Uber Stock IPO: These So-Called Alternative Metrics

You know what is the sign of a great management team? An unrelenting focus on earnings per share. If you look at the annual reports of Nike, Dollar General, Home Depot, and Autozone stocks over the past twenty years, you will see regular inclusion of “per share data” along with the management team’s description that this is the metric by which wealth for the investors is created over time.

When a company is not satisfactorily growing profits on a per share basis, it will often create some alternative metric that it will convince current and prospective shareholders that it should care about as an alternative to growth in profits per share.

Right now, Uber is telling the investor community that it should focus on “core platform contribution profit” rather than profits per share because Uber claims it is earning $941 million in this core platform contribution profit, or $0.56 per … Read the rest of this article!

First Impressions! Anchoring! Underrated Forces Of The Universe!

I want to discuss with you a phenomenon that has applications in the investing world and beyond: anchoring. Simply put, anchoring occurs when someone tells you a fact or opinion, and then you use that information to make a series of decisions thereafter (that are based on that first bit of information).

If someone performs their own analysis and concludes that Berkshire Hathaway is worth $150 per share, the fact that the price is $115 per share at the time they perform their analysis will affect their subsequent decisions. If, say, the stock goes up to $145, they may be reluctant to buy (even though it is still $5 less than their estimate of value) simply because the twenty percent rise in the price of the stock somehow indicated that it is now expensive.

You see it all the time with people who conclude “that stock is at a 52 … Read the rest of this article!