Baidu Has High-Quality Earnings

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Baidu (Nasdaq: BIDU  ) reported $759 million in net income over the last four quarters. But how good are those earnings, really? Apparent profits on the income statement won't always tell you the whole story. Instead of looking just at the reported numbers, you need to find companies with authentic earnings power. So how do the earnings at Baidu look?

It's earnings that count
In his book, It's Earnings That Count, Hewitt Heiserman explains how to determine the quality of a company's profits. First, he points out four key limitations of the traditional income statement:

  • Fixed capital investments are not fully expensed, but rather depreciated over time.
  • Investments in working capital are left off the income statement.
  • Intangible growth-generating expenditures (such as advertising) are immediately expensed, even though they pay off over time.
  • Retained earnings that are reinvested back in the business are not treated as an expense.

To compensate for these defects, Heiserman suggests that investors recalculate the income statement, creating both a defensive income statement and an enterprising statement. If a company can achieve profits on both statements, then that business has authentic earnings power. And that, explains Heiserman, can lead to safer and more profitable investments.

The defensive income statement
The defensive statement shows whether a company can self-fund and generate more cash from its operations than it uses. The defensive statement looks like a regular statement, but corrects for the first two limitations above. First, it expenses all capital investments in the year they're incurred. Second, the defensive statement treats a company's investments in working capital as if they were expenses. This statement is stringent in order to provide the most conservative look into the company's operations.

The enterprising income statement
The enterprising statement reveals whether the business can create value and turn shareholder money into even greater profit over time. It corrects for the second two limitations mentioned above. First, it treats R&D and advertising costs as capital assets, depreciating them over their useful lives. Second, the enterprising statement treats equity capital held on the balance sheet as an expense.

Here are the statements for Baidu and a few peers over the last few years, divided into enterprising and defensive profits, respectively. We're looking for solidly profitable numbers that grow over time, in order to show authentic earnings power.

Source: Capital IQ, a division of Standard & Poor's. (Enterprising, Defensive earnings)

Baidu's enterprising and defensive earnings have consistently grown over the last few years, and much the same can be said of the peers, which all sported positive numbers in both categories in 2010.

The earnings power chart
For an illustrative depiction of a company's earnings power, Heiserman recommends graphing the earnings from the defensive and enterprising statements, plotting enterprising profits along the horizontal axis and defensive along the vertical. I've done this for Baidu below.

Ideally, you want to see the company generating both earnings figures in the upper right quadrant. A staircase of escalating earnings toward the upper right over time would be even better. That pattern would show that the company is consistently generating value and self-funding, two great signs of a winning company. The chart shows that Baidu is clearly moving solidly into the best quadrant (upper right) and has seen a general upward trend in its enterprising and defensive profits since 2007. This is exactly the type of trend we want to see.

Foolish bottom line
The enterprising and defensive statements can provide you some key insights into a company's earnings power and quality. Just because a company doesn't make it into the upper right quadrant doesn't mean it can't be a good investment. But if it isn't at least moving toward the upper right, you'll want to dig in deeper to find out why. To keep an eye on these companies, add them to your Watchlist:

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Source: http://www.fool.com/investing/general/2011/09/04/baidu-has-high-quality-earnings.aspx

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The Post Office May Shut Down This Winter Unless Congress Authorizes A Bailout


Post office Bankrupt

“Neither rain, nor snow, nor sleet, nor hail shall keep the postmen from their appointed rounds.” But unless Congress steps in, bankruptcy will.

The New York Times reports that unless the House and Senate take drastic action in the next few months, one of the nation's oldest institutions — which employs 574,000 Americans — may be forced to shut down.

A combination of labor costs and a declining number of packages and letters has the United States Postal Service running short on cash. The independent government agency will be unable to make a $5.5 billion payment to its employee healthcare plan by the Sept. 30 due date.

“Our situation is extremely serious,” the postmaster general, Patrick R. Donahoe, told the Times. “If Congress doesn’t act, we will default.”

To avoid insolvency, Donahoe says needs Congress to approve the elimination of Saturday delivery and the undoing of the agency's contract with its union to allow it to layoff up to 120,000 works. The Post Office is also planning to close 3,700 locations.

Ending Saturday delivery would only cut about two percent of the agency's budget — and is vigorously opposed by many lawmakers from states with large rural populations. They would rather the agency recover the $60 billion it has overpaid into its employee pension plans and pursue less drastic restructuring.

The Senate Homeland Security and Governmental Affairs Committee will hold a hearing on the Post Office's precarious financial position, though no politically palatable solution is in sight.

Read the full report at The New York Times

Please follow Politics on Twitter and Facebook.

Join the conversation about this story »

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Source: http://feedproxy.google.com/~r/businessinsider/~3/YwUhWxyXdMM/post-office-may-shut-down-this-winter-unless-congress-authorizes-bailout-2011-9

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Three Contrarian Bullish Plays In Video Games

Meanwhile, there are also a few opportunities for the bears, too, as optimism surrounding an underperformer can result in a contrarian-related retreat. Against this backdrop, let's take a closer look at industry peers Electronic Arts, GameStop and Activision Blizzard.

Source: http://www.forbes.com/sites/greatspeculations/2011/09/02/three-contrarian-bullishp-plays-in-video-games/

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The Post Office May Shut Down This Winter Unless Congress Authorizes A Bailout


Post office Bankrupt

“Neither rain, nor snow, nor sleet, nor hail shall keep the postmen from their appointed rounds.” But unless Congress steps in, bankruptcy will.

The New York Times reports that unless the House and Senate take drastic action in the next few months, one of the nation's oldest institutions — which employs 574,000 Americans — may be forced to shut down.

A combination of labor costs and a declining number of packages and letters has the United States Postal Service running short on cash. The independent government agency will be unable to make a $5.5 billion payment to its employee healthcare plan by the Sept. 30 due date.

“Our situation is extremely serious,” the postmaster general, Patrick R. Donahoe, told the Times. “If Congress doesn’t act, we will default.”

To avoid insolvency, Donahoe says needs Congress to approve the elimination of Saturday delivery and the undoing of the agency's contract with its union to allow it to layoff up to 120,000 works. The Post Office is also planning to close 3,700 locations.

Ending Saturday delivery would only cut about two percent of the agency's budget — and is vigorously opposed by many lawmakers from states with large rural populations. They would rather the agency recover the $60 billion it has overpaid into its employee pension plans and pursue less drastic restructuring.

The Senate Homeland Security and Governmental Affairs Committee will hold a hearing on the Post Office's precarious financial position, though no politically palatable solution is in sight.

Read the full report at The New York Times

Please follow Politics on Twitter and Facebook.

Join the conversation about this story »

See Also:

Source: http://feedproxy.google.com/~r/businessinsider/~3/YwUhWxyXdMM/post-office-may-shut-down-this-winter-unless-congress-authorizes-bailout-2011-9

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The Fabulous Life Of One Of The Scariest, Most Important People At Goldman Sachs (GS)


John F. W. Rogers

John Francis Williams Rogers might be one of the most important people at Goldman Sachs.

Not only is he one of the bank's 11 top executives, but he spent a considerable amount of his earlier career working deep inside the Beltway for both the White House and the Treasury Department. 

He comes from humble beginnings, but now he has unprecedented access to some of the biggest power players on Wall Street and D.C. 

Some say he's terrifying because of that power. One former colleague says, "If wronged, his vengeance can kill careers."

Rogers was passionate about politics at a young age.

Rogers grew up in Seneca Falls, New York near Finger Lakes. 

His father owned wholesale frozen foods business where Rogers worked as a salesman.  His mother was a dental hygienist.

His passion though was politics. 

 

Source: Bloomberg Business Week

He spent his college years inside the Beltway.

Rogers earned a scholarship to study at George Washington University.

As a student, he interned in the White House’s speechwriting and research office.

 

 

 

Source: Bloomberg Business Week

"He became a legend within the White House."

When David Gergen, the director of communications to President Gerald Ford, needed a chair for his office he was told to ask the intern, John Rogers.

The next day Rogers had Gergen's office fully furnished with a desk, couch, television and artwork.  This move impressed Gergen so much that he asked Rogers to be his research assistant. 

Gergen said Rogers "became a legend within the White House." 

Source: Bloomberg Business Week

See the rest of the story at Business Insider

Please follow Clusterstock on Twitter and Facebook.

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Source: http://feedproxy.google.com/~r/businessinsider/~3/DYucACARnvE/john-f-w-rogers-2011-9-2

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The Advantages Of Private Student Loan Refinance

Private student loan refinance is an option that is worth checking out. Essentially, it means taking a fresh loan that attracts a lower interest rate and which is taken in order to pay off an existing loan. The whole idea of resorting to private student loan refinance is that the student feels that the refinance [...]

Source: http://www.legaldebthelponline.com/2011/09/03/the-advantages-of-private-student-loan-refinance/

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On Obtaining Your Well Warranted Accident Compensation

Insofar as accidental injury circumstances are engaged, there will be simply two types of people-the offending party and the seriously injured party. Now if you’re the wounded individual, the trouble you face does not end right with the physical damages as well as injuries you sustained. Usually, the consequences of an mishap, apart from the [...]

Source: http://www.legaldebthelponline.com/2011/09/04/on-obtaining-your-well-warranted-accident-compensation/

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These Are The Luxury Hotels From Around The World That Celebrities Love


Saifina, Brangelina, royals and world leaders have stayed at these hotels. They've got everything from mammoth suites with more bedrooms, bathrooms and private terraces than you really would use, to restaurants that treat dining as fine art.

 

This post originally appeared on Luxpresso.

Hotel De Crillion: Paris, France

This luxury hotel by the Place de la Concorde in Paris extends to 174 rooms. The highlight is the Bernstein-Suite, with 245sqm of living space and boasts two terraces with views of the Eiffel Tower.

Famous Guests: Jennifer Lopez, Madonna, Mariah Carey, Arnold Schwarzenegger, the Dalai Lama, Jacky O and late Elizabeth Taylor.

Source: Luxpresso

Grandhotel Schloss Bensberg: Bergisch Gladbach, Germany

This baroque palace in Bergisch Gladbach looks over the Rhine Valley and the Cologne Cathedral. Accommodating about 120 rooms and suites, it also has a 155sqm large presidential suite. Gourmet restaurant 'Vendôme' works under the supervision of French cuisine star-chef Joachim Wissler.

Famous Guests: Lady Gaga, Paul McCartney, Robbie Williams and Prince.

Source: Luxpresso

Hotel Hassler Roma: Rome, Italy

Near the Spanish Steps in the Italian capital stands the legendary Hotel Hassler Roma. The 95-rooms-and-suites structure is decorated with antiques, chandeliers, mirrors and precious materials. The 300sqm Penthouse Suite, come with a 160sqm private roof terrace. Tom Cruise usually puts up at this suite when in Rome.

Famous Guests: Madonna, George Clooney, Jennifer Aniston, Camron Diaz, Audrey Hepburn and King Juan Carlos.

Source: Luxpresso

See the rest of the story at Business Insider

Please follow The Life on Twitter and Facebook.

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Source: http://feedproxy.google.com/~r/businessinsider/~3/vFm8gw4ofEc/10-luxury-hotels-celebrities-love-2011-9

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Credit Card Traps - Another Thing to Look Out For

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In the previous article of this three-part series focusing on investigating the spurious charges with which credit-card companies hit us, we covered avoiding banking at the same place from which you received your card (so that the fine print doesn't allow them to extract funds from your actual account in the event that you are too late repaying your credit card balance) and paying close attention to grace-period adjustment tactics. The former is a bit underhanded because more often than not, the bank will allow you to be late for a period of time before they finally go directly into...

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