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David Trainer
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Follow me on Twitter: @NewConstructs David is CEO of New Constructs (, an independent research firm that leverages proprietary technology to find key insights from the Financial Footnotes of 10Ks and 10Qs. Having analyzed over 70,000 annual reports and their Financial... More
My company:
New Constructs
My blog:
The Diligence Institute
My book:
The Valuation Handbook
  • How To Get The Truth About Valuation

    How does one make money in the market?

    The answer to this question depends on whether you are a speculator or an investor.

    If you are an investor, we may be a good fit for your research process.

    50-day moving average. Stochastic oscillator. Bollinger bands.

    These terms, and many more, are ones you will not find at New Constructs. Why? Because we're more concerned with terms like invested capital, net operating profit after-tax (NOPAT), return on invested capital (ROIC), and economic earnings.

    While listening to technical traders explain their complex strategies may be interesting or even entertaining at times, it does not provide the protection most investors like to have for their portfolios.

    Why Do Stocks Outperform?

    (click to enlarge)

    * From date of original report

    Sources: New Constructs, LLC

    The Long Ideas in the figure above are a testament to why New Constructs believes in value investing. However, finding these investing opportunities isn't easy. Cutting through GAAP and getting to the truth about profits is increasingly time-consuming and difficult

    Don't let market noise drown out good research. If you're interested in learning about the best way to make money in the market, join us for this week's webinar "How to Get the Truth About Valuation".

    CEO David Trainer, a Wall Street veteran, will discuss the challenges of investing, break down the process on how to make money in the market, and go into detail about some recent examples such as General Motors (NYSE:GM) and Twitter (NYSE:TWTR). The webinar will be held live on October 8th at 4pm EST.

    Click here to register for the free webinar "How To Get The Truth About Valuation"

    Oct 05 6:07 PM | Link | Comment!
  • We Can't Let Carl Icahn Take All The Credit

    See our March 24, 2014 report predicting the news that caused Dunkin Brands (NASDAQ:DNKN) to fall over 10% last week.

    Here are a few other early warnings that we hope served you well in these volatile markets.

    Long before Carl Icahn piped up, we have pointed to many overvalued stocks with misleading earnings.

    See the Danger Zone section of our site for more warnings. We publish a new Danger Zone article about weekly. Many of these ideas are picked up by Barron's, USA Today, CNBC etc.

    1. DemandWare (NYSE:DWRE)* - June 23, 2015
      • Performance: DWRE -28%; S&P -11%
    2. Groupon (NASDAQ:GRPN) - June 9, 2015
      • Performance: GRPN -43%; S&P -9%
    3. Twitter (NYSE:TWTR) - June 1, 2015
      • Performance: TWTR -30%; S&P -11%
    4. El Pollo Loco (NASDAQ:LOCO) - March 23, 2015
      • Performance: LOCO -59%; S&P -10%
    5. CenturyLink (NYSE:CTL) - February 9, 2015
      • Performance: CTL -38%; S&P -8%

    *Featured In Barron's

    Oct 05 6:04 PM | Link | Comment!
  • How To Find Safe Harbors In Market Storms

    How do you navigate the numerous sources of investment advice? How do you determine who is telling the truth and who is not? The answers to these important questions are key to successful investing.

    Who Is Telling the Truth?

    With market pundits on every news outlet and "experts" around every corner, the information they are selling may not always be what it may seem. How do you avoid falling prey to Wall Street analysts' ulterior motives?

    To be sure you have access to advice you can trust, you need a reliable source of truly independent research.

    What Is A Safe Investment?

    A safe investment is one that provides low risk and high potential reward or good risk/reward. One can measure risk/reward objectively if you have all the right data, especially data from footnotes. We believe the core elements of measuring risk reward are:

    1. Economic earnings
    2. Valuation - based on cash flow/economic earnings

    The calculations require sophisticated models and a lot of data, some of which can be hard to get. But, that's what it takes to be a smart investor.

    Our recent report on General Motors (NYSE:GM) was built upon these metrics. General Motors generates positive economic earnings, a top quintile ROIC of 15%, and has a low price to economic book value (PEBV) ratio of 0.6. This ratio implies that the market expects General Motors' profits to permanently decline by 40%, in spite of the business operations showing otherwise. General Motors represents an excellent safe harbor investment.

    Why Do You Need Safe Harbor Investments?

    As we have seen recently, the seven-year bull market is growing weak. As this has occurred, stocks with lofty valuations have been reeled back in, often in dramatic fashion. Without focusing on the metrics above, investors are leaving themselves open to significant risk. Figure 1 shows the performance of three companies we've put in the Danger Zone recently, Twitter (NYSE:TWTR), DemandWare (NYSE:DWRE), and Splunk (NASDAQ:SPLK). Each of these companies, despite low quality earnings, low ROIC's, and extremely high valuations, had seen their share prices soar up until the market realized its error and shares crashed.

    Figure 1: New Constructs Helps Avoid Dangerous Investments

    (click to enlarge)

    * Closing prices from June 11, 2015 to September 24, 2015

    Sources: New Constructs, LLC

    How To Find Safe Stocks

    Watch our recent webinar "How To Find Safe Harbors In Market Storms". In this webinar, CEO David Trainer, discusses the state of the market, what makes a safe investment, and how you can find safe stocks.

    Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme.

    Sep 29 10:16 AM | Link | Comment!
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