First Steps of Income Statement Analysis: A Look at Cheesecake Factory, Inc. (CAKE)

A picture is worth a thousand words — or maybe around $2 bn (which happens to be CAKE’s market cap). Three of Sentieo’s core functions are table extraction, plotting and record management. In this blog post, we demonstrate how analysts use these convenient functions to visualize a company’s financials in minutes.

CAKE, like many other restaurant companies, reports its Income Statement in a non-standard format: there is no all-encompassing COGS. Instead, we see different line items with different cost buckets, such as food costs, labor costs, and occupancy costs. In its earnings release 8-K, CAKE also calculates each of these line items as a percentage of sales.

Using Sentieo’s Time Series Function, we will build a time series containing the major operational line items: food costs, labor costs, and “other” operating expenses.

 

After the extraction, we can review the numbers by document by clicking ”Next’ (always check to see if the numbers are a 6-9-12 month summation, or just the Q4 is a 12-month. See the boxes in the lower left that help the adjustments). From here, one can open the source document, export to Excel, or open in the Plotter charting engine — after checking the numbers. For companies that change formats, you can enter the correct number in the columns on the left field. We do this here for Q1 and Q2 2015 as the numbers appear without a “%” signs.

The corrected numbers for 2015 look like this:

After we have made sure that the numbers look good (all are coming from quarterly columns, all are in the same percentage format), we open the data in Plotter.

Since all numbers are given as a percentage of sales, we can merge the Y-axes from the chart settings.

To get a better idea for the underlying cost trends, we are muting the quarterly numbers for each series, and adding a 4-quarter moving average. We can also customize colors, line format and line thickness.

Here we can see the longer term trends. While food and occupancy costs have stayed relatively steady (as a percent of sales), we can see that labor expenses have been moving up.

 

We are now ready to save, tag, and share the chart with the team.

The chart is now a part of our CAKE Notes, and can be commented on, added to full theses, or to other Notes inside Sentieo’s Notes Records Management System.

 

From here, we are ready to dig in deeper in the corporate documents to see what has been going on. Click here for interactive chart.

See how these, and many other tools on the platform, can make your research process more efficient: request a free trial here.

Introducing Sentieo Capture: Clip and Save Document Content into the Sentieo Notebook

We recently introduced an enhancement to our document markup functionality: Sentieo Capture.

Within documents in Sentieo, you’ve had the ability to highlight, annotate, and tag your colleagues within important passages of text. Oftentimes, you’ve also come across important graphics such as charts or tables that you may have wanted to collect and save.

With Sentieo Capture, you can now:

  • Capture any portion of a document (such as a capex breakout slide from a company’s investor presentation).
  • Mark up the capture with shapes, arrows, and lines of text.
  • Save the captured area as an image (along with the source document) directly into your Notebook.
  • As with highlights, you can also add label(s) and annotations to your captures.


Why Should I Use Sentieo Capture?

While performing a deep dive analysis on a company, investment professionals are likely to face information overload, which can make it challenging to effectively manage all the information being consumed. Ultimately, effectively managing information and data becomes one of the key skills of a successful investment professional:

  • How do you collect information snippets from the documents you are reading, and then create a summary report?
  • How do you record the link (URL) to remember the source of the document along with your information snippet?
  • How do you organize the information you’ve collected so that you can easily retrieve it at a later time?
  • When collaborating with others on your team, how do you efficiently share and update this information?

You have probably used various tools to tackle these questions, including the Windows Snipping Tool, MS Outlook, MS Word, MS OneNote and Evernote. These are all great tools and have their own particular strengths, but they do not solve the a major problem in the investment professionals’ information capture flow: having to source, organize, remember, and be able to retrieve your research.

At Sentieo, we are building features to replace the fragmented information capture workflow to become a one-stop solution for managing, sharing, and retrieving the information you’ve gathered on a company or topic. That way you can come up with a meaningful conclusion using all of the information you’ve gathered, and not just bits and pieces. In this post, we’ll nudge you into trying a slightly different approach when doing your company research in Sentieo.

 

How Do I Use It?

The Capture feature can be triggered via the photograph icon located in the upper-right corner of the document that you are viewing. There is no real setup required other than making sure that you have installed the Sentieo Chrome extension, which you will be prompted to do if it is not already installed.

To enable capture mode, simply click the “Capture” button on the toolbar while viewing any document within Document Search or your Notebook:

 

Begin your capture by selecting the area you would like to capture and clicking and dragging:

A new screen with your captured area will appear, allowing you to:

  1. Name your capture
  2. Mark up your capture with the annotation tools menu
  3. Copy to clipboard, e-mail out, or save the image to your computer
  4. Add a label or annotation to your capture
  5. Save or discard your capture

Where is this information being stored, and what can I do with it?

All of your bookmarks, highlights, annotations (and now captures) are also stored and searchable within your Sentieo Notebook. This also means that your information is available from any computer with Google Chrome and an internet connection.

Like highlights, all of your captures are automatically sent to your Notebook and populated with the source document title and filing date, any relevant company tickers, and any labels and annotations. This automatic tagging makes retrieving your highlights and captures a breeze in the future.

Additionally, you can share selected research with the rest of your team and people outside of Sentieo. You can also view what others have shared with you.

 

We hope that Sentieo Capture saves you more time and keeps your research more organized. Give highlighting and Capture a try; you won’t want to do your Sentieo research without it! Please message us via customer support chat, or email nauman@sentieo.com with any feedback on the functionality that you would like to see added to the new capture feature! Haven’t used Sentieo yet? Get a free trial.

Our $19 Million Series A Round: What It Means For Sentieo and the Future of Financial Research Software

sentieo

 

By Alap Shah, CEO @ Sentieo: On behalf of the entire Sentieo team, I’m proud to announce that Sentieo has secured $19 million in Series A funding. We are thrilled to have Centana Growth Partners leading the round, and we couldn’t be more excited to welcome Eric Byunn to our board of directors.

This milestone caps 18 months of accelerating momentum at Sentieo, driving a tripling of our client base to 700, a doubling of our global headcount to 160 and the release of the Sentieo Notebook / RMS (Research Management System) for collaboration. While we’re certainly celebrating today’s milestone, fundraising is merely a means to our ultimate end- accelerating human productivity and collaboration in the financial space.

We’ve come a long way from our earliest days, when my brother Naman and I began building tools to improve my own research productivity in running our family office portfolio. Working with our early engineering team, I remember being struck by the huge and immediate performance boost I experienced when I was delivered search and analytics software that was custom built for my workflow. This new capital will help accelerate our R&D spend and go-to-market strategy to help us deliver this same productivity boost to more financial decision makers globally.

The pace of change continues to accelerate in the financial industry, with increased regulation, continued shifts to passive and quant strategies and shrinking trading commissions / fee pools. In our experience, the most important underlying change is the relentless explosion in data available to inform decisions. Beginning with the internet and accelerating with mobile, cloud and now AI, data is multiplying, together with the opportunity for insight. There is a prevailing narrative across industries including finance that algorithms are best equipped to generate this insight, translating to a growing loss of human jobs.

We see things a bit differently from our unique vantage point. AI and related technologies such as Natural Language Processing (NLP) are best at performing repetitive, trainable processes. In our world we use AI and NLP to help researchers take away the monotonous work of extracting financial data from tables, finding key management commentary in a transcript or alerting a user to changes in a company’s risk factors disclosures. Using our tools, analysts can drastically increase their speed and coverage without sacrificing the depth and accuracy of their work, freeing them up for more meaningful work that only humans can do. Getting out from behind their desks, researchers can visit more management teams, attend more industry conferences and spend time cultivating unique data sources to develop differentiated viewpoints on markets and industries.

Finally, as the stakes go up and the number of data inputs increase, finance continues to become more of a team sport. Our work with increasingly matrixed organizations with diffuse knowledge and skill sets has underscored the unique challenges in bringing an organization’s best thinking to bear in driving decisions. This institutional knowledge management and collaboration function is a uniquely human act that can’t be matched by machines. Sentieo’s Notebook / RMS is custom designed to enable humans and software to work seamlessly, automating knowledge sharing, cataloguing decision points, leaving a clear audit trail and allowing concise measurement of outcomes. The results are clear- better visibility, accountability and performance.

To see how Sentieo can make you Superhuman, simply go to Sentieo.com and sign up for a free trial. If you would like to receive content related to topics of interest in the markets, don’t forget to subscribe to the Sentieo Blog so that we can notify you of new posts by email.

Save Time Analyzing Off-Balance Sheet Commitments with Sentieo

Not all contractual obligations that result in cash outflows are listed in a company’s balance sheet. Looking purely at debt figures leaves an incomplete picture of future funding needs. In this blog post, we will find and visualize these liabilities in several examples across industries. While most analysts are very familiar with common items like operating leases and post-retirement healthcare liabilities, here are a few other items that we found.

We compiled these using the search term “Contractual Obligations” in Sentieo’s Document Search, and then built a Time Series chart using the Sentieo Time Series function to export from the 10-K or 10-Q. Lastly, we displayed the data in Sentieo Plotter.

Netflix: The online streaming hegemon has over $18 billion in future content liabilities. That’s a lot of binge-watching! The number has been growing steadily every quarter. Public chart viewer: http://snt.io/3YEv9pLtK

Nike: The dominant athletic footwear and apparel maker is known for its high-profile athlete endorsements. But these contracts do not come cheap; Nike’s 10-Ks show a growing off-balance sheet liability, now at over $10 billion. Public chart viewer: http://snt.io/aeEv9rCv9

Waste Management: The leader in waste management has over $3 bn (and growing) in environmental-related liabilities around the closure of garbage facilities at the end of their useful lives. Public chart viewer: http://snt.io/rcEv9sR9C

Vulcan Materials is a large supplier of aggregates (like sand and crushed stone) to the construction industry. We plotted the mineral royalties that they expect to owe to the property owners of the sites that they operate. Public chart view link: http://snt.io/fNEv9srx4

Valero, a large oil/petrochemical refiner, has over $30 bn in purchase commitments, mostly crude oil. The numbers have stayed fairly steady over the last 10 years. Public chart viewer: http://snt.io/EgEv9vTXr

Finally, our favorite find: Deckers Outdoor Corporation. This parent company of the UGG brand has purchase commitments for (you guessed it!) over $100 million dollars of sheepskin. This is a new disclosure; only two 10-Ks have it, so we are not showing a bar chart.

Sentieo Guide: Quick Tips For Starting a Hedge Fund

Chances are that you’ve thought about starting your own hedge fund. Perhaps you’ve felt an entrepreneurial pull, have an investment strategy in mind, or know a team of people with a similar goal.

Below, we’ve compiled a list of some of the best guides we’ve found online.

 

Resources:

Business Insider

Investment Law Group

Grant Thornton / Stonegate Capital Partners

Hedge Fund Law Blog

Investopedia

Vanity Fair

Mergers and Inquisitions

HFM Global

Hedge Fund Seeders

Hedge Fund Technology

Hedge Fund Law Firms

 

If you’d like to download Sentieo’s full, comprehensive guide that pulls together the best advice from all of these sources —  including legal advice, raising capital, office space, building a team, and more — download the full whitepaper.

Here are the topics that the guide covers:

  • Fund Structure
  • Raising Capital
  • Building a Team
  • Legal Considerations
  • International Considerations
  • Office Space
  • Technology Stack
  • Naming the Hedge Fund

 

“Pumpkin Spice” season starts earlier than ever, and is bigger than ever (at least on the internet)

Do you ever feel like Pumpkin Spice season seems to start earlier and earlier? Well, it’s true. It’s also bigger than ever — at least in Search.

Sentieo’s Mosaic pulled ten years of “pumpkin spice” search data, and we see some clear trends. Pumpkin spice season was typically off to a slow start, building up to a spike around Thanksgiving in late November (and we see the late November spikes on different days as Thanksgiving moves around).

We also see that over the last ten years, the pumpkin spice season has been starting earlier, and search volume in September/October has started to dwarf the previous peak around Thanksgiving. Finally, the pumpkin spice volume peaked in early September this year!

We are also seeing the term “pumpkin spice” appear across corporate communications: press releases, transcripts, and presentations. Using Sentieo’s thematic search, we looked for “pumpkin spice” across all corporate communications. We see a range of pumpkin spice products from Dunkin, Coca-Cola, IHOP, and even a pumpkin spice Baileys coffee liquor from Diageo.

And, of course, the 800-pound pumpkin spice gorilla is Starbucks: the company announced in a tweet that its legendary pumpkin spice latte is back on August 28th. Below, we used Sentieo’s Plotter to look at the frequency of pumpkin or PSL mentions from the Starbucks Twitter account.

Interactive chart

Locating Transaction Comparables in Fairness Opinions with Sentieo

A fairness opinion is a report, usually created by an investment bank, showing that a contemplated strategic transaction (such as a merger) is fair to the shareholders who are represented by the company’s Board of Directors. A fairness opinion will typically contain carefully researched and adjusted trading and transaction comparables.

Fairness opinions are used by buyside and sellside analysts to analyze transaction multiples and trends. They are used by activist investors who might feel that the target is undervalued and look to exercise their appraisal rights in court. In a similar fashion, securities litigation specialists might look at the documents while seeking compensation on behalf of shareholders. Finally, fairness opinions are looked at by corporate M&A/development professionals who monitor their own or adjacent industries.

Fairness opinions are usually rendered after the transaction has been announced, and they are filed with the SEC. However, a merger or an acquisition typically creates a deluge of filings from both parties, making locating this important document time-consuming, as there is no special SEC form for fairness opinions.

Sentieo users save time locating fairness opinions in seconds. Sentieo can also locate fairness opinions for companies that no longer trade. Here we show two examples: the pending deal between ConAgra Brands and Pinnacle Foods, and the acquisition of LinkedIn by Microsoft from a few years ago.

Pending deal between ConAgra Brands and Pinnacle Foods:

Acquisition of LinkedIn by Microsoft:

 

 

 

How to Analyze Changes to Executive Pay Structures with Advanced Document Search Features

“Show me the incentive and I will show you the outcome”  – Charlie Munger

This classic quote from Berkshire Hathaway’s nonagenarian Vice Chairman is something that fundamental investors need to always keep in mind when analyzing companies. Is your CEO paid to grow sales at any cost? Will she amass generational wealth if she sells the company?

Thankfully, these questions can be answered by a careful review of various SEC filings regarding compensation, and, especially, by noting changes compared to prior years. Analyzing pay is not used only by buy-side and sell-side analysts: compensation consultants, and, increasingly, activist shareholders and political groups have been scrutinizing executive pay. Looking for changes in company filings is easy in Sentieo’s document search which allows users to compare filings to any other filing, filed at any time with the SEC.

For example, here we are looking for changes in Colgate Palmolive’s omnibus executive compensation plan that was previously filed five years ago. We have selected the “All Changes” option in Redlining Mode and compare the recent 8-K filing to a custom-selected 8-K filing from five years ago that we located easily in through our Document Search.

 

How Selective Wealth Management Improved Productivity by 50% With An RMS

Challenges Faced Without an RMS (Research Management System):

With a lean team and a rigorous research process, Chris Devlin, founder of Selective Wealth, wanted a solution that would save him time. He wanted to spend less time trying to find information, and more time analyzing his findings to create more alpha-generating ideas.

Before switching to an RMS, Chris saved notes in Word documents within ticker-labeled file folders on his desktop. This involved a lot of time spent copy-pasting and annotating outside of the original documents, and it was also challenging to keep track of different document types and ultimately build a thesis in a reasonable amount of time.

 

What Is an RMS?

An RMS — or research management system — helps investment professionals organize and optimize their research process with features like:

  • document highlighting & annotation
  • team collaboration on shared notes and documents
  • auto-tagged notes, charts, and tables that are searchable by ticker or custom tags defined by you

 

An RMS Makes Idea Organization Easier in 3 Ways

Chris uses the Notebook, Sentieo’s integrated research management system, “from soup to nuts” in these key ways:

  • His document highlights and annotations get auto-tagged to tickers so his team can stay organized
  • He uses a custom thesis template to speed up and standardize thesis writing across the team
  • He saves hours creating and sharing notes with his team inside the RMS, instead of using Word docs and emails.

Vision Research Achieves 75% Time Savings With Sentieo Collaboration Tools

Challenge

The Vision Research team needed a tool that would allow for thorough document research, but also allow them to quickly organize and communicate ideas across their remote team.

Solution and Results

One of Vision’s clients recommended Sentieo to Robert and his team, and they were immediately impressed with Sentieo’s Document Search, and especially Sentieo’s Notebook research management system.

Robert and his team members have been using various document search tools for over a decade, including Thomson Reuters StreetEvents and Alphasense. However, they now solely use Sentieo, which has powerful search functionality, but also integrates with the rest of their workflow very easily.

Document Search For Idea Generation and More

The Vision Research team uses Sentieo’s Document Search on a daily basis, for a couple of reasons:

• Idea generation – querying certain “buzzwords” or specific keywords and their synonyms (and eliminating false positives)

• Researching an idea that they have already begun, continuing to follow a story

Sentieo has been a timesaver in both of these tasks, allowing the team to experience 75% time savings when compared with previous platforms. The team especially likes the Document Search redlining tool, which allows them to compare language from the same document type from different quarters.

Tables, Export to Excel, and Modeling

One feature that the team was not able to find in Alphasense or other platforms was a table extraction tool that allowed them to extract tables from any document and push them into Excel. Sentieo allows them to do this and more, including the ability to extract and easily compare tables historically over quarters or years. With the Sentieo TableX suite, the team spends 50% less time than it used to on modeling activities.

The Notebook: Collaboration Made Easier

The Sentieo Notebook was the platform’s biggest selling point for the team. Before Sentieo, the team used a shared cloud drive to store files, and communicated information using only hundreds of emails and Excel spreadsheets, which ended up being a very inefficient process for them.

Now the team is able to create notes and categorize them for easy organization across the team. They have created a system where they can share ideas and label them “Reviewed” “Unreviewed,” and more. Everyone on the team can comment, and there is a trail of comments and activities that they can reference at any time.

This is especially helpful because the team works remotely across different offices in Dallas, and some members of the team travel frequently. The Notebook keeps their research all in one place, transparent across the team, and has made for at least 50% time savings compared to their old process.

 

Equity Data Terminal: Financial Data At Their Fingertips

The team started using Sentieo’s built-in equity data terminal because they ultimately wanted to replace Bloomberg, and did not want to have to buy expensive Bloomberg licenses for future junior employees joining the team. Sentieo offers all the quality financial data they need, from street estimates to trading multiples and shareholders data — at a fraction of the price of Bloomberg.

Mobile Apps For Researching Anywhere, Anytime

The team uses the Sentieo mobile app to get instant push notifications about tickers and companies that they are following.