It’s often said in sports that “the best defense is a good offense.” When it comes to investing and stocks, this means focusing on companies that produce floods of cash and that “pay us first.”
What does “pay us first” mean? Well, it means companies that put shareholders and long-term stability at the top of the priority list.
And when we can buy these rare companies at clearance-sale prices, we have to jump before it’s too late. Then we sit back, enjoy the dividends and share buybacks, and watch our investments increase in value. This way, there’s no need to worry about “the market.”
Sometimes the best stocks like these are hidden in plain sight.
But, it’s all about the data.
And sometimes clearing away the noise is the most important thing you can do before assessing your next move, no matter what that may be.
As you well know by now, we live in a time where hype and spectacle get the most attention. Stocks-of-the-month come and go; some company promises to cure this or that disease; another tech startup promises to “disrupt” some mundane thing – say, convenience stores – and, in the process, reinvents the damn vending machine.
It’d be funny if it weren’t such a sad summary of a big part of our culture.
This makes the abilities of Dent Research’s forensic accountant, John Del Vecchio even more important nowadays. It’s all about hard data: inventories, receivables, sales, costs, cash flow, earnings, dividends… creating value.
John’s job is to find stocks and companies that are primed for real profits down the line.
This isn’t a gimmick, nor are these, pie-in-the-sky penny stocks. These probably include companies most of us have heard of before but never thought of them as sound investments. That is why they are stocks hidden in plain sight.
John and the Dent Research team hunt down companies using aggressive accounting to bamboozle their investors.
The same tools that can be used to identify bad companies with low-quality earnings can be turned around to find good companies with high-quality earnings.
In plain English, this means looking for underpriced companies with good management and honest bookkeeping. These are profitable gems, hiding in plain sight.
Companies that use aggressive accounting tactics to puff up their earnings eventually have to face the music. At some point, they run out of tricks and have to come clean. And when they do, it catches most investors by surprise and leads to a bloodbath in the stock price.
But companies using clean, conservative accounting are a lot more likely to surprise with better-than-expected earnings.