RECENT NEWS Separating information from noise Education Segment Cincinnati Investment Model Club.

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Presentation transcript:

RECENT NEWS Separating information from noise Education Segment Cincinnati Investment Model Club

H.D. Recent Quarterly Figures When we see recent quarterly figures that indicate there is a problem we must investigate and find out what is happening.

Is it the economy or an Industry Problem? Check the competitors to see if it is an industry problem or if it is a problems specific to your company. These were the figures for Lowe’s most recent quarter.

Value Line Commentary Check the date at the bottom of the Value Line Sheet. The more current the date, the more valuable the commentary. If this were Jan. 15, this commentary would be very relevant. By March 15 it is probably of limited value.

Recent News When a large well known company such as Home Depot has a problem there will be a lot of news articles written about the company. As smart investors we have to learn what recent news is important and what is “just noise” that may distract us.

Separating the information from the noise We are going to look at some of the recent news articles. We need to find out what happened and how Home Depot is going to fix the problem. Home Depot is discussed in all these articles. I will do a couple as examples and then ask you to decide which of the others are important

From an AP article on 2/25/03 This is not important unless you are a day trader.

Press Release 2/2703 This does not answer our questions but it does give us a clue about Home Depot’s expectations for future growth. They are increasing their dividend from.21 to.24. It might be a good idea to look at the payout ratio on the SSG.

This is from a news article on 3/04/03. Again this is a short term issue. As long term investors we have taken into account the fact that the “housing boom”would not last forever and have made conservative projections about the future.

Recent News Sometimes it is very easy to decide what is news and what is noise and sometimes it becomes a judgment issue. Information that may be very important to some people is less important to others.

Is this important or is this noise?

Important or Noise?

Is this important or is it noise?

Recent News Watch the terminology! There is a difference between sales and net profit and between basic earnings and diluted earnings. Also watch for the words “Pro Forma”. We never want to use “Pro Forma” Earnings Statements for our financial numbers.

Headlines for News articles from Reuters, AP and a Home Depot Press Release. Be sure you compare apples to apples and not to peaches and potatoes. We use sales and earnings on our SSG’s.

Recent News We set out to find out what happened at Home Depot and how they are planning on fixing it. Did any of these six news articles we looked at answer our questions?