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Barron's Battle Goes Another Round

Digging through the Barron's dispute, and how to report same-store sales.

The contretemps between The Business Press Maven and Barron's turned a bit ugly in recent days, even degenerating into a Barron's reporter putting a hex on Alex Rodriguez as I headed toward what I hoped to be his 500th home run. The hex, I'm sorry to report, worked.

But I just want to set it all out here on a platter so you can step back from the dust and haymakers to decide for yourself who was right and -- if you think I was -- also get a sense of how the business media works, reacting to criticism from a defensive crouch.

Two weekends ago, I was reading

Barron's

when an article making the big call that

Microsoft

(MSFT) - Get Microsoft Corporation (MSFT) Report

was still a growth stock seemed remarkably familiar to me. My one talent in life -- besides lantern-jawed good looks and the ability to dance the trot -- is memory. Sure enough, over the past three years, the same

Barron's

journalist had made the same big Microsoft-is-a-growth-stock call in other articles that seemed written from the same template.

I disagree with the contention that Microsoft -- huge, embattled in the public square of opinion, tremendously competent mainly in one product (whose latest incarnation seems half-hearted) and starting to glance at a Gates-less future -- is a growth stock. But markets run on such disagreements, and I only minded somewhat that the articles appeared written in Mad Lib, fill-in-the-blank formats, with little taking place to merit the third installment but a media conference held by Microsoft in which the company laid claims to still being a growth stock.

My

central point two weeks ago was that when a journalist has been wrong about a stock before and is saying the same thing again, they should let the investors know:

I've been a dope on this one.

Then the investors can decide for themselves. I've done this on

Oracle

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and have probably earned more praise from readers than if I had made the right call in

the first place, which is another matter altogether.

Anyhow, despite all my criticism of the business media, I keep it to themes -- rarely naming names. This is to help you, the savvy investor, figure out whether what you are reading or hearing about a stock is accurate. There is no need to give a journalist a public flogging, except -- as in the case of Gross Domestic Product reporting, which is so repetitively dismal that I had to name names, even weaving them into an insulting and incredibly

poorly written limerick -- when the mistakes come again and again and again.

That's why this time I named names: Eric J. Savitz.

Now, it's funny. Business journalists do a lot of criticizing of others, including money managers and CEOs of public companies who are held to identifiable performance measures and are kicked in the shins if they underperform.

But when you suggest -- as I did when speaking at the Society for American Business Editors and Writers annual convention at Disneyland (of all places) -- that business journalists get held to the same measures, getting a performance rating next to their byline -- or just admitting when they've been wrong on a company or market direction -- I field emails for weeks telling me why I'm wrong.

On his blog and in an email to me, Savitz was steaming.

He first said that my coverage was obnoxious. To this, I must say: I resemble that accusation. But beyond that, he only had one point I agreed with -- and even that was pretty close to semantics.

Savitz held my hand through Microsoft's middling stock performance in a great market. He went over its revenue and profit growth and compared it with other software companies, all to prove to me that his call on Microsoft hadn't been terrible.

But his call was that Microsoft was a growth stock. That has been a bad one -- and once again, my major criticism was not that he misled investors with his (so far, misguided) call but that he misled them by not letting them know it was the third time that he had been making the same precise call without being right. (He knew enough to do this in his second article, by the way, but dropped it by the third.)

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In explaining why he didn't, he said: "I could have written that my other stories were wrong; I just don't happen to think they were. I stand by what I wrote."

To that, I said: I know you stand by what you wrote. Otherwise you wouldn't have written the exact same thing three times. But for readers to judge the validity of what you write, they need to know you've been wrong so far. Then let them judge.

Savitz also said that I should have spoken to him before writing, but I am a reviewer and as in the case of movies and restaurants, the work speaks for itself. In this case, I thought it was off-base and, worse, terribly redundant.

He said I implied he was an idiot. This a man who, though I criticize work four times a week, I have never before seen fit to criticize.

Here's the one thing I'll give Savitz, though he hides behind an old journalist trick in doing it. I wrote that Savitz said that "the nattering nabobs are dead wrong" in thinking Microsoft was not a growth stock. In fact, Savitz did not say that directly. He was at the media conference in which Microsoft was trumpeting their stance that they were a growth stock and was quoting Microsoft. So I was wrong on that. He didn't say it. He was just prominently quoting someone who did.

But I'll never forgive him for cursing A-Rod. I paid over face value for those tickets.

Anyhow, if you are on my side of this contretemps, let it serve as an example of why you have to read about the stock market critically. If you are on the other side -- well, good luck.

Where Were Wal-Mart's Sales

Meanwhile, I want you to compare these two wire-services articles on

Wal-Mart's

(WMT) - Get Walmart Inc. Report

same-store sales. First, read the

AP's

hyphenfest of a headline -- "Wal-Mart July Same-Store Sales Rise: Wal-Mart Posts Stronger-Than-Expected Same-Store Sales Growth in July, Despite Economy" -- and you get the sense of great things.

Right in the lead, you hear that same-store sales in the four weeks ended Aug. 3 rose 1.9%, "topping expectations." Holy ghost of Sam Walton, Batman!

We then hear about grocery sales (stronger), electronics (stronger) -- and more happy talk. Buried all the way down in the second-to-last sentence is the central fact that discounts hurt gross margins.

Uh-huh. Once again, the business media is too impressed by top-line numbers. If you are giving away your lemonade, you really don't benefit from a long line at your stand. Perhaps you have a plan to eventually raise prices without driving away the customers who are now used to free lemonade. But that should be the focus of the article, because that is the most important factor for investors.

Reuters

, by contrast, does not catch its foot in the bear trap of raw sales growth. Look how it zeroes in on the basic truth right

in the lede

:

"Wal-Mart Stores Inc. on Thursday posted a 1.9 percent rise in July sales at U.S. stores open at least a year, toward the top end of its forecast, after cutting prices to attract shoppers. But the world's largest retailer, which will report quarterly earnings on Tuesday, warned that its aggressive price reductions were hurting gross margins."

No word on whether

Reuters

thinks Microsoft is a growth stock.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;

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