The Rabbit Hole that led to Core Earnings

19 Mar 2026 · 1 min

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A presenter traces how he became obsessed with core earnings after noticing companies' reported profits diverged sharply from their GAAP earnings. He dug into financial manipulation, CFROI, and expectations investing. His conclusion: investing is really one question: for every dollar you put in, what actual cash comes back out.

Chapters

When it came to the idea of the core earnings leaders and the index and all, it wasn't, it certainly wasn't just, I have this idea and here's how it works. What it really was sort of developed a little bit over time. And that I started to notice things in earnings reports and stuff like that, right? I started to see that the difference between what companies were reported as reported earnings and what they're reporting as GAAP earnings, the distance between those 2 things started to get bigger and bigger. And that sent me down the core earnings rabbit hole, as I think of it. And you and I have talked about this, from the financial shenanigans to CFROI and expectations investing. And after you go down the rabbit hole, you really figure out that there's really just one fundamental piece to investing. And that is, it is simply, if I give you money, how do I get back? It's really quite that simple. If I give you $1, I want $1.10 back. Is that an attractive investment for me? And it's all about the cash flow and real cash flow.