Just imagine if you had 50 percent of the stock market consisting of comprehensive investors. A comprehensive investor considers other factors about a company performance, not just earnings per share.
Currently, what is taught in business schools and shown on business channels on TV is that Earning per Share are the primary criteria to consider. This herd mentality causes other investors to factor in their decisions to purchase stock because they can obtain a greater fool down the road if they just follow EPS increases. However, earnings are not distributed to investors as in a partnership or unless a company declares dividends. A small percentage of net income is payed from dividends. Therefore, whether it is off by a penny from guidance should not cause a panic sell of the stock
Management of these companies is aware of this and engages in practices that hurt employment by relocating jobs to low wage countries or minimizes the pay of workers to subsistence levels. They also have the self-interest of stock options to increase EPS to boost demand for the stock. All the while, the worker at these companies is under constant assault.
Comprehensive Investor
After determining that company made an acceptable profit to maintain operations, a comprehensive investor would consider the following information:
1. Domestic jobs levels of a company at year end
2. Percentage of jobs located in foreign markets.
3. Pay ratio of Management to Workers
4. Benefits offered to Employees and costs per Worker
5. Average Wage of Workers in each country and percentage
6. Average Wage of Management
7. Unionization Levels.
8. Revenue Earned in each country versus Wages paid
9. Unnecessary Layoffs
For example, Company A earned a high EPS, but paid its workers poorly and had all of its operations overseas and received very little revenue in that market (Wal Mart). Company B had a moderate EPS, however, maintained significant domestic operations and paid their worker well and provided good benefits (Costco). A comprehensive investor would buy the stock of Company B because of the positive effect on the national economy. They could easily see that management achieved the high EPS through a low wage country and not through demand for their product or some genius decision.
If a significant number of people engaged in the same practice, EPS would not be the primary criteria, the stock price of companies could go up if they raised wages or moved operations domestically! Stock prices could actually decline if a company announces a layoff!
This would cause a massive number of jobs to be relocated back to the United States, if a company had to deal with this type of investor. If business schools, the media, regulatory bodies, and the accounting firms provided this information to investors, it could be easily achieved. As stated earlier, the earnings of a public company are not distributed to investors in any way versus a private company/partnership. Therefore, you can look at additional factors to decide purchasing a stock and still make money in the stock market.
Currently, what is taught in business schools and shown on business channels on TV is that Earning per Share are the primary criteria to consider. This herd mentality causes other investors to factor in their decisions to purchase stock because they can obtain a greater fool down the road if they just follow EPS increases. However, earnings are not distributed to investors as in a partnership or unless a company declares dividends. A small percentage of net income is payed from dividends. Therefore, whether it is off by a penny from guidance should not cause a panic sell of the stock
Management of these companies is aware of this and engages in practices that hurt employment by relocating jobs to low wage countries or minimizes the pay of workers to subsistence levels. They also have the self-interest of stock options to increase EPS to boost demand for the stock. All the while, the worker at these companies is under constant assault.
Comprehensive Investor
After determining that company made an acceptable profit to maintain operations, a comprehensive investor would consider the following information:
1. Domestic jobs levels of a company at year end
2. Percentage of jobs located in foreign markets.
3. Pay ratio of Management to Workers
4. Benefits offered to Employees and costs per Worker
5. Average Wage of Workers in each country and percentage
6. Average Wage of Management
7. Unionization Levels.
8. Revenue Earned in each country versus Wages paid
9. Unnecessary Layoffs
For example, Company A earned a high EPS, but paid its workers poorly and had all of its operations overseas and received very little revenue in that market (Wal Mart). Company B had a moderate EPS, however, maintained significant domestic operations and paid their worker well and provided good benefits (Costco). A comprehensive investor would buy the stock of Company B because of the positive effect on the national economy. They could easily see that management achieved the high EPS through a low wage country and not through demand for their product or some genius decision.
If a significant number of people engaged in the same practice, EPS would not be the primary criteria, the stock price of companies could go up if they raised wages or moved operations domestically! Stock prices could actually decline if a company announces a layoff!
This would cause a massive number of jobs to be relocated back to the United States, if a company had to deal with this type of investor. If business schools, the media, regulatory bodies, and the accounting firms provided this information to investors, it could be easily achieved. As stated earlier, the earnings of a public company are not distributed to investors in any way versus a private company/partnership. Therefore, you can look at additional factors to decide purchasing a stock and still make money in the stock market.
Last edited: