Steven Reiman
Long/short equity, value, research analyst, small-cap

Pulse Seismic: A Free Cash Flow Machine Disguised By Accounting

"Managers and investors alike must understand that accounting numbers are the beginning, not the end, of business valuation."

-Warren Buffett

Accounting can sometimes be a value investor's greatest asset as the rigid rules can cause a great business appear to be a poor one due to possible distortions in earnings due to depreciation, amortization or some other finance construct. In select cases, this gives investors the opportunity to buy these businesses at a discount due to Wall Street's overemphasis on earnings.

One of the most well-known examples of this is the case of TCI, which for years was undervalued due to heavy depreciation expenses that masked TCI's prodigious ability to generate free cash flow. Needless to say, the investors...

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