Ann: Management Changes, page-20

"From a data harvesting point of view, do you go through each individual annual report and extract the numbers or do you use another service to make it a little easier?
I have tried copying from marketindex but the donkey work is a bit soul destroying getting it all into a spreadsheet before I can even start."

@rlj,

When looking at a company from first principles I like to manually capture financial history data myself (in chronological order).

It can indeed be a time-intensive exercise but I find that going through the relevant line items for each financial year gives me great insights not only into the current financial pedigree of the company under study, but also how the business has evolved over time (periods of varying capital investment, acquisitions/divestments, changes in capital structure, operating margins, asset turn, return on capital, etc), and especially how it has performed during various external macroeconomic conditions.

In doing so I feel like I'm tracking the business in real time, but with several years compressed into just a few minutes/hours.

The shortcut is obviously to subscribe for the data, but I invariably don't trust external sources (especially when it comes to properly "sanitising" financial results in order to derive normalised/underlying profitability - as opposed to what the company's management tell us).

So, it might be a bit of a pain in the neck, but it's the way I get to an position of conviction in my assessment of a stock.

That said, it's actually not as painful as it sounds: over time I have come to learn by just scanning one or two recent results what the most salient earnings and value drivers are, and I then focus just on those.

For example, the exercise I posted above would have not taken more than 30-45 minutes - it's literally copying a mere:

a.) four line items from the balance sheets of the past 15 years... Issued Capital, Retained Earnings (Shareholder Equity merely summed these two, because there are no minority interests and the Reserve accounts are almost non-existent), Cash and Borrowings,

and

b.) two items from each P&L (Pre-Tax Profit and Interest Expense) to derive the EBIT for each year.


So, that's probably not a very helpful answer, because it is obviously a manual approach, but I respect my family's capital too much to trust data inputs from external sources such as service providers (or, heaven forbid, stockbrokers!)

That said, and I'll promptly contradict myself now: once a week I tutor a couple of uni youngsters who are studying finance or economics, and who are also interested in learning about fundamental valuation theory and I used DCG as a case study for one of the sessions.

So I cheated in this particular case: I got these uni students to do all the grunt work as "homework" (although I did check it afterwards).

It was only after I saw the outputs in spreadsheet form, and discussed them with the group, that I felt such an interesting (and damning) case study might be instructive to others, which prompted me to post it on this forum.

.