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No. of Recommendations: 5
What's Behind the Numbers?, which Tom wrote with fellow Fool advisor John Del Vecchio and which Special Ops members received a complimentary copy of, was just praised in Barron's.

If you're a Barron's subscriber, click here to read the entire review:

If you're not, you can Google "Sidestepping Losers Is the Way to Win" and get a free pass to see the article.

Here's an excerpt from the review:

"According to this informative book, the key to superior performance in stock picking is not to find winners, but to shun losers. Authors John Del Vecchio and Tom Jacobs, portfolio managers associated with the Motley Fool, note that from 1983 to 2007, the Russell 3000 rose by nearly 900%, yet 39% of the stocks in the index posted negative returns. Just a quarter of the stocks accounted for all of the Russell's gain.

"But how to decide which stocks not to own? Answer: Avoid buying those with telltale signs of deceptive accounting. Accomplishing that feat requires healthy cynicism about companies' reported earnings. As the authors observe, managements love to "change comparisons of apples to apples to comparisons of apples to kiwis, obscuring reality and earnings quality."

"Telltale signs include such classics as a pattern of perennial "one time" charges and an unrealistically high assumed rate of return on pension assets. Another red flag: a buildup of accounts receivable, measured by a ratio called "days sales outstanding." A rise in this ratio suggests that either the company has been compelled to offer more-liberal terms to attract business or that increasing numbers of customers are unable to pay.

"Del Vecchio and Jacobs draw on the work of several forensic accounting luminaries, including David Tice, Eugene Comiskey, and Charles Mulford, and add some refinements of their own. One especially helpful innovation is a ranking of various types of accounting trickery in order of the degree of hazard they pose to investors."

Special Ops editor
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