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  • Retail Firms at Risk for Bankruptcy [View article]
    It is amazing that this list isonce again propagated with no details about how it is compiled. Audit Integrity has no analysts that actually look at companies, only quants that prepare and review statistical data. To repeat: Audit Integrity does only quantitative analysis using proprietary ratios and algorithms. This technique provides a lot of comparative detail which can be correlated across industries to historical events like bankruptcy. However, it fails utterly when the company has unusual features that do not fit the templates Audit Integrity uses.

    A specific example in the list provided is Redwood Trust. RWT is an unusual mortgage REIT that uses equity capital to make unleveraged investments. The company balance sheet appears highly leveraged but most of the Debt is non recourse securitizations. Audit Integrity’s mechanistic approach can not distinguish between recourse and non recourse debt and assumes incorrectly that RWT is highly leveraged.

    These types of screens have value, but only as a starting point for further investigation.
    Sep 29 18:57 pm |Rating: +5 -1 |Link to Comment
  • 20 Companies Most Likely to Go Bankrupt in Next Year [View article]
    It's amazing that this list is propagated with no details about how it is compiled. Audit Integrity does only quantitative analysis using proprietary ratios and algorithms. This technique provides a lot of comparative detail which can be correlated across industries to historical events like bankruptcy. However, it fails utterly when the company has unusual features that don't fit the templates Audit Integrity uses.

    A specific example in the list provided is Redwood Trust. RWT is an unusual mortgage REIT that uses equity capital to make unleveraged investments. The company's balance sheet appears highly leveraged but most of the Debt is non-recourse securitizations. Audit Integrity’s mechanistic approach can't distinguish between recourse and non-recourse debt and assumes incorrectly that RWT is highly leveraged.

    These types of screens have value, but only as a starting point for further investigation.
    Sep 18 12:38 pm |Rating: +1 0 |Link to Comment
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