Author Archives: Scalper1

QAD Inc. (QADA) Ex-Dividend Date Scheduled for December 21, 2015

QAD Inc. ( QADA ) will begin trading ex dividend on December 21, 2015. A cash dividend payment of $0.072 per share is scheduled to be paid on January 06, 2016. Shareholders who purchased QADA prior to the ex

Market Lab Report – Premarket Pulse 12/18/15

Major averages finished lower yesterday on lower volume with the NASDAQ Composite closing under its 50-day moving average and the S&P 500 closing below its 50/200-day moving average crossover. With the majors erasing the prior day’s gains and finishing under resistance levels, the only respite is the lower volume. Today is quadruple witching which exaggerates volume and adds further “murk” to the waters. The unstable, erratic nature of this market makes it difficult for investors to navigate, and a cautious approach is likely warranted. Chinese social networking platform Weibo (WB) had another pocket pivot. We reported on this stock on November 25. As we have suggested many times, it is better to wait to buy on constructive weakness. For example, WB had a low volume “voodoo” pullback for a few days leading up to December 11. It could have been bought around then instead of on the pocket pivot day. On another point, for those who bought WB either on the first pocket pivot report or on any of the “voodoo” days that followed, today could be a good day to take at least partial profits since the stock is sticking straight up relative to the chart and to the action of the general market. The after-hours market can be used to sell if you did not already do so. Of course, some may have a different style and prefer to add to their position on a day like yesterday. But given the general tone of the markets over the last couple of years, it has been better to take profits when you have them in context with the stock’s chart and general market environment.

Thoughts On Metrics And Incentives

Thoughts on Metrics and Incentives first appeared at The Activist Investor. A brief meditation on motivating, measuring, and rewarding executive performance. Metrics have been in the news lately: Sensational accounts of how share repurchases boost EPS to benefit CEOs Bennett Stewart promoting his Corporate Performance Index (CPI) Corporations futzing with GAAP accounting, specifically EBITDA, to present great results. Let’s consider the metric alphabet soup, then. EPS: Earnings per Share, duh. Accounting profit divided by number of outstanding shares. EBBS: Earnings Before Bad Stuff. EPS without expenses that management doesn’t like, the zenith of futzing. EBITDA: Earnings Before Interest, Tax, Depreciation, and Amortization. A customary measure of operating cash flow, but based on accounting profit. Adjusted EBITDA: see EBBS, call it AEBITDA ROI: Return on Investment, with whatever measure of return and investment the company chooses. Highly futz-able. TSR: Total Shareholder Return. Change in share price, plus any cash to shareholders as dividends. Can’t really futz with it. CPI: Corporate Performance Index. The new metric, based on EVA (Economic Value Added). How to make sense of all this in the context of recent news accounts? For as long as investors have monitored EPS and EBITDA, companies have tried to massage it into EBBS or AEBITDA. GAAP accounting is rife with judgment, so management will seek to influence (futz with) EPS and EBITDA in subtle ways, or just dispense with it and use EBBS and AEBITDA. Investors also know that EPS measures mostly the returns part of ROI. We also want to know the investment part. Bennett Stewart years ago gave voice to these two concerns with EVA. It deals with the two problems of EPS, EBBS, EBITDA, and AEBITDA: management can futz with accounting results, and thinks capital investment comes free of charge. He spent decades trying to persuade companies and investors that EVA improves on these other metrics. We don’t know why Stewart created CPI, which starts with EVA. It seems like he wanted something similar to but better than TSR in exec comp packages. Many exec comp packages reward EPS or change in EPS. Lately, they also reward TSR. Neither idea makes any sense. Basic economics, and indeed cognitive and behavioral science, finds that one designs incentives to elicit the behavior one desires, or to discourage behavior one doesn’t. In this instance, exec comp incentives should pertain directly to decisions and other actions that executives can influence and control. Executives don’t influence and control share price. TSR measures mostly share price. On the other hand, executives control the metrics EPS, EBBS, EBITDA, and AEBITDA, in addition to controlling the decisions and other actions whose outcomes these metrics measure. That won’t work. More generally, exec comp programs should use metrics that measure company performance, not investment performance. TSR makes sense for a PM, but not for a CEO. EVA or maybe CPI makes sense for a CEO. EPS makes no sense for anyone. Critics can object to share repurchases that boost exec comp. Let’s improve exec comp and the underlying metrics – reward and punish CEO decisions and other actions, and make it hard to futz with the metrics. Leave share repurchases alone.