Finding snakes in the fine print
By JERRY GLEESON
Westchester (N.Y.) Journal News
| |||
 |
|
||
|
|||
|
|
||
When Michelle Leder of Peekskill, N.Y., lost a few grand on Qwest Communications stock in the telecom crash, she went back to the financial statements that the publicly traded company had filed with the Securities and Exchange Commission before the meltdown.
The slew of red flags she subsequently discovered made her wish she had read them sooner.
Among other things, she found financial results that differed significantly from a Qwest public statement just two months earlier, aggressive approaches for revenue recognition and hints at sizable off-balance sheet obligations.
Had Leder reviewed Qwest's statements sooner, she could have sold her investment at a profit.
As she ruefully put it later in her book, "Financial Fine Print: Uncovering a Company's True Value," she estimated that the hour she didn't spend reading the public filings on Qwest cost her about $5,500, "a rate that few people can claim an hour of their time is worth."
A freelance business writer and public speaker, Leder is sadder but wiser. And today, it could even be said that she's having the last laugh.
Leder's blog, www.footnoted .org, puts the devilish details of financial statements on public display. Each entry examines a particular element of a public company, gleaned from freshly filed documents at the SEC.
Leder's observations have a snarky flavor that fans savor:
"Left out of the release, however, was the terms of (his) consultancy, which will pay him over $45K a month (Canadian) through June 2007 and a $150K (Canadian) bonus after a year," Leder writes. "Maybe we're missing something here, but that doesn't exactly look like 'financial discipline and cost control' to us."
Leder, 39, started the blog two years ago to promote her book. Now the blog itself is getting attention, and respect. Business Week, CNN and the Financial Times all have cited it as a top business blog.
Some readers say they share Leder's view that financial statements don't get the attention they deserve from investors. They also like her tone.
"When you've been in this business as long as I have, you get that way," said Joel Serebransky, a bond analyst and Westchester County, N.Y., resident. "As an analyst, you do become very jaded after so many years of reading those statements and seeing them try to pull the wool over your eyes.
"I have to say there are times when I look at the statements, and I have to read them three times to figure out what they're saying," said Serebransky.
For the average investor, financial statements can be formidable texts to wade through. Leder acknowledges that they're not for the faint of eyesight. "They're trying to write it to get you to not read it," she said.
