Friday, 1 December 2017

On the subject of fluff (and Premium Brand Holdings)

This will be a short off the cuff stream of consciousness post.

Fluff. What is it in the context of finance? It is what most of us do (or have done) in terms of evaluating and acting on ideas (I'm no more or less guilty than anyone else).

How to then tell if the evaluation of an idea is fluff as opposed to proper research? I think this question can only be answered in the context of participant objectivity. Objectivity is real when a participant is really objective. How's that for circularity?

Ok, define objective: Objective is...?

I think this point is best demonstrated with a simple illustration. From this week's globe and mail:

And further to this, from regurgitative fluff /spam-wagon Stockwatch, complete with ridiculously misconstrued and misleading headline:

Comparing the source of the citation to the citation, you can clearly see that nowhere in Heinzl's original article does he indicate that he's "keen" on the "sandwich king". Heinzl simply articulates that the yield is diminutive as the companies profiled have reinvested in their businesses to fuel growth.

My issue with the original article is that there is a dangerous leading inference with respect to "potential" future growth on display here. In pointing out that "if you are craving big returns, the specialty food producer has hit the spot...", one could potentially make the inference that big returns are still available.

So where does the search for truth take us next? Why, to the company's own letter to shareholders posted on its own website, in which CEO George Paleologou explicitly warns shareholders against expecting future returns to mirror the past:

See link here, and see excerpt below:

Quite a different rhetoric here than either the original article or in Stockwatch's regurgitative butchering of the original article.

Which leads me back to my original comment on fluff. Fluff happens every single second of every single day. EVERYWHERE. And from seemingly legitimate sources of information. It's our job to sift through the fluff in search of truth and objectivity.

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