I stayed up late last night... and woke up early this morning... just so I could keep reading your e-mails.
Between Wednesday night and yesterday, we've received a ton of great feedback from both old and new clients about what we're rolling out at Altimetry.
My favorites are the ones where folks are simply blown away about how wrong most investors are if they use GAAP as-reported accounting. It's like they're not even seeing the same picture.
I agree 100%. I've been building our Uniform Accounting methodology for years. And I'm still shocked that so few investors realize how incredibly risky it is to invest just using traditional accounting data.
Other readers are surprised that we've made our research available to individual investors at all... considering that we have institutional clients that pay more than $100,000 a month for our analysis.
The reason is that it's high time individual investors get access to this type of analysis. And I'm excited to share it with you. Regular folks deserve the same quality of data, analysis, and insights that the best institutional investors are using.
With that in mind, let's jump into some of the best questions we received over the past two days:
Q: Will you replay the webinar for investors who had prior commitments last night?
A: We're ahead of you on that one... We have the full presentation available right here.
Please listen in while you can, as the replay is only available for a short period of time. It was great talking with my friend Porter Stansberry and Stansberry Research Managing Director Jared Kelly on the distortions that are currently rampant in as-reported accounting, and how we are fixing them to identify unique ideas.
Q: Can you explain Uniform Accounting?
A: Uniform Accounting is our way of "fixing" the more than 130 rampant issues in GAAP and IFRS accounting standards that distort a company's true earnings for investors.
Uniform Accounting doesn't require management teams to restate their financials. Instead, it simply adjusts the reported financial statements to create as consistent a report of financial activity as possible.
Then, we produce consistent metrics – like uniform margins or uniform assets – from those new uniform financial statements. We use the term "adjusted" for these new uniform numbers.
We didn't invent uniform accounting... In fact, one of the world's greatest investors – Shelby Cullom Davis – was calling for it to be embraced by chartered financial analysts way back in 1947.
At the time, he used his uniform accounting methods to invest $50,000 into just a dozen stocks... and over the next 40-odd years, made nearly $1 billion. But despite his incredible success as an investor, practically no one has paid attention to the accounting behind his success. Until now.
My team at Altimetry and I have spent the past 10 years building a system to capture exactly the issues that Davis was calling out. We understand the numbers that companies report aren't even close to reality. And we understand how to fix them.
We get deeper into Shelby Cullom Davis' incredible story and how you can use these same insights to make 100% to 500% your money in our first issue of Altimetry's High Alpha. Click here if you're interested in learning more.
Q: How do you pick stocks with Uniform Accounting?
A: After making the 130 adjustments to as-reported financials required to get an accurate picture of a company's profitability and valuation, we look at a few key factors.
Specifically, we examine a company's adjusted returns, adjusted growth, and adjusted valuations. When taken as a whole, we can see what the market is thinking in terms of expectations for the company.
Rather than trying to start by deciding what we think a company is worth – like most Wall Street firms – we do the opposite... We ask, "What is the market expecting at the price right now?"
From there, we do research to determine if the market is too optimistic or too pessimistic. You can think of us like the Las Vegas bookie, but for corporate profitability instead of NFL games.
Once we've identified if the market misunderstands the company, we then roll up our sleeves and do deep investment research. We look at industry factors. We do analysis on the earnings calls to figure out if management is really as excited as it says about its outlook. Most important, we also look at how management is compensated to see if members are aligned to make the right decisions.
We are trying to prove ourselves wrong. We're trying to explain why the market is thinking what it is thinking. More often than not, the market has it right, and the stock is "cheap for a reason."
But when we find a company where the market looks flat wrong, that's when it'll end up in our High Alpha portfolio.
Q: You talked about your market outlook during the event. How can Uniform Accounting help with that?
A: People often get caught up with headlines and big macro stories, forgetting one important thing... At the end of the day, the market is really just the sum of the fundamentals for a couple thousand companies. Sure, they are all impacted by those macro factors, but it's what they're doing that actually drives the stock market as a whole.
By using GAAP, combining company financials to analyze trends is impossible. It's a garbage-in-garbage-out exercise.
But once every company is under the same Uniform Accounting framework, it's just simple arithmetic to look at country-specific averages.
We can aggregate companies to look at the profitability and valuation of the S&P 500, for example, to get an idea of whether the broad market is cheap or expensive.
We can look at the aggregate credit riskiness of the S&P 1500 Index to get an idea of when the next crisis might arrive.
These aggregate factors give us a view no one else has, and when coupled with some traditional metrics like credit availability and investor sentiment, it can give us an idea of where we fall in the market cycle so we can make better investing decisions.
I suspect our current outlook might surprise you... We'll have more details on Monday for you about what we expect from the market in the coming months.
And to get the details on the best companies you can buy for exactly where we are in the current economic cycle, learn more about Altimetry's High Alpha by clicking here.
Those were just a handful of the questions we've received, and of course, if you have any more, I'd love to hear from you. Send us more questions at [email protected].
September 27, 2019