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David Trainer
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Follow me on Twitter: @NewConstructs David is CEO of New Constructs (www.newconstructs.com), an independent research that specializes in unearthing key insights from the Financial Footnotes of Annual Reports. Having analyzed over 50,000 annual reports and their Financial Footnotes, New... More
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The Diligence Institute
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  • The Danger Zone Pick: 11/5/12

    Check out my latest Danger Zone interview with Chuck Jaffe of MarketWatch.com.

    This week US Steel (NYSE:X) is in the Danger Zone. Recent downward earnings guidance by management is playing out as I suggested in US Steel (X) At Risk Of Pension Pressure on June 19, 2012.

    Some stocks are more dangerous than others. In an anemic economic environment, the most dangerous stocks are those with issues that are lurking behind the scenes or in footnotes. Too often, investors are willing to invest without much diligence when times are good. But when times get tough, more are willing to roll up their sleeves and do some old-fashioned analysis.

    US Steel (X) is an example of a stock that could see significant additional downward pressure as more investors become aware of the $5.2 billion in liabilities related to its "Pension Benefits", "Other Benefits" and "Other postemployment benefits" plans, which I will bundle under the term "pensions" for the remainder of this article.

    A loophole in GAAP accounting minimizes, at least temporarily, the impact of big pension liabilities on reported earnings. Eventually, however, these issues can hurt earnings and surprise investors if the company does not take measures to get them under control.

    In a challenging economic environment, taking appropriate measures is not always feasible. As Warren Buffett famously said, "when the water is drained out of the pool, you see who is not wearing trunks".

    My fear is that US Steel's pension liabilities will eventually manifest in downward earnings revisions that will drive the stock down.

    Disclosure: I am short X.

    Tags: X
    Nov 05 3:33 PM | Link | Comment!
  • November's Most Attractive Stocks Available To Subscribers Today

    Paying customers can access November's 40 Most Attractive Stocks as of midnight last night. We provide 20 large/mid cap names and 20 small cap names to buy in this monthly newsletter.

    All Most Attractive Stocks reports more than 90 days old are free. All reports published in July and earlier are now free - access them here.

    Public release will be on Wednesday Nov 7.

    Microsoft (NASDAQ:MSFT), Cisco (NASDAQ:CSCO). McDonald's (NYSE:MDC) and Ford (NYSE:F) have been on this list in the recent past.

    Disclaimer: I own MSFT and AAPL.

    Disclosure: I am long MSFT, F, CSCO.

    Tags: MCD, MSFT, F, CSCO
    Nov 02 10:02 AM | Link | Comment!
  • November's Most DANGEROUS Stocks Available To Subscribers Today

    Paying customers can access November's 40 Most Dangerous Stocks as of midnight last night. We provide 20 large/mid cap names to sell or short and 20 small cap names in this monthly newsletter.

    All Most Dangerous Stocks reports more than 90 days old are free. All reports published in July and earlier are now free - access them here.

    Public release will be on Wednesday Nov 7.

    Nov 02 9:45 AM | Link | Comment!
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