I just published a new long-form piece through OSAM Research Partners entitled “The Earnings Mirage: Why Corporate Profits are Overstated and What it Means for Investors.”
In the piece, I describe a new methodology for measuring the profitability and valuation of corporations. I apply the methodology to different companies, sectors, industries, countries and time periods. In the process, I encounter a massive discrepancy in corporate capital allocation. I examine different explanations for the discrepancy and ultimately conclude that reported company earnings are systematically overstated relative to reality. I end the piece by exploring the implications that this conclusion has for individual stock selection and overall stock market valuation.
Hope you enjoy!