There is a lot to learn from Wachovia’s fall from $38 per share in 2008 to approximately $2 per share prior to being acquired by Wells Fargo stock for less than 10% of its book value during the financial crisis. If I had to answer the question “What disastrous investment was most likely to ensure a long-term investor”, the answer would almost certainly be Wachovia.
Heading into the summer of 2008, Wachovia was a company earning almost $10 billion per year in annual profits, operating banking subsidiaries across the northeast and southeast portions of the United States, and had such a strong-business model that it had reported profits in 158 years of the … Read the rest of this article!
One of the most important metrics that investors use when evaluating the merits of a company’s business success is the growth in earnings per share that a company has experienced or is expected to experience over a period of time. It’s become such an important measure, however, that it often gets gamed so that American companies avoid reporting a sudden drop in earnings. One method to accomplish that task: companies take on debt to repurchase stock and boost earnings per share to bolster the appearance of organic growth when none it exists.
The investors—read: owners—of the companies are not blameless in this regard, as we come to expect quarterly growth and hey, there … Read the rest of this article!