ebook essays pieces of the puzzle
Monday, July 19th, 2010
manic mountain

It happened last week.  Tyco announced a deal to buy ADC Telecommunications (ADCT), causing the stock to rise more than forty percent, as shown by the little uptick at the end of the price chart above.  The maker of electronics gear bought fifteen companies leading up to the peak of the dot-com craze, as investors cheered its strategy on — and its stock on, which is now worth four percent of what it was back then.  The revenue chart upper left shows that the firm managed to stay afloat, but the EPS chart details the losses; the firm never got back to the steady earnings growth it had before all of the excitement.  Had the company demonstrated caution rather than abandon, it would have been ridiculed, but only for awhile.  (Charts:  Bloomberg terminal.)


“Who has time to read the footnotes?”  Spoken or unspoken, that’s a common theme in the markets today.  Well, Michelle Leder and the others at footnoted do — they named the site after them, after all.  Digging through SEC filings is a lost art in many parts of the investment business, but day in and day out, the site (now owned by Morningstar) offers interesting nuggets, especially in regard to questionable corporate governance practices that often come home to roost in the end.  In addition to the free site, the subscription service FootnotedPro offers more in-depth analyses.  Throughout the week, we’ll pick out posts of interest from footnoted.

investor relations information

A June posting at  B2B Voices was titled, “Social Media for Financial Communicators,” which is surely a timely topic.  From the financial planner down the street to global investment powerhouses, everyone is either talking about social media or wondering about it.  What works and what doesn’t?  Who is doing interesting and, more importantly, effective things with social media?  One area that’s ripe for development is the investor relations function.  Part of the posting references some coming tools at StockTwits, but what really caught my eye was the statement that social media was a “footnote” at the NIRI (National Investor Relations Institute) annual conference.  That doesn’t seem possible.  In any case, there will be an in-depth look at this in a few weeks on the research puzzle; tips on important developments would be appreciated.

applying the ideas

Professors at universities and technical traders could hardly seem further apart, but a screencast on Friday from Abnormal Returns (the pix inaugural site of the week) shows how linkages are changing in the market place.  Tadas Viskanta says that “traders sometimes tend to pooh-pooh academic research,” but he used an academic paper about price movements at the open in “high attention stocks” to illustrate how such work can provide perspective.  He also threw in a reference to one (MarketSci) of the sites that studies historical patterns, which often serve as a bridge between academic work and those who spend their days trading.

stocks for the long run

In Sunday’s New York Times, Jeff Sommer’s “Strategies” column reviewed Jeremy Siegel’s upbeat stance on equities.  Siegel, who gained fame from his 1994 book, Stocks for the Long Run, was quoted as saying, “It’s exactly at times like this, when bearish sentiment has brought down valuations, that your chance of strong returns in the following years is greatest.”  I’m sympathetic to that notion, but I don’t recall Siegel making the opposite point when valuations were historically high (and when devotees of his book kept saying not to “time” the market because in the long run stocks would win out).  Articles on Siegel tend to gloss over that part of the story; if he’s going to be quoted now, we ought to know how he responded when stocks were priced so that the probability of good returns was very low.

tolstoy on us

“Everyone thinks of changing the world, but no one thinks of changing himself.” — Leo Tolstoy (as quoted by Doug Kass).