InvestEd 2012
March 2012 Webinar: Discounted Cash Flow
Comprehending Pre-tax Profit Margin
Google Reader Tool


InvestEd 2012
Charlotte NC June 8-10, 2012
Renaissance Charlotte Suites Hotel

Paper Handout Deadline March 31, 2012. Save $20. Register Now!
InvestEd 2012 registration is $389 until March 31, 2012 and includes a complete set of desirable paper handouts. Beginning April 1, 2012, registration is $409 and excludes paper handouts. Register Now!

Do you have friends or family members who are new to investing? Bring them along with you to InvestEd 2012 in Charlotte, North Carolina, June 8-10, 2012. Enroll them in our outstanding Newbies Program, a time tested, measured progression through introductory classes that are designed for the novice investor. Many of our Newbies from prior conferences have gone on to become successful investors who continue to attend InvestEd and who continue to grow through these experiences.

Come early and attend our computer/technology sessions on Friday afternoon, a bonus offering for no additional fee. At these sessions you can learn how to maximize your use of Gmail, how to avoid computer nightmares, how to create and manage your passwords, and how to take advantage of new technologies.

InvestEd is a cutting-edge investor education conference that introduces new topics to improve our traditional presentations well before they appear at conferences sponsored by other organizations. We offer a computer lab and vendor availability to supplement your experience at InvestEd. The lab, staffed by knowledgeable computer-savvy investors, offers opportunities to try new software, check out websites mentioned in presentations, and receive answers to questions.

We continue to run our pioneering, open-topic Cyber Cafe on Friday and Saturday evenings for all InvestEd Conference attendees. The Cyber Cafe is complimentary to all attendees and offers an opportunity to interact with fellow investors in an informal atmosphere.

Conference attendees have the opportunity to speak directly with our instructors in the Cyber Cafe, gain additional information related to their sessions, ask questions, and discuss aspects of investing that don’t quite fit into Q & A at the end of session presentations. Often, the Cyber Cafe is cited by attendees as a favorite educational and social happening at which enhanced investor education is achieved in a relaxed, informative, and entertaining manner.

InvestEd 2012 does not stop at merely having a large set of topics presented. You will enjoy traditional sessions in addition to new and dynamic material. The sessions range across all levels of investor experience so that all attendees will be challenged, each to the attendee’s individual abilities and experience.

Our all-volunteer staff and instructors eagerly look forward to your arrival in Charlotte. Our sponsors (Duke Energy, GE, General Mills, PepsiCo, Procter & Gamble, SAP, and FINRA) believe in our mission and in the importance of providing investor education to our conference attendees. They, too, are looking forward to meeting you and answering your questions about their companies.

You can’t afford to miss InvestEd 2012! Please join us in Charlotte this June 8-10 and enjoy the education and our famous camaraderie as we increase our investing knowledge together. We are looking forward to welcoming you to our best InvestEd ever. All we need for that to happen is YOU! Register Now!


InvestEd Inc. Free Webinar
Discounted Cash Flow
Sunday, March 25, 2012
7:00 PM-8:00 PM ET / 4:00 PM-5:00 PM PT
Instructor: Bakul Lalla
Webinar Registration

Money Talks, Cash Shouts!
Cash is the lifeblood of a company. Understanding how the management of a company allocates cash provides plenty of clues as to the sustainability of the competitive advantage it enjoys. Learning how to interpret the cash flow statement and the cash flow ratios gives you an additional set of tools for managing the holdings in your portfolio.

Webinar Topics
- Understand the three sections of the cash flow statement
- How a company allocates cash
- Using a website to look at cash flow and cash flow ratios
- Interpret cash flow ratios in conjunction with the balance sheet and income statement

Bakul will answer cash flow questions about a company of your choice as time permits.
Register now to attend the InvestEd Inc. free online investor education webinar. Space is limited.

Bakul Lalla is an InvestEd webinar instructor. He is a former president of an investment club and serves as one of the forum administrators on the Investing for Growth Forum, where he participates in the discussion of various investment topics. Bakul, who resides in Norwalk, California, has a Bachelor of Science degree in electrical engineering and a Master of Science degree in computer engineering, both from the University of Southern California.



Comprehending Pre-tax Profit Margin
John Diercks

A company's management has two significant jobs. One is to make money to invest in new assets. The second is to spend money wisely to grow assets and shareholders' equity. Pre-tax Profit Margin (PTPM) helps assess how well management is performing the first job, and Return on Equity (ROE) helps assess how well management is performing the second job. Section 2 on the Stock Selection Guide (SSG) addresses quality analysis.  Section 2A provides 10 years of history for PTPM, and Section 2B provides history for ROE. Our interest in this article is PTPM.

The website, Investopedia, defines PTPM as "a company’s earnings before taxes as a percentage of total sales or revenues. The higher the PTPM, the more profitable the company. "Although the absolute number is important, the trend is more important when evaluating a company’s stock for purchase or sale.

Evaluating profits before taxes is important because government policies regulate taxes, and it puts companies in the same industry on an equal basis without regard to their revenue size. Not only does PTPM tell us if management kept growth of expenses in line with growth in sales, but it also tells us if management kept expenses competitive with other companies in the same industry.

Before we analyze trends in PTPM, we must isolate the positive and negative factors affecting PTPM, which is not as straightforward as just looking at the absolute numbers over 10 years on the SSG. We need to look behind the numbers on the company's Income Statement that affect the trend.

Now for a bit of algebra:

PTPM = 100% minus (EXPENSE1 + EXPENSE2 + EXPENSE3 + . . . + EXPENSEn),

where each Expense is given as a percentage of sales.

We will consider three broad categories of expenses including cost of goods sold, overhead or operating expenses, and research and development (R&D) for two  companies. Let's assume that money from company sales goes into expenses and profits. Increasing sales from one year to the next does not necessarily result in an increase in PTPM.

The combined cost of goods sold, overhead, and R&D as a percentage of sales must decrease from one year to the next in order to increase PTPM. If the combined expenses as a percentage of sales increase from year to year, then PTPM will decrease.

The company, Cree, Inc. (NASDAQ:CREE), a major manufacturer of light emitting diodes, is an example of a company with a significant decrease in PTPM.  Below is Section 2 from the SSG showing a reduction in PTPM and ROE from 2010 to 2011.

The following table shows sales, expenses, and PTPM for CREE. PTPM is calculated by subtracting the yellow highlighted percentages from 100% (see previous algebraic formula). The percentage difference in sales and changes in expenses as a percentage of sales are shown in the right-hand column.

Cree (CREE)
Item (in millions)



Percent of Sales



Percent of Sales





















Cost of Goods Sold






Operating Expenses






Research and











Depreciation & Other












Pre-tax Profit Margin






Cost of goods and operating expenses both increased as a percentage of sales and were major reasons for the reduction in PTPM even with sales increasing by 14% from 2010 to 2011. The increase in R&D can be considered a positive expenditure for CREE as it develops new products.

The company, Apple Inc. (NASDAQ:APPL), is a positive example for controlling expenses. Below is Section 2 from the SSG showing the steady upward trend in PTPM. Note the huge jump in ROE during 2005.

The following table shows Apple's sales, expenses, PTPM, and differences for 2010 and 2011.

Item (in millions)



Percent of Sales



Percent of Sales





















Cost of Goods Sold






Operating Expenses
and Other











Research and

















Pre-tax Profit Margin






With a huge jump in sales due to the introduction of new, innovative products, Apple's PTPM increased 3.2 percentage points from 2010 to 2011. Decreases of 1.1 and 1.6 percentage points in cost of goods sold and operating expenses as a percent of sales, respectively, were the main factors in the improved PTPM.

In conclusion, when you see a large negative or even positive change in PTPM, take the time to investigate the change. The process can be profitable, and it is easy to do.

John is an InvestEd instructor who teaches financial classes and mutual fund workshops at local, regional, and national events. Currently, he is a director of the Central Pennsylvania Chapter of BetterInvesting and the treasurer of two investment clubs, including the Centre Region Model Investment Club. Prior to retirement, with advanced degrees in meteorology, John spent 26 years in the Air Force and 16 years as an instructor of meteorology at The Pennsylvania State University.


Google Reader Tool
Douglas Gerlach

A helpful way to use Google tools in order to keep informed about your holdings is to use Google Reader. It is an online RSS (Really Simple Syndication) program that helps you track and organize blogs and websites that use the RSS syndication format for distributing information.

First, you'll need a free Google or Gmail account in order to use the Google Reader. If you don't have one, you'll be asked to create one when you access the Google Reader for the first time.

From any company's summary page on Google Finance, you can view a list of recent company-related news (to the right of the stock price chart). Notice the orange RSS icon and "Subscribe" link below the news. Right-click the orange icon and copy this link address. Don't click the Subscribe link in the regular fashion - you'll get a page that can't be read in a web browser.

Next, open the Google Reader page ( Click the red "Subscribe" button at the top left side of the page, and paste in the Google Finance company link that you just copied. Click "Add." Now, whenever you visit your Google Reader, you will see the recent news relating to that company. Repeat this for all of the companies that you wish to follow.

In Google Reader, you can organize your separate feeds into folders to make updates easier to follow. Take a tour to learn more about the reader's features.

The InvestEd Inc. February 2012 Monthly Newsletter published Doug Gerlach's article about another Google tool, Google Finance Portfolio Monitor. These tools from Google are a convenient way to prepare a report on a stock for an investment club meeting, as well as to ensure that you remain an informed investor with respect to the stocks in your personal portfolio.

Douglas Gerlach is an InvestEd instructor, the founder of, and the President of ICLUBcentral Inc, maker of tools for investment clubs and individual investors, including Toolkit 6. A popular speaker and investment educator, he is the author of six books, including The Pocket Idiot's Guide to Direct Stock Investing and The Armchair Millionaire. A former editor for Mutual Funds Magazine, currently Doug is the Editor-in-Chief of the Investor Advisory Service, the award-winning market-beating stock newsletter.


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