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Herb Greenberg’s 5 Simple Lessons

Posted By Barry Ritholtz On May 25, 2008 @ 9:00 am In Earnings,Financial Press,Investing,Legal,Valuation | Comments Disabled

In case you didn’t know, Herb Greenberg has retired from WSJ and Marketwatch to go into "private practice."

For his final column as a journo, he put together these 5 simple lessons for investors.      

Lesson No. 1:
The numbers don’t lie.
That is why some short sellers and forensic analysts don’t
like to talk to companies. They want to avoid the spin or the
face-to-face meeting that can create a psychological connection that
may skew what otherwise would be black-and-white analysis.

Lesson No. 2:
Quality, not quantity.
Ignore the "beat the Street" headlines on
earnings. It is what goes into the earnings that counts. The
real story is often on the balance sheet, and the
cash-flow statement. The more complex and convoluted the
financial statements get, the more reason to worry.


Lesson No. 3:
GAAP isn’t the same as a Good Housekeeping seal.
Generally Accepted
Accounting Principles include plenty of gray areas — GAAP is subject to
interpretation.  Just because its legal doesn’t mean the results aren’t lousy.


Lesson No. 4:
Don’t confuse stocks and companies.
They sometimes go in opposite
directions. Stocks sometimes do lie. They can be pushed
artificially higher by rotation, by short squeezes, by momentum.


Lesson No. 5:
Risk isn’t a four-letter word. Before you
buy, instead of asking how much you can make, ask how much you
can lose.
Great stuff, Herb. Good luck in the new venture — and if you ever feel the need to vent or want an outlet for us proles [1], the floor is always open for you . . .



Parting advice [2]:
After 34 years of covering business, five simple lessons
Herb Greenberg
MarketWatch, 7:49 p.m. EDT April 27, 2008

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URL to article: http://www.ritholtz.com/blog/2008/05/herb-greenbergs-5-simple-lessons/

URLs in this post:

[1] proles: http://en.wikipedia.org/wiki/Nineteen_Eighty-Four

[2] Parting advice: http://www.marketwatch.com/news/story/columnists-parting-advice/story.aspx?guid=%7B57777FAD%2D79CD%2D4355%2DA7FA%2D7132EB2F4DB2%7D

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