Thursday, August 30, 2012

Focus Media

What are earnings?
Bronte Capital's John Hempton is out with another awesome analysis.
Focus Media - a potentially sham Chinese outdoor media company...
Here, here, here, here and this. Please move in that order but daym, it's a lot to read. Luckily, I had been reading it as and when it came out.
By pre-booking losses, impairments or writedowns, a company can boost its future earnings. That is the magic of accounting. (one of the magics...)
John's style is a good scuttlebutt approach - he looks around and tried to understand the essence of how money is made. For example, when he wrote about lululemon, he said that he does not know how there can be such a demand for yoga pants! Some of the commenters, spoke about how good the pants are and how some of the customers save up or keep coming back for more stuff just because it is so damned good. Point: he tries to understand why the company is able to sell stuff, how it makes money and whether all that flows into the numbers.

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