Most investors stare at spreadsheets and miss the small sentences that quietly shout: “Something’s wrong here.”

I want to show you how to catch those clues in the way executives talk, long before the trouble shows up in the numbers. I’ll walk through five big communication clues, but I’ll also show you how to train your ear so this becomes second nature, even if you think you’re “bad with words.”

Let’s start with a simple idea: if a company is healthy and confident, management usually talks in a clear, direct, boring way. When things start breaking, the language changes before the financials do. Your job is to notice those changes.

“The most important thing in communication is hearing what isn’t said.”
— Peter Drucker

Ask yourself as you read: “If I were the CEO and things were going badly, how would I try to talk my way through it?” That simple question alone can save you a lot of money.

Now let’s go through the five major clues.

First clue: patterns of evasion on earnings calls. Not one vague answer, not a bad day, but patterns.

Imagine you’re listening to an earnings call. An analyst asks, “Can you give us a timeline for returning to positive free cash flow?” Instead of a clear range like “We expect to get there in 2026,” the CEO says, “We’re very confident in our long-term strategy” and moves on. You hear that once, fine. You hear it four times on different questions, you should sit up.

Direct language usually has three things: a clear number or range, a time frame, and a specific action. “We’ll cut capex by 20% over the next 12 months to protect cash” is direct. “We’re taking a thoughtful approach to capital allocation to support our long-term vision” is fog.

Ask yourself: “Did I get anything I can write down?” After each answer, literally try to write one concrete fact: a number, a date, a specific action. If you can’t, that answer is verbal smoke.

Another subtle sign: when questions are answered by repeating the question in different words. For example:

Analyst: “Why did customer churn increase this quarter?”
CEO: “The key question is churn, and churn is something we’re very focused on. We’re committed to improving churn going forward.”

Nothing there. When you hear someone “answer” by massaging the wording, they’re often buying time or dodging.

One more tiny trick to watch for: when only the easy questions go to the CEO and all the hard ones go to the CFO or some other executive, especially after a rough quarter. That shift can show discomfort or internal misalignment.

Second clue: sudden shifts in favorite words over time.

Strong companies do change their messaging, but usually in a steady, coherent way. Weak or pressured companies often change vocabulary suddenly, like a person who starts talking about “diet” only after their health scares them.

If a company has talked for years about “growth,” “market share,” “expansion,” “new customers,” and suddenly every sentence is “efficiency,” “optimization,” “productivity,” and “discipline,” you should ask why. Usually that means either growth is slowing, or the board has told them to stop overspending, or debt holders are nervous.

None of those automatically mean “run away.” But they do mean: “Don’t treat this as the same story as three years ago.”

Try a simple test: pick two earnings calls from the same company, one from the “good times” and one recent. Count how many times they say “growth” words versus “efficiency” words in each. You do not need software. A pen and a printed transcript work fine. The direction of change matters more than the exact count.

You can also spot fancy re-labeling. When “cost cutting” becomes “portfolio optimization,” when “layoffs” become “rightsizing,” when “shutting products down” becomes “strategic focus,” ask yourself: “If this were my small business, what plain words would I use?” That quick mental translation often strips away the sugar coating.

“When in doubt, tell the truth.”
— Mark Twain

If a company cannot say simple, honest words about tough actions, you should doubt how honest they’ll be with you when things get worse.

Third clue: obsession with non-standard metrics.

Every business has some custom metrics. That is normal. The problem starts when the custom metrics become the main show, and standard accounting numbers are pushed to the side like an unwanted relative.

When you see headlines or slides shouting about “adjusted EBITDA,” “community-adjusted EBITDA,” “contribution profit,” “platform margin,” or “pro-forma profitability,” you should immediately ask two questions:

What are they removing?
Is the thing they remove actually part of real life?

If “adjusted EBITDA” removes stock-based compensation, restructuring charges, marketing costs, or “one-time” items that seem to happen every year, then the “adjusted” picture is basically a wish, not a business.

You don’t need to be a professional accountant. Just list the items they added back. Then ask in plain language: “If I owned a small shop, would I treat this as a real cost?” If your answer is yes, then it is a real cost for the big company too, no matter how they label it.

Another sneaky sign: the more lines they use to “adjust” the numbers, the more careful you should be. One or two adjustments can be okay. A long list of adjustments is like someone telling you, “I swear I’m honest, let me explain these ten exceptions.”

Also watch the order of presentation. If a CEO spends five minutes talking about adjusted figures and barely mentions GAAP numbers, that’s a signal. When management is proud of the official numbers, they usually lead with them.

Ask yourself: “Which numbers would I show if I were trying to sell this company to someone less experienced?” If the company presentation looks exactly like that sales pitch, slow down.

“The stock market is filled with individuals who know the price of everything, but the value of nothing.”
— Philip Fisher

Your job is to understand the value of the core business, not the prettiest version of the numbers.

Fourth clue: constant blame-shifting.

Every company faces external problems: recessions, wars, regulations, pandemics. The issue is not whether management mentions external issues. The issue is whether they ever say, “We messed up here.”

Accountable leaders say things like: “Yes, supply chain hurt us, but we also underestimated demand and didn’t plan inventory well. That’s on us, and here’s what we’re changing.” Evasive leaders say: “The quarter was impacted by macro headwinds, foreign exchange, and temporary industry dynamics.” Notice how that second sentence has zero ownership.

You can use a very simple filter: in a whole call or letter, count how many times they use words pointing outward (macro, environment, headwinds, factors, conditions) versus words pointing inward (we, our decisions, our execution, we failed, we learned). If almost everything points outward, that’s a problem.

Ask yourself: “Would I hire this person to run my personal business?” Imagine you own a small restaurant and your manager always blames the weather, the suppliers, the customers, but never the menu, the staff, or their own decisions. You would not accept that. Don’t accept it from CEOs either.

Also watch how they talk about employees and customers when things go wrong. When management talks as if customers were “churn” and employees were “headcount” but speaks warmly only about “shareholder value,” that gap in tone can show a culture problem. Culture problems often show up in numbers later through high churn, weak service, and brand damage.

“You are what you do, not what you say you’ll do.”
— Carl Jung

If what they say always pushes fault outward, it’s unlikely their actions inside the company reflect strong responsibility.

Fifth clue: changes in communication frequency and tone.

Healthy companies usually have a steady rhythm: similar length shareholder letters, regular investor days, fairly consistent guidance format. When that rhythm suddenly changes without a clear reason, ask why.

A few simple signs:

Sudden drop in forward guidance, or guidance becomes extremely wide (“between -5% and +10% growth”) without a solid explanation.
Cancelled or “postponed” investor days, especially after a bad quarter.
Shareholder letters becoming shorter, vaguer, or more glossy and marketing-heavy over time.
Q&A sessions on calls getting shorter, with fewer questions allowed.

None of these alone mean disaster, but together they can signal internal uncertainty or fear of tough questions.

Tone also matters. Compare the mood of management’s words across a few years. Were they once quietly confident and now almost aggressively defensive? Are they overly promotional, repeating phrases like “game-changing,” “transformative,” “disruptive,” while the results are mediocre?

Ask yourself: “Does the tone match the numbers?” If results are weak but the tone is hyper-positive, that mismatch is a warning. If results are strong but the tone is humble, that’s often a good sign.

One more practical trick: read transcripts instead of listening to recordings at first. On audio, a charming CEO can sound convincing. On paper, you see the emptiness of some sentences. Once you train your eye, then go back and listen to hear the hesitations, pauses, and changes in voice.

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
— Benjamin Graham

Corporate communication is part of the “voting” game. Your job is to focus on what will matter when the “weighing” happens.

Let me now tie all of this together into a simple practice you can actually follow.

First, always read the Management Discussion & Analysis (MD&A) section of the annual report before any numbers. This area shows how management wants you to think. Ask: What are they emphasizing? What are they minimizing? Do they clearly discuss risks, or do they bury them in legal boilerplate?

Second, create a tiny checklist of phrases that bother you. For example:

“We don’t give guidance, but…”
“We don’t manage the business to quarterly results.”
“Macro headwinds” repeated five times.
“Transient,” “temporary,” or “non-recurring” for problems that appear again and again.
“Adjusted” attached to almost every metric.

Your checklist does not need to be perfect. It just needs to be yours. When you review a call, mark each time you see those phrases. This keeps your emotions out and makes your review more systematic.

Third, practice with companies you do not own. Once a month, pick an earnings call transcript of a random company in a sector you vaguely understand. Read it with one rule: ignore the numbers. Look only at language, tone, clarity, and the five clues we just walked through.

At the end, answer three questions:

What is one sentence that made me more confident?
What is one sentence that worried me?
If I had to summarize management’s honesty level from 1 to 10 based only on their words, what number would I choose?

This builds your “ear” over time. Later, when real money is on the line, you will have practice.

Fourth, compare communications between peak and decline. Pick a company that had a clear peak and later struggled. Read a call from the good period and one from the bad. You will often see the clues we discussed:

Straight answers turning into vague comments.
Growth language shifting to efficiency language.
GAAP numbers turning into a jungle of adjustments.
Responsibility shifting from “we” to “macro.”
Tone shifting from calm to defensive.

Doing this with a few companies will burn these patterns into your mind. Then, when you see them appear in a company you own, you will notice quickly instead of slowly.

“Risk comes from not knowing what you’re doing.”
— Warren Buffett

You reduce that risk by listening not just to what management says, but how they say it, how often they change it, and what they avoid.

Let me ask you plainly: will you start treating corporate communication as seriously as income statements? Or will you keep reading only the numbers and hope the words don’t matter?

Even if you feel “not smart,” you can still be very good at this. In fact, sometimes people who are not overloaded with technical jargon are better at feeling when someone is dodging, exaggerating, or glossing over a problem.

Use simple tests:

Can I restate their answer in one clear sentence?
Did they give a number, a time frame, and a specific action?
Did they accept any blame?
Did they change their favorite words compared to last year?
Are they proud of standard numbers, or hiding behind adjusted ones?

If you keep asking those basic questions, you will spot many red flags long before the crowd. And once you see those flags, you do not need to predict the exact future. You just need to say, “I’ll wait. I don’t need to own this now.”

Good investing is often just good listening.