March 17, 2017

Risks with the Obermatt rankings

If you have been following this blog for some time, then you will know that I only rely on measurable financial facts when considering equity investments. I ignore all subjective opinions and any and all future projections.

This can sometimes lead to major differences in stock analysis, as I explained last week with the Temenos and Kudelski case study. Using their analysis, Finanz & Wirtschaft (F&W) recommended Temenos; while our computing processes showed better financial figures at Kudelski.

Whenever experts, analysts or the financial press come to different conclusions than ours, it will be an interesting experiment for you. You can decide for yourself which opinion you think is right because nobody really knows exactly.

We have already identified an area where our analysis often differs and may be less significant. This occurs when a large part of the company's value will be generated in the future.

Facebook and Twitter, for example, can hardly be measured with today's financial facts because everything is in the future. The same applies to biotech companies, which often don’t generate any returns even though a lot of money has already been invested.

In these cases, as well as other financial-based analyzes, the Obermatt method works less well.

Fortunately, situations such as these are rare. Mostly, the very big companies, in which stock exchange laymen like you and I should invest, usually have extensive financial data readily available. That is why I still rely primarily on the Obermatt ranks in my decision making process.

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