I'm actually excited about this because I feel like there's a great opportunity for using more and more machine learning and AI to do the mindless mechanical stuff and then enable us as humans to continue to do the synthesis, do the analysis weave together the qualitative with the quantitative. Patrick Badolato: At one point this might be possible and I love your question because we were recently talking in class about ChatGPT. Ricky Mulvey: I thought about this, why can't a computer program just screen for metrics and then pick stocks for me, look for companies with high returns on invested capital, low P/E, give me some examples and then let's go. But financial metrics can be very limited where they give a snapshot of a company, they give a general overview, but there usually is much more behind the scenes that you can get from reading the management discussion analysis, looking through different parts of the footnotes or the rest of the financial filing. Alongside that, we're definitely to use and talk about financial metrics. As you said, read the footnotes and think carefully about what the business is doing. As a result, what I trie to do in class is just to give a moment to slow things down, to have a chance to digest the information. Patrick Badolato: Ricky, I think one of the reasons is just that slowly and surely computers and AI and all that will replace what we do. Walk me through this why is it worth it for investors to dig into the weeds in financial statements? Now in a more normalized interest rate environment, it might be worth your time. Ricky Mulvey: One point in Howard Marks' memo, sea changes that investors have this moving sidewalk for the past 13 years, and that a lot of fundamental analysis wasn't really worth one's time. But they also wanted us to effectively ignore the cost of their clothes by ignoring their depreciation on all of these items that clearly depreciate quite quickly and are a constant recurring use of cash to stay in business.Ĭhris Hill: I'm Chris Hill and that's Patrick Badolato, a professor at the UT Austin McCombs School of Business, Ricky Mulvey caught up with him to gain some insights from an actual MBA classroom and discuss whether artificial intelligence can take a financial analyst's job, why investors should pay close attention to operating income and how Rent the Runway made an interesting adjustment to its earnings. This is a company that buys and then rents out fashionable clothing. Patrick Badolato: I just want to slow us all down for a second. This video was recorded on February 11, 2023. *Stock Advisor returns as of February 8, 2023 and Walmart wasn't one of them! That's right - they think these 10 stocks are even better buys. They just revealed what they believe are the ten best stocks for investors to buy right now. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* When our award-winning analyst team has a stock tip, it can pay to listen.
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