Value investing, which is often traced back to Ben Graham in the 1940s, is among the most influential trends in finance in recent decades. Value investing is based on the idea that lots of stocks are out of investors’ favor because of a myriad of reasons, such as recent losses, management upheaval (think GE), product failures, etc.
I am not optimistic about reversing the trend of the ever-rising estimates, but I found a way of substantially improving their accuracy and reliability, thereby enhancing the usefulness of reported earnings and asset values to investors.
Everyone knows that accounting is boring (not when I teach it, though), but, at least, people think it’s factual. No fake news. After all, accounting comes from counting―counting money, units of inventory, etc. All facts. Nothing further from the truth.
For several years I have argued, based on comprehensive statistical evidence, that corporate financial reports―quarterly and annual statements―have lost most of their relevance and usefulness to investors.