Ridout Barrett CPAs Tony Ridout has visited and addressed our students many times. We have placed graduates with Ridout for several years.
Financial Consulting Firms
Aventine Hill Partners, Inc. Beth Hair CEO founded Aventine in San Antonio in 2009. The firm now has offices in Dallas, Austin, San Antonio, and Houston. She formerly was with RGP.
Resource Global Professionals Susan Hough has been to campus and spoken to our students. She is the San Antonio Manager of RGP. RGP and Aventine are not CPA firms. Instead they offer contract specialists for firms needing specific tasks such as compliance or Controllerships.
Acounting Today This is an independent site for accounting news regarding firms and current issues.
Certified Information Systems Auditor CISA Now that everything is literally on the computer and cyber security becomes a prominent issue, I see more and more accounting professionals with this designation. Previously known as the Information Systems and Audit Control Association, it now goes by the acronym ISACA.
Institute for the Study of War The Institute for the Study of War advances an informed understanding of military affairs through reliable research, trusted analysis, and innovative education. We are committed to improving the nation’s ability to execute military operations and respond to emerging threats in order to achieve U.S. strategic objectives. ISW is a non-partisan, non-profit, public policy research organization.
Stratfor This Austin, TX based site was begun by an ex Texas State Professor.
This report suggests the real economic problem is the lack of capital spending. We are studying depreciation in Intermediate Accounting. This lack of spending and hoarding of cash in a low interest rate environment reflects the over regulation of the economy and uncertainty of tax policy.
Check out page C7 of today's WSJ, the Sears Tower in Chicago has sold for $1.3 Billion. This is the highest price ever paid for an office tower outside New York City. This is positive social mood in action. The Skyscraper Theory holds that big projects are planned during booms. So it figures that the biggest sale ever would happen at a stock market high. I assume the building is well rented, unlike a new office tower.
BP PLC swung to a loss in the second quarter, a victim of lower oil prices and a $9.8 billion pretax charge relating to the deal it reached earlier this month to settle U.S. claims over the 2010 Deepwater Horizon disaster, The Wall Street Journal’s Sarah Kent reports. Also, bets on Libya and Russia failed to pay off. BP’s replacement cost loss, similar to net income reported by U.S. oil companies, was $6.27 billion as compared with a profit of $3.18 billion a year earlier.
The loss comes even though the oil giant has cut spending by freezing pay, selling assets and delaying projects with reserves of over 3.5 billion barrels of oil and gas, which is more, according to Wood Mackenzie, than any other big independent energy company.
One bright spot for BP was its refining arm, which gained from the low oil prices. Pretax earnings increased to $1.6 billion from $933 million a year earlier for BP’s downstream business, which includes refining and marketing.
Still, investors want to know how BP plans to move forward from the Deepwater Horizon incident, now that the settlement has given the oil giant some breathing room. “We’re entering into a period where the company needs to decide what it’s going to be,” said Paul Mumford, an investment manager at Cavendish Asset Management Ltd.
Note, this is typical of the kind of press that happens as we approach a market low. I have no idea of how low oil prices will go but BP is going to be around, it is not going kaput. My point here is that amid all this torrent of bad news, most of which is now behind BP, one needs to use accounting analysis to really discern the strength of the company.
BP the long view
Here is a weekly chart going back to the 2008 meltdown. Now it is possible BP will continue falling all the way to 22.5, if oil drops to $35. If so that would really be a great opportunity to buy. As it is BP is going down to the blue uptrend line which has been in place for several years. Let's watch to see if it has a good bounce from the 35 level.
The key to investing is to buy low sell high. But most investors do the opposite, and are put off by bad news stories at market lows. This is where accounting knowledge is important. Will BP stay around, is the balance sheet strong enough to weather this? What is the book value, how much cash flow does BP have, is it self sustaining? That is what makes a study of both socionomics and accounting interesting. Social mood as evidenced by the first article on BP is negative, that is what makes buying at lows difficult, but profitable.
Now look at this
Yep BP is trading at book value! So how is cash flow?
Back in the late 1970s a guy came in my office observing that Exxon was trading with a 10% dividend. He said I think that's a pretty good deal. Indeed it was. The Exxon Mobil merger in 1998-9 was another classic good deal.
At its current price the dividend is 6.6%. Notice the article suggests the CEO cut back the capital expenditures to 'protect the dividend.' Why is that important?
So with a 6.6% dividend and trading at book value, is BP a good buy amid all this negative news? How would you structure a buy program if at all?
SA Institute of Internal Auditors will sponsor an all day Fraud Seminar Monday September 14.
Learn more at this link.
I believe we will be furnishing student volunteers to help with registration and such. This will be a great opportunity to mix mingle and network with IA professionals as well as learn more about fraud detection.;
We have noted that fewer and fewer stocks are still advancing, this is both a divergence and shrinking leadership, a classic sign of an ending bull market. Into day's WSJ Page C1 we learn that six firms account for over half the $664 billion value added to the NASDAQ this year.
Amazon, Google, Apple, Facebook, Netflix, and Gilead
On page C6 Heard on the Street notes that peak demand for gasoline is now. Refineries are churning out plenty of gasoline and distillates given the low energy prices. This suggests the market may may well take out the previous $42 low. That would be a fifth wave to the $35 range last seen in Dec 2008. Just speculating...
I’d say there is a big difference psychologically between $50 and $49.
Allen Gilmer, CEO DrillingInfo
The market for surface oil technologies in North America is stabilizing though it is unclear where it goes from here.
Charles Sledge, CRO, Cameron International
The prognosis assumes no significant change in market circumstances through yearend.
Bernard Duroc-Daner, CEO Weatherford International
A few weeks back we declared $50 to be the ‘line in the sand’ for oil prices. Oil is now trading within $5 of its previous low of $43.46 on March 17. But strangely, not all energy sectors are still declining. Let’s take a look.
Crude Oil futures trade for every month of the year on the New York Mercantile Exchange NYMEX. This morning September futures are $48.38 but December is trading at $50.13. So the near term is below $50 but four months out that level is still holding. Unleaded gasoline has fallen below its entire daily moving averages, which is negative. But at $1.81 on the close yesterday, it is well above the sub $1.130 level of January. Heating oil at $1.637 is less than a dime from its January lows.
Since the start of the year, crude oil has made two lows around $45. It appears headed for a third low in that area. Market technicians refer to this as a ‘triple bottom. ‘ Most triple bottoms do not hold resulting in lower prices.
Commodity markets typically have to go to such low prices that some producers are literally driven out of the market. Which is to say prices have to fall below the cost of production. This means only the strong balance sheets with lots of cash and low debt survive. Already Hercules Offshore, a Houston shallow water driller, will file for Chapter 11 next month.
The Saudis have higher costs today than in the past. And surely they view low prices as hurting their nemesis, Iran.
Market lows happen amid massive pessimism. The result is that such lows tend to be sharp and short-lived. The March 17 low is a good example. Amid negative sentiment, social mood turned on a dime and prices rallied to $61.
There are other signs of an eventual low. The basic accounting equation holds that Assets minus Liabilities equals Owner Equity or book value. When publicly traded firms fall to book value or below, assuming they have cash to sustain them selves through a loss period, such companies are a ‘Warren Buffet’ kind of buy. We have evidence that is happening now.
Let’s start with the majors. A price to book value ratio of 1 has a company trading at exactly book value. A value of say 1.03 means the firm trades for just 3% over book. With that in mind British Petroleum BP is 1.03, Chevron CVX is 1.12, and Conoco-Phillips is 1.37. And BP is paying a 6.2% dividend at this price.
Interestingly the pipeline companies seem to be registering lows after falling the last several weeks. Alerian MLP AMLP an ETF of some 25 Master Limited Partnerships has fallen from $19.35 to $14.97, now trading at $15.08. The fact that it is not falling with the price of oil suggests investors are seeing value. This is particularly so in light of the overall stock market drops this week.
Energy service companies are trading for lower values than energy producers, which is usually the case in a bear market. Price to book ratios include Patterson PTEN .86, Transocean RIG .38 (not a misprint, 38% of book even after write downs!), and Key Energy Services KEG at a mere .21. Key is trading at $1.32 a share, which is less than the $2 it hit at the 2009 Crisis Low. The big guys like Halliburton and Schlumberger are trading at twice book.
Eagle Ford producer Abraxas AXAS is trading fell to $1.69 yesterday close to my target of $1.50 mentioned on my weblog. At $1.88 today it is literally trading for book value.
Natural gas prices are in much better shape than crude oil. Natural gas needs a weekly close over $3 to get going. Devon DVN is trading for 17% over book and train wreck Chesapeake at a mere 58% of book value.
It is not too early for investors to start tracking their favorite energy or energy service companies. Warren Buffet has become legend for scooping up bargains when as he says ‘others are fearful.’ Look for strong balance sheets (lots of cash and low debt) with a long management history. There is a low coming for oil prices but no one rings a bell at the bottom.
For the second time in five years, A & P has filed for bankruptcy. This is not a familiar name to most younger students but when I was a kid, A & P was the equivalent of Wal Mart today but in the grocery business.
With assets of $1.6 B and debts of $2.3 B, looks like the party may be over.
The larger companies get the more they tend to stray from their roots and lose their way.
It happened again as it does so many times. The class showed up but near no one had read the chapter. Nor had they attempted the problems. So the class was unable to follow what I was doing as I repeatedly filled two boards with solutions.
This is a waste of our time and your money. I was going to write an essay on the importance of class preparation but first I wandered over to Kirk Tuck's fine blog Visual Science Lab. He had a post titled
Kirk is a pro photographer based i Austin. His blog has attracted millions of hits from all over the world.
His point is that one does not just show up with camera and lights in hand for the shoot. There is much much more involved in preparation for the shot. Here he describes what he did preparing for a food shot for the Hilton in Austin. He makes his point well. One can readily grasp why he is a successful photographer.
And it matters not what the topic is, photography, tennis, golf, making movie, or studying accounting. Preparation is the key.
Our new President is focused on a a Model for Student Success. I don't know what her model will finally look like but we can easily identify many necessary components.
Get familiar with the syllabus.
Read the book, take notes, outline the learning objectives
Work the sample problems until you can complete them without look at the answer.
Bring questions to class.
Read other accounting blogs
Subscribe to e mails from accounting firms.
Join a professional accounting group as a student member, you will receive loads of great information in their e mails.
Read the websites of accounting firms that offer free information which is constantly changing.
And be sure to read Kirk's post. Notice how thorough he is.
TAMUSA graduate Ed Rios and reader of this blog made a great post, here is his suggestion for MCD and its problems.
Indeed WMT has targeted San Antonio in its battle with HEB. WMT built just the store Ed describes in the trendy Shavano area in NW San Antonio. It sits back form the street in a secluded setting and even has its own new street connecting two larger streets. I will have to check it out.
Maybe MCD should take a page out of Wal Mart's play book? Wal Mart has recently started opening smaller, I think far nicer and better staffed, "neighborhood market" stores as a means to continue its growth into more developed and nicer areas where more expensive real estate and the idea of a big box stores don't sit well. A Trader Joe's type area. These stores are much nicer, cleaner, properly maintained and not the chaotic mess the larger stores are. Maybe MCD should pursue a similar model of smaller, better customer experience, strip center type restaurants. Cheaper to open which would entice more franchisees. just my two cents.