New York (TheStreet) -- "We have a long track record of pulling together when times are tough," proclaimed Lehman Brothers CEO Dick Fuld on the company's third quarter conference call, September 10th 2008. "We are on the right track to put these last two quarters behind us."
Five days later the venerable 158-year-old Wall Street company declared bankruptcy, sending shockwaves throughout the global economy.
When a company's earnings disappoint and its CEO starts making excuses, how can you tell if they're bluffing? At what point do you start to question the veracity of what the company's leader says? I find quarterly earnings calls to be one of the most fascinating ways to get a peek into what's really going on under the hood of any particular company.
Whether you're the CEO of a $40 million brick & mortar retailer or $400 billion tech giant like Google, you have to get on the phone each quarter and broadcast your story to the world, standing metaphorically naked in front of the thousands of investors and - even more daunting - dozens of persnickety research analysts who proceed to launch a full-fledged Q&A assault. Yeup - even the deified Mark Zuckerberg has to come down to earth every three months to appeal to his followers and defectors alike on the quarterly call. And this is when analysis turns into an art. The best portfolio managers keep a very close pulse on the tone, wording and cadence of any management team they're invested in. That's why you can see a stock shoot up or down well over 10% during any given conference call, depending on what the executives say or don't say.