Practical Uses of Inventory Accounting

Inventory accounting methods help report cost information to management and investors. They don't directly affect the physical management of the inventory operations. Yet, these methods can provide insights to general consumers of the financial world and investors.

Learnings From Mistake (#1)

A few years back I bought a company in the communications services sector. That was a mistake. I stumbled in evaluating either the fidelity or the ability of incumbent managers and, I was wrong in my evaluation of the competitive position of the company. Last year, I lost confidence in the initial investment thesis and decided to sell all my shares at a loss. Perhaps, by reflecting on what went wrong, I am hoping to avoid similar mistakes in the future.

Intrinsic Value: What Doesn't Count? Some Interesting Phenomena.

Intuitively, the concept behind intrinsic value is well understood. However, I repeatedly observe various unrelated factors get into its definition. This post will highlight two of those.

Amortization Accounting

Blindly following conventions is the enemy of reality. When companies or investment professionals add back certain expenses such as stock-based compensation they want you to accept concepts that are dangerously defective.

Insurance Float's Underappreciated Value

It is no longer a secret that upfront premiums collected by insurance companies, called float, help their profitability. The additional investment income adds to the earnings. But the degree to which an insurance company's worth increases during a high-interest rate period, like now, is still imperfectly understood.