Forum Archive Index - June 2002
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[sharechat] WorldCom
The Wall Street Journal reported last week that one of WorldCom's internal
auditors discovered that, starting in early 2001, huge expenses related to the
company's telecom system were being capitalised instead of being treated as
regular costs. This resulted in a significant boosting of the company's EBITDA,
which many fundamental analysts use as a critical gauge of growth. They were
fiddling the fundamentals.
Just out of interest, I called up the chart of Worldcom, to see if there was
any warning there of the meltdown that has occured. (The share price has fallen
to 83 cents, from highs of over $60!)
This stock has been in an inexorable downtrend for three years. It would
appear that the cooked fundamentals did not fool the market. Technically, this
stock was a Sell years ago. Spare a thought for the poor suckers that would
have been buying more as the price fell - averaging down - because of this
stocks perceived "value". If you can't trust the fundamentals, what can you
trust? The chart.
Phaedrus.
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