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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
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  • Add A New Toy To Your Portfolio

    This week's hot stock comes from our comprehensive sector analysis on the Consumer Discretionary sector. We perform this type of analysis for each of the 10 sectors. Hasbro (NASDAQ:HAS) is probably best known as the maker of popular toys such as Play-Doh, Nerf, and Monopoly. However, resurgence in its other brands, such as My Little Pony and Transformers, as well as planned expansions of existing brands, gives Hasbro great potential for years to come.

    Hasbro has grown after tax profit (NOPAT) by 8% compounded annually over the last 10 years. The company currently has a 15% return on invested capital (ROIC), nearly $500 million in free cash flowon a trailing 12 month basis, and positive economic earnings for the past nine years. At the end of the third quarter of 2014, Hasbro announced that its total sales were up 6% over 2013 and operating income was up 45%. These increases were attributed to strong sales in Transformers and Marvel branded boys' toys, and My Little Pony branded girls' toys. Going forward, Hasbro has secured the rights to Marvel and Star Wars brands through 2020, and will obtain the rights to produce Disney Princess toys, including Frozen toys in 2016.

    All the above are the biggest reasons that Hasbro receives our Very Attractive rating. Best of all, Hasbro remains undervalued despite these positive fundamental metrics. At its current price of ~$52/share, Hasbro has a price to economic book value (PEBV) ratio of 0.9. A 10% permanent decline in NOPAT seems overdrawn given the positive sales results and upcoming product lines touched on above.

    If Hasbro can grow NOPAT by just 6% compounded annually for the next 10 years, the stock is worth $72/share, a 33% upside.

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

    Mar 26 2:20 PM | Link | Comment!
  • Ranked: Our Top 10 ETFs

    There are almost 500 ETFs under our coverage, many of which track the same indexes. It's almost impossible for investors to perform due diligence on each of these ETFs - that would mean analyzing all of the stocks in each ETF, the stocks' weightings, as well as analyzing all of the funds' associated costs.

    We do all of this diligence for you. We apply our work on almost 3,000 individual stocks to the holdings of all of the ETFs we cover, and we're able to rate each fund on the quality of its holdings. When combined with our total annual costs rating, which takes into account all of the costs of being in a given fund for the average holding period, this level of diligence allows us to have the most complete and transparent fund ratings in the business.

    The following is a list of our top 10 ETFs that have over $100 million in assets under management (AUM), and that are not leveraged.

    Click here to see the in depth analysis for only $9.99.

    Mar 26 10:05 AM | Link | Comment!
  • 8 Items Distorting The Net Income Of Companies In Your Portfolio
    Income Statement Adjustments Reveal the Truth

    Filing season is upon us: The time of year when majority of publicly traded companies release their 10-K annual reports. During this time, we get a complete, audited view of a company's financials along with footnotes and the Management Discussion & Analysis.

    These sections contain items that are imperative to obtaining a true picture of the cash flows a company generates. In 2012 for example, JP Morgan (NYSE:JPM) revealed on page 73 of its 10-K that it received $1.1 billion from a bankruptcy settlement. This was then bundled with other items and included as operating income despite being a one-time settlement and certainly non-recurring.

    Our analysts scrutinize every page of over 3000 10-Ks to find instances in which accounting adjustments need to be made to each company's GAAP numbers. We adjust for over 30 items that can artificially inflate or deflate earnings.

    The only way to truly value a company is to know the true recurring cash flows generated by the company. We do this for you by calculating net operating profit after tax, or "NOPAT."

    This week, we've created a list of the companies (who have already filed for 2014) with the largest adjustments to GAAP net income. These adjustments allow you to see the recurring cash flows generated by the business, and not what management wants you to see.

    Find out which companies have the largest adjustments to NOPAT for just $9.99

    Mar 24 5:28 PM | Link | Comment!
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