{"id":2341,"date":"2010-11-21T07:59:44","date_gmt":"2010-11-21T14:59:44","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=2341"},"modified":"2018-08-17T08:58:44","modified_gmt":"2018-08-17T12:58:44","slug":"a-brief-financial-analysis-lesson-slight-return","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2010\/11\/21\/a-brief-financial-analysis-lesson-slight-return\/","title":{"rendered":"A brief financial analysis lesson, slight return"},"content":{"rendered":"

As you may\u00a0know, periodically on the blog I provide financial analysis lessons.\u00a0 Today’s lesson uses American Express as a case study.\u00a0 That staid charge card issuer has just changed the date in which payments are due each month.\u00a0 It used to be that payment was due around the 27th of the month.\u00a0 Then with no fanfare, this month payment changed to around the 14th of the month.\u00a0 Why would AMEX do this?\u00a0 And what can we learn about the state of AMEX from this?<\/span><\/p>\n

First of all, by moving payments earlier in the month, now just two weeks after the close of a bill, as opposed to almost 4 weeks after the close of the bill, American Express improves its float.\u00a0 By getting client payments two weeks earlier each month, American Express now gets use of that money earlier.\u00a0 Typically cash flows like this are deposited immediately and begin earning a return for a business.\u00a0 Does this make sense?\u00a0 I hope so.\u00a0 But this doesn’t answer the question of why AMEX would make this move now.<\/span><\/p>\n

The only real reason to make this change after so many years of a different policy would have to be that AMEX needs to make the change.\u00a0 Yes, its good that the company has found an additional way of increasing its profits, but the question is why now?\u00a0 As a former portfolio manager of a mutual fund I can only conclude that AMEX is trying to improve their fourth quarter operating results.\u00a0 And that must mean that they are off of their targeted earnings in the quarter.\u00a0 So, as an investor, this is the sort of anecdotal evidence that exists, ripe for the picking, if only just focus your eye to finding it.<\/span><\/p>\n

The other thing that I want to highlight is that AMEX used to include the monthly balance you owed in its customer e-mail alerts.\u00a0 This month, the date changed with no warning and now they don’t tell you how much you owe.\u00a0 Why would they do that?\u00a0 For this one, it is harder to say.\u00a0 But my guess is that the two new policies taken together may be trying to generate excessive, and very profitable, late fees for American Express as they catch their customers in a billing surprise.\u00a0 Nice!\u00a0 Here, the insight garnered as an investor, is that AMEX has crossed an ethical threshold that they previously were unwilling to cross.\u00a0 And why would they do that?\u00a0 It adds support to the idea that they may be more desperate to generate profits.\u00a0 And that means that they probably are having difficulty making their fourth quarter numbers.<\/span><\/p>\n

For a charge as strong as the ethical one I suggest above you would want verification.\u00a0 That verification could come by listening to an AMEX conference call and assessing the mood, modes, and character of management.\u00a0 It may be that AMEX will later restore the “amount owed” to their e-mails and that this was an oversight.\u00a0 However, that is not my assessment.<\/span><\/p>\n

To summarize, from the one piece of information that AMEX has changed its bill due date we can conclude a lot.\u00a0 All without breaking out a calculator and all without a phone call to the company’s Investor Relations department.\u00a0 This sort of analysis makes use of both sides of the brain, left-analytical, and right-intuitive.\u00a0 The left brain notices the change in the billing date.\u00a0 The right brain assesses why from amongst all of the possible reasons AMEX would make this change.\u00a0 In doing that work, the right brain relies upon the knowledge that many businesses try and win the “float” battle with their customers.\u00a0 The left brain also knows that company’s do everything they can to make their quarterly profit predictions a reality.\u00a0 The right brain assesses whether or not this change is evidence of those efforts, as well as the character of management.<\/span><\/p>\n

Lots and lots of information like this is floating around out there, but most people miss it.\u00a0 If you found this exercise useful, all of the specifics of how to do it are contained within my book The Intuitive Investor: A Radical Guide for Manifesting Wealth<\/span>.\u00a0 Normally if I read a plug like that I would roll my eyes.\u00a0 But in this instance, the reason I wrote the book is so that both of us can benefit from its purchase.\u00a0 I benefit to a very small extent financially from your purchase, but you also benefit because you learn how important the right brain is to making money.\u00a0 A balanced and excellent arrangement, don’t you think?<\/span><\/p>\n

Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

As you may\u00a0know, periodically on the blog I provide financial analysis lessons.\u00a0 Today’s lesson uses American Express as a case study.\u00a0 That staid charge card issuer has just changed the date in which payments are due each month.\u00a0 It used to be that payment was due around the 27th of the month.\u00a0 Then with no […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-2341","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2341","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=2341"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/2341\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=2341"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=2341"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=2341"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}