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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
  • 2Q15 Sector Ratings Recap

    At the beginning of each quarter, we rank each sector from best to worst with our Sector Rankings Report. These rankings are forward looking and are indicative of how each sector should perform going forward. We then analyze each sector, looking into its fundamental metrics such as return on invested capital (ROIC), after-tax profit (NOPAT), and price to economic book value (PEBV). This gives you a picture of each sector as a whole. The 1Q15 Sector Rankings can be found here.

    We also highlight the top ETFs or mutual funds, along with the worst, or ones to avoid. We even highlight a quality stock and a dangerous stock within the sector as well. This analysis is available to our platinum and higher members. This information allows you to make better decisions when allocating your portfolio, what stocks to look at, which funds to avoid, or which funds to buy. The following is our analysis of each sector for the second quarter of 2015.

    Jun 05 5:23 PM | Link | Comment!
  • The ETFs That Hold The Very Best Stocks

    At the beginning of each month, we publish a Most Attractive stocks list that lists the very best 20 large cap and 20 small cap stocks in the market at that time. This list has done pretty well for itself over time, and has generated annualized returns of 10% for our clients since its inception, compared to under 7% for the S&P 500 and Russell 2000.

    We also talk a lot about how we leverage our stock rating expertise on over 3000 stocks and apply these ratings - along with our total annual costs diligence - to our ETF and mutual fund ratings. So wouldn't it be great if you could marry these two products and get the ETFs that hold the very best stocks in the market?

    Well now you can. The following is a list of the five ETFs (with over $100 million assets under management) that allocate the greatest percentage of their assets to the stocks on our Most Attractive list for May:

    Get the five ETFs that allocate the greatest percentage of assets to the Most Attractive Stocks List for May for only $9.99.

    May 11 4:42 PM | Link | Comment!
  • Are You Missing Something In Your Company Valuations?
    Accounting rules make it easy for companies to manipulate traditional measures of profitability and value. That's why we make over 30 types of accounting adjustments to strip out the effects of these accounting policies.

    Several of these adjustments help us accurately calculate economic book value (EBV) and shareholder value in our discounted cash flow model. EBV is our measure of the no-growth value of a stock based on the current net operating profit after tax (NOPAT) of the business, and it helps us measure the market's expectations relative to the company's current economic profitability. Shareholder value is the value available to shareholders in our DCF model after other, senior claims on cash flows have been met.

    Some adjustments represent senior claims to equity holders that reduce economic book value and shareholder value while others are assets that we expect to be accretive to shareholder value. For example, Tesla (TLSA), instead of paying employees in cash, elects to pay much of its compensation in the form of stock options, which amounted to $553 million at the end of 2012. Of course, after the stock's historic run-up over 2013 and 2014, these options were worth much, much more. By the end of 2014, the value of Tesla's outstanding stock options had reached $4.1 billion, or 15% of the company's total market value. These options represent future share dilution that reduce the cash flows that are paid out to shareholders, which reduces Tesla's value in our model. As Tesla has failed to become a cash machine in the past 12 months, investors have begun to worry about the company's position, and shares have dropped over 33% since their peak in September 2014.

    There are countless other examples of how footnotes diligence could have given investors a clear picture of what companies were worth investing money into in 2014.

    We've compiled a "top 10″ list of the companies (who have already filed for 2014) with the largest adjustments to their valuations.

    See which companies have had the largest adjustments to their valuations this year for only $9.99.

    Tags: AAPL, VZ, BA, MT, PBR, FMCC, WMB, ORCL, T, valuation
    Apr 23 9:59 AM | Link | Comment!
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