Since the year 2001, many investors have lost all or large portions of theirPersonal Retirement Accounts (PRA). This was particularly true of investors whose mutual PRA Operational Resilience funds and 401(k) accounts were heavily invested in companies like WorldCom, Global Crossings, Quest, Adelphia, and the infamous Enron.
Their stock pickers and managers continued to give 'buy' signals almost to the last gasp of these companies. That was especially true of Enron where in the final week before its historic meltdown, most stock houses were saying buy, buy, buy. Had they or their investors known the true pathetic state of Enron's cash and cash-flow positions, they would have sold, sold, sold.
One of the reasons that so many were caught in this trap is because of the herd mentality that relies so heavily on Earnings Per Share (EPS). If you talk to any banker or listen to the talking heads on cable; when discussing the strength of companies, they always tout EPS. Does the name Arthur Anderson ring a bell?
That's right - Arthur Andersen is no longer in business. Putting such a premium on EPS data has allowed for some very creative accounting. After all, what is EPS really? Generally, it whatever the manager, CEO or accountant says it is. It gives them the means to hide or shelter the true condition of a company.
Good news is on the way! Brilliant and savvy investors like Warren Buffet know that the true strength of companies revolves around their cash and cash-flow positions.
What if you were personally in trouble, perhaps having lost your job. Having available cash and cash-flow could allow you to weather this period until you got another job. This simple illustration can begin to help you understand Operational Cash-Flow Per Share (OCF).
You are going to be hearing a lot more about OCF in the near future... STOP! BREAKING NEWS! It is now March, 2009 and here is great news! This breaking news PRA Operational Resilience is at the core of my beliefs about how to help average investors like you and I to regain "Control" and manage our money more wisely!