[Flashback] How can you tell a good board of directors from a bad one?

http://www.economist.com/node/21529101

Posted by YEO Wei Lin, Year 3 undergrad at the School of Accountancy, Singapore Management University

THE directors of Yahoo! were “so spooked by being cast as the worst board in the country” that they fired Carol Bartz as chief executive “to show that they’re not the doofuses that they are.” That was Ms Bartz’s typically blunt verdict, offered to Fortuneafter she was dismissed with a phone call by the internet firm’s chairman, Roy Bostock, on September 6th. Continue reading

What Long Term Investors Can and SHOULD LEARN From Short Sellers: Mere accounting irregularity is not enough, focus on the fundamentals of the business; Reading notes to account much more important now

https://contrarianvalueedge.wordpress.com/2015/01/30/what-long-term-investors-can-should-learn-from-short-sellers/

What Long Term Investors Can and SHOULD LEARN From Short Sellers

Posted on January 30, 2015by Anil Tulsiram

Note: Unless otherwise stated, entire text in this blog post is from two books 1) Art of Value Investing 2) Art of Short Selling . David Einhorn quotes are from his book Fooling Some of The People All the TimeMy comments are in italics. 

Let me make it clear at the outset that I had never done short selling nor do I plan to do in future. But I found principles of short selling technique to be equally helpful to long-term investors. For short sellers the maximum upside is 100% whereas downside is UNLIMITED. These asymmetrical returns force short sellers to be much more diligent and conservative compared to long only investors. I was surprised to note that most successful short sellers NEVER SHORT ANY STOCK MERELY ON OVER-VALUATION. I am not talking here about short sellers who short a stock in the morning and cover their position by the end of the day.  I am talking about short sellers, who after deep analysis create a position and hold on to it until their conviction pays off. 

Charlie Munger once said, ‘All I ever want to know is where I’m going to die, so I never go there’. My sole attempt at studying short selling technique is to find what successful short sellers look for in a good short and to avoid such stocks. 

when-gurus-shortinstitutional

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[Flashback] Should auditors be able to exercise more ethical judgment?

http://www.fraud-magazine.com/article.aspx?id=4294968847

http://www.btinvest.com.sg/personal_finance/young-investors-forum/can-auditors-be-trusted-to-detect-fraud/

Posted by Latha Do NADARAJAN, Year 3 undergrad at the School of Accountancy, Singapore Management University

Imagine an external auditor in this situation. In the course of a financial statement audit, unequivocal evidence of a fraud is uncovered. The auditor confronts the client with evidence; the client admits to the fraud and agrees to make the requisite adjustments in the firm’s financial statements. The auditor also notifies the client’s audit committee of the fraud. However, the committee comes to the decision that no further action is necessary. Continue reading

Alibaba’s IPO Warnings Ring True With Fake Goods Dustup

http://blogs.wsj.com/moneybeat/2015/01/30/dealpolitik-alibabas-ipo-warnings-ring-true-with-fake-goods-dustup/

Posted by John SOH Yong Ye, Year 4 undergrad at the School of Economics, Singapore Management University

Alibaba Group Holding Ltd. investors got a taste this week of why investing in Chinese businesses can be fraught no matter how large or blue chip the company is. Although the e-commerce giant, in my view, appears to be on solid legal ground with the disclosures it made to investors ahead of its IPO in September about its challenges with fake goods, the skirmish shows there are limits on how much investors can really know about Alibaba or any public company relying heavily on Chinese operations. Continue reading