NEW YORK ( TheStreet) -- In September, when Andrew Bary of Barrons predicted Facebook (FB - Get Report) would fall to $15 per share, I ripped him and said, Merry Christmas, baby! Jim Cramer told me he hadn't read Barrons in 8 years.
You're up roughly 17% if you did the opposite of what Bary suggested. And even more if you bought Facebook last year and sold at or near its highs earlier this year.
A major part of Bary's Facebook bear case involved the company's use of stock-based compensation. He argued it distorts the true earnings picture. The Facebook experience obviously didn't set Bary straight.
He's out this past Saturday with an equally-as-weak piece that again calls out Facebook, but adds names such as
(AMZN - Get Report)
(GOOG - Get Report)
(LNKD - Get Report)
to the list.
Here's a prime example of where digging into the quantitative portions of a firm's quarterly report can work against you. You think you have something novel, but you don't. You're putting in the time to do the research, but it's all for naught. The conclusions you draw mean little, if anything, in the grand trajectory of a company's fate.
Some dude from
The Motley Fool
made a similar error in an article where he claims to have "debunked"
my contention that Netflix (
) floats an unsustainable business model. It's this type of lazy "reporting" that renders so much financial journalism worthless.
Grab a number or two, mock up a chart or graph, provide zero context, your editor glances over your copy for typos, it gets published and
, you, too, are a "journalist!"
In the pantheon of lazy NFLX articles -- and there are plenty -- the above-linked Fool piece ranks near the top.
Teasing out the category cash sits in or exposing something nobody's hiding, as Bary did with stock-based compensation, does absolutely nothing to debunk perceived myths or provide investors anything meaningful to consider.
These types of quantitative cases -- particularly when cherry-picked and used in isolation -- truly amount to nothing. In fact, they're not cases; they're just that -- cherry-picked and isolated pseudo-factoids.
If you want to form a case about a company like Netflix or Facebook, you should take a whole series of numbers into account. No doubt. But you must do the absolutely necessary qualitative work. From sitting under a tree to think and vision for countless hours to talking to people close to the company, at the competition and from within related spaces.
In the not-so-long-term Netflix doesn't work because it has zero leverage when licensing third-party content and can't possibly produce original programming -- in needed quantity or quality -- to survive. Take a peek beyond the tip of your nose. A Google search or glance through the SEC's archives does not constitute the work that needs to be done to construct a thoughtful and convincing bull or bear case.
It's easy to knock back a company like Amazon or LinkedIn because they pay their people aggressively with stock. It's much more difficult to consider the practice within the context of the trail each company blazed, their always-developing business models and the long-term opportunities they created
are well-positioned to seize.
Written by Rocco Pendola in Santa Monica, Calif.