Valuations Aren't Always What They Seem: Fund Manager

This earnings season, be cautious when considering the valuations placed on companies, said renowned financier Bob Olstein.

Las Vegas Sands, one of two examples Olstein cited, is a premier name in gambling with a market capitalization of $25 billion, said Olstein, chairman and chief investment officer at Olstein Capital Management. The resorts and casino operator, however, hasn't produced any cash flow for the last few years, he said.

"So how do you value a company at $25 billion that's producing no cash?" asked Olstein, who added that Las Vegas Sands needs cash to refurbish its casinos and stay competitive.

Concerning analysts, Olstein said it would be helpful if they were divided into two categories: fundamental and technical. Fundamental analysts, he said, value a company according to figures. A technical analyst tells investors where stocks will move intraday.

Olstein co-founded the research note, "The Quality of Earnings Report," in 1971. The publication pioneered the use of forensic accounting techniques to identify positive or negative factors affecting companies' earnings power. From 1981 to 1985, he served as senior portfolio manager and senior vice president at Smith Barney.