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There Are No Mistakes in SEC Filings - VALUEx Vail 2012 Notes

August 01, 2012 | About:
On the second day Michelle Leder of footnoted.com fame talked about SEC filings (here is a link to a PDF). The message I got from her talk: there are no mistakes in 10Ks and 10Qs. Most financial documents are templates that are created by corporate lawyers; and though numbers and explanations change from year to year and quarter to quarter, the risks disclosure, for instance, rarely changes. If there is a new section inserted, there is usually a very good reason for it.

A few months before AMR filed for bankruptcy it inserted a bankruptcy risk section into its quarterly filing – Michelle caught that before anyone else. Michelle uses 250 different searches to look for nonquantitative information in financial filings. I read financial statements all day long, but it is simply impossible to read every sentence in every document – I’d simply fry my brains with the monotonous legal language they are full of. So it makes sense to do searches for words that may spell trouble. Also, MS Word offers a very nice feature that allows you to compare documents to see if there are any template changes.

About the author:

Vitaliy Katsenelson
Vitaliy Katsenelson is Director of Research at Investment Management Associates and teaches at the University of Colorado. To read more of his articles visit www.ContrarianEdge.com . His book Active Value Investing was published by John Wiley & Sons in September 2007.

Visit Vitaliy Katsenelson's Website


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