for, 336–340
  • using with fundamental analysis, 334–336, 344–347
  • what to look for, 332
• technicals, defined, 330
• tech-stock boom. See dot-com and tech-stock booms

• 10-Ks, 61–62, 215–223, 232–233
  • annual reports vs., 217–218
  • competitors, 292
  • defined, 61, 217
  • key elements of, 61–62, 219–223, 225–235
  • obtaining, 218–219
  • revisions and restatements, 224–225, 232–233, 305, 326
  • 10-K wraps, 63, 218
  • 10-Qs vs., 61
• 10-Qs, 59–61
  • components of, 60
  • deadlines, 59–60
  • defined, 59
  • lack of auditing, 61
  • 10-Ks vs., 61

• terminal growth rate, 255
• Tesla, 51–52, 167, 290

• 13F-HRs, 266

• 3Com, 40
• 3M, 184–186

• Tier 1 and Tier 2 capital, 293
• time value of money, 31, 201–202
• Time Warner, 113
• top-down analysis, 267–277
  • key measures, 273–275
  • leading economic indicators, 275–277
  • overall economy, 268–273
• TRACE (Trade Reporting and Compliance Engine), 206–207, 261–262
• trade credit, 103
• trade cycle, 25, 38
• trading commissions, 361–362
• trading costs, 52
• trading patterns, 28
• trailing P-E, 148–149
• transparency, 56–57
• treasury stock, 105
• Trefis, 214
• trend analysis, 176, 183, 205, 297–312, 366
  • forecasting future, 301–303
  • importance of, 298–300
  • index-number trend analysis, 303–304
  • industry changes, 357
  • insider trading, 306–310
  • moving average analysis, 304–306
  • stock screening, 310–312
• trough phase, 274
• Trump Hotels & Casino Resorts, 96
• Twitter, 265
• Tyco International, 158

U

• unavailability of capital, 270
• undervalued stocks, 23, 26, 38, 48, 177, 181, 194, 198, 212, 340, 360
• unemployment, average weekly initial claims for, 276
• U.S. Department of Commerce Bureau of Economic Analysis, 275
• U.S. Department of Labor Bureau of Labor Statistics, 275

V

• valuation, 22, 366
  • analysts’ reports, 255
  • overview, 13
  • signals to buy, 176–177
• valuation ratios (multiples), 35, 136, 145–148
  • dividend payout ratio, 147, 193
  • dividend yield, 146–147
  • earnings yield, 147–148
  • price-to-book ratio, 145–146, 181, 188, 311, 320–321, 355
  • price-to-earnings ratio, 35, 145, 148–153, 177, 183, 186, 188–189, 197, 287–288, 290, 311, 319, 345
• Value America, 131–132
• value stocks and investing, 47–48
  • defined, 38
  • fundamentals, 48
  • Graham and Dodd, 47–48
  • growth stocks vs., 39, 189
  • index investing, 41
  • origins of, 48
  • price-to-book ratio, 146
  • trend analysis, 183
• Visa, 49–50, 136, 150–151
• Volatility Index (Vix), 343
• volume (conviction)
  • average daily volume, 338–339
  • stock price charts, 27
  • technical analysis, 337–338

W

• Wall Street analysts
  • analyst conference calls, 238–239
  • analysts’ reports, 250–256
  • earnings estimates, 96
• Wall Street Journal, The, 166
• Walmart, 294–295
• Walsh, Frank, 158
• Walt Disney Company, 271
• Warner Bros. Discovery, 167
• Warren Buffett Way, The, 45
• Washington Mutual, 111
• Welch, Jack, 169
• WhaleWisdom, 310
• Whole Foods Market, 264
• Wild Oats Market, 264
• wisdom of crowds, 262
• working capital
  • analyzing, 110–111
  • calculating, 110
  • defined, 100
• WorldCom, 111

X

• XBRL (eXtensive Business Reporting Language) format, 70–71

Y

• Yahoo! Finance, 70, 73, 95, 208, 242, 264, 288, 292, 335–336

Z

• Zacks Investment Research, 312
• Zaslav, David, 167
• Zynga, 316