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Sherri Cruz

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Investment Advice From 3 Sources, Including a Felon

Sherri Cruz, Business Journalist 5/9/2012 13 comments
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How can investors protect themselves from white collar crimes? Here are tips from three diverse sources: Michelle Leder, author of Financial Fine Print and founder of Footnoted.com; Joan Pastor, psychologist and chief executive of JPA International Inc.; and Sam E. Antar, convicted felon and former chief financial officer of his defunct family business, Crazy Eddie. One thing all three can agree on: Be skeptical about financial analysts, because they can be biased in favor of the company.
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Tips from Leder: Be wary of publicly traded companies that are still run like family businesses. It could mean sweet deals for insiders, but bad deals for investors. Check to see if pensions are overfunded or underfunded. Overfunded plans can pump up net income. Underfunded plans can be a drag on future earnings. Be wary of companies that take special charges from quarter to quarter or year after year. It can mean a company is trying to write off bad business decisions. Tips from Pastor: Pick an industry and become an expert in it. Look for companies with brilliant people at the top who arent afraid to surround themselves with smarter people. Be wary of companies with high turnover. Tips from Antar: Study financial statements over time to find patterns of inconsistencies. Study financials quantitatively -- the numbers -- and qualitatively -- the footnotes. Look for subtle inconsistencies rather than outright lies, and look for them not only in financial statements but in trade journals, newspapers, blogs, and other documents. Related posts: Digging Into Unethical Corporate Behavior Investors Pay for Dubious Corporate Ethics
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Re: Good tips mInvestor 5/15/2012 4:39:19 AM @Noreen,

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You asked a great question. I guess the best answer to that question is one tip from Pastor "Pick an industry and become an expert in it." Unfortunately, it's not that easy for our average investors to become an expert in any industry. Suggestion?

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Re: Good tips driven 5/14/2012 11:08:17 AM

I would pay the equivalent of 50% or more of my income tax to a charity. I would pay the equivalent of up to 50% of my income tax to a charity. No, I trust the government completely to spend my tax dollars wisely. Other. Tell us on the message boards. Submit
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:) Bargain Bin! Yep, me too.. I also like to balance what I read in financial publications against real life conversations or real life experiences. I mean, it makes a lot more sense to consider Buffalo Wild Wings if you've gone there with your friends four weeks in a row, amd everyone seems pretty happy with the place.
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Re: Good tips Bargain Bin 5/12/2012 11:01:32 AM Investor Uprising, of course!
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Re: Good tips Noreen Seebacher 5/11/2012 9:08:20 AM

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If you don't trust the analysts, who do you trust? Fellow investors? Friends? only your own research? On what do you base your investment decisions>
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Re: Good tips driven 5/10/2012 9:06:59 AM

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I understand exactly Cat Tail -- it pays to be a little skeptical when people with a vested interest in something start urging you to buy or sell.
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Re: Good tips cat tail 5/10/2012 9:01:03 AM

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I'm engaging in a certain amount of hyperbole here, yalanand. But my point is I always grow skeptical when the analysts start leaning one way or another...I always feel they have ulterior motives.
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Re: Good tips yalanand 5/10/2012 7:53:34 AM

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I like the consensus warning about financial analysts. When analysts say buy, I usually sell,
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@cat tail, that is a very risky strategy. You never know when the financial analysts are lieing. I think the best method is to study the stock fundamentals yourself before taking any investment call and just ignore the analysts advice because most of the time they are biased.
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Re : Investment Advice From 3 Sources, Including a Felon yalanand 5/10/2012 7:48:36 AM

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@Sherri, thanks for this informative post. Really good compilation of investment advices.Could you please explain why should investors be wary of companies with high turnover ?
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Re: Good tips Phoenix 5/9/2012 11:51:06 AM

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I like the advice given by Antar best. Who would have ever thought how important reading foot notes could be? He's right about keeping an eye out for possible inconsistencies.
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Re: Good tips Drivewaygirl 5/9/2012 9:35:02 AM

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I think it makes sense to "Look for subtle inconsistencies rather than outright lies." Most execs are smart enough (OK - we'll exclude the Yahoo CEO) to keep from making a direct false statement, but many of them get tripped up in exaggerations and overly optimistic projections.

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