Blogs to watch (part 15): Behind the Balance Sheet

Blogs to watch (part 15): Behind the Balance Sheet
18 December 2020
If you work in Britain's finance industry, you are almost guaranteed to have come across Stephen "Steve" Clapham already.

Steve is the go-to expert whenever the British media need someone to speak about financial fraud and aggressive accounting. You could have seen him in the Financial Times, the BBC, or the Sunday Times, as well as in more specialised publications, such as Investor's Chronicle.

Outside of the UK, he is lesser-known.

It's about time that changes!

Steve's website and blog, Behind the Balance Sheet, is a high-quality resource. Anyone who wants to learn how to pick winning stocks should take a look at it.

Who is Steve Clapham?

Originally trained as an accountant, Steve's employers comprised equity research firms and hedge funds. He was Head of Research at a USD 2bn hedge fund, and has racked up over a quarter century working in this field.

In 2018, Steve set up his own project, Behind the Balance Sheet.

His service includes a blog, but it goes well beyond that.

Why Behind the Balance Sheet is worth checking out

1. The importance of balance sheets

There is a reason why Steve picked "Behind the Balance Sheet" as the name for his website. To him, the balance sheet is the most informative of all financial statements, and yet gets too little attention from the investment community.

Put another way, understanding balance sheets helps you gain an edge over other investors.

Steve is very good at breaking down the subject into bite-sized pieces that novice and intermediate investors can understand and put to use. E.g., he loves explaining which three factors are the biggest red flags for potential accounting fraud – and anyone could check them quite easily. In Steve's view, some of the highest-profile corporate frauds of recent times could have been spotted by spending just five minutes looking at the respective companies' balance sheets.

On his blog, Steve often cites concrete examples. E.g., I was amused to read that Alibaba (ISIN US01609W1027) has USD 49bn of intangibles on its balance sheet, including things like non-compete agreements. Is it all hot air? As Steve puts it: "I have never seen this on any other balance sheet."

One day, when the world looks back on the current excesses in the financial sector, Steve will probably say: "All the clues were there!"

Following Behind the Balance Sheet will help you become more aware of these risks and improve your ability to stay clear of risky investments.

For more about Steve's philosophy and work, check out this excellent November 2020 interview published by GlobalCapital.

2. Stock picking training for both private and institutional investors

As a follower of Undervalued-Shares.com, your likely key objective is to get better at picking stocks. Since 1990, just 1% of stocks in the world have produced almost all of the gains. Stock picking is a more important skill than ever before.

Steve offers training courses for both private and institutional investors which follow the motto:

"How to make money in the stock market, at reduced risk."

For institutional investors, Steve's course about forensic accounting is a good fit. Steve also offers training for employees of government regulators and central banks to help them improve corporate oversight in their respective countries.

Private investors can pick from the following five courses:

  • Analyst Academy: Everything you need to know to become a competent investor
  • How to Read a Balance Sheet (and the other statements): What you need to know to understand company accounts
  • How to Pick Winning Stocks: All you need to know about finding great stock ideas, verifying them and implementing them
  • How to Value Companies: A comprehensive and practical guide to company valuation
  • Debenhams Case Study: How investors could have identified multiple warning signals from Debenhams' accounts

There are also more advanced courses on offer:

  • Forensic Accounting - Pandemic Edition: Assessing cash flow, working capital unwind, and projecting end ‘20 balance sheets and '21 profits
  • Advanced Valuation Techniques - Enterprise Value Calculation: Everything you need to know about calculating Enterprise Value based valuations

Everyone has different training needs, and I haven't done any of these courses myself (yet).

However, I would put the potential value of such educational, in-depth courses higher than anything you can purchase for areas such as day trading or flipping real estate – where many courses are outright scams.

3. Intellectual research around current affairs, and some fun

I like it when bloggers do research about cases that are not immediately geared towards making money, but which are an intellectual exercise and tie in with current events.

E.g., Steve tried to analyse the value of Donald Trump's golf course in Scotland.

Sign up to Steve's monthly-ish newsletter to keep abreast of his writing, and you'll learn quite some interesting facts such as "the 261 large US companies which were loss makers in 2019 are up 65% in 2020 ON AVERAGE" (as did I when I read the latest issue).

The fact that Steve's newsletter only arrives ever so often makes me enjoy it even more.

4. The "club": exclusive content and networking

Quite similar to myself, Steve prefers to attract a smaller but higher-quality audience.

His "club", a website where you can register and interact with Steve and other readers, is free to join and currently has 400+ members.

Steve is very selective in sharing new content with this network - which is of higher value to me. I have just joined myself and will now check back every week or two. Just today, I found a copy on there of the 2021 edition of Steen Jakobsen's "Outrageous Annual Predictions", which I had wanted to read but so far couldn't find anywhere else (if you are interested in the free PDF, you can download it from the "Club Café").

The club's main feature is a "library", where Steve has assembled around 1,500 articles that can help you improve your investment skills or simply find out more about a subject. The library welcomes submissions from members and could turn into a powerful resource over the coming years.

(Before you ask, I have a long-term plan to create something similar for my readers. But I am SO busy with other plans and products for my website that it's unlikely to happen before 2022 at the earliest.)

Get to know Steve through his new book

Steve has just published a book: "The Smart Money Method – How to pick stocks like a hedge fund pro".

For just GBP 19.99 (around USD 27), you can get to know his approach and decide if his other products are worth pursuing. 

(Just for the avoidance of doubt, I have no affiliate marketing agreement with Steve and even paid for my copy of his book.)

Blog series: Blogs to watch

There's more to "Blogs to watch" than this Weekly Dispatch. Check out my other articles of this ongoing blog series.

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