How New Constructs creates value for clients
- Superior Recommendations - Our stock picks consistently outperform. See our track record in our stock-picking accolades and Proof Is In Performance reports.
- More Accurate Research - Our patented Research Platform for reversing accounting distortions and discounted cash flow analysis leverages better data to deliver smarter research.
- Time Savings - We check the fine print in thousands of corporate filings so you don't have to. As reported by "Barron's, our expertise in analyzing SEC filing delivers Hidden Gems and Red Flags that drive long-term stock-picking success.
- Transparency - We are proud to share the results of our analysis of over 50,000 annual reports. See the Corporate Disclosure Transgressions report we provided the SEC. Our reports detail all data and assumptions. Our Company Models enable users to change them.
- Objectivity - New Constructs is an independent research firm, not tied to Wall Street or investment banking services. Our models are driven by comprehensive high-quality data not stories. See our presentation to the Senate Banking Committee, the SEC, and many others in DC.
Access to our research is available by subscription or individual report purchase.
Frequently Asked Questions
Where do we get our data?What is a 10-K or a 10-Q?
Why are 10-Ks so long?
How long are 10-Ks?
What are the Financial Statements?
What are the Notes to the Financial Statements?
Why Do the Notes to the Financial Statements Matter?
What are economic earnings?
Why are reported accounting earnings unreliable?
How do you do the work to determine economic earnings yourself?
Why are price-to-earnings ratios unreliable?
How do so many companies get away with exploiting accounting earnings?
Why do we believe our profitability analysis is superior?
Is New Constructs affiliated with a hedge fund?
Do our employees ever trade in their own accounts?
Do we offer free trials?
What we charge for a subscription?
Who owns New Constructs, LLC
Where do we get our data?
We get company financial data directly from the documents that companies must file with the Securities and Exchange Commission (SEC). We process new filings, updates, and corrections daily. The primary filing types we process are: 10-Ks, 10-K/As, 20-Fs, 40-Fs, and 8-Ks.
What is a 10-K or a 10-Q?
10-K is the SEC's name for the Annual Report that all publicly traded companies must file with the SEC each year. A 10-Q is a quarterly version of a 10-K. Usually, only the 10-Ks/annual reports are audited.
Why are 10-Ks so long?
They have not always been as long as they are today. 15 - 20 years ago, 10-Ks were much shorter. As companies have become more focused on managing and manipulating their earnings, they have moved more information from the Financial Statements into the Notes. In our opinion, the Notes are more important than the Financial Statements these days.
How long are 10-Ks?
Most Annual Reports are more than 100 pages, some more than 1000 pages, with most pages dedicated to the Notes to the Financial Statements.
What are the Financial Statements?
Financial Statements are the Income Statement, Balance Sheet, Statement of Shareholders' Equity, and the Statement of Cash Flows and are required in every 10-K filing.
What are the Notes to the Financial Statements (aka "Financial Footnotes")?
The Notes to the Financial Statements are the section of the Annual Report or 10-K where the company's auditors are required to disclose all assumptions behind the information presented in the Financial Statements, which include the Income Statements, Balance Sheet, and Statement of Cash Flows. In summary, the Notes to the Financial Statements are where the best financial data goes to hide. See Finance 101 for more detail on this topic.
Why do the Notes to the Financial Statements matter?
Auditors can pretty much put whatever they want in the Financial Statements as long as they disclose what they did
in the Notes to the Financial Statements. The Notes matter because they contain important information related to
the Financial Statements. In fact, next to every Financial Statement submitted to the SEC, companies and auditors
must disclose that the notes should be reviewed when analyzing the Financial Statements.
As explained in Finance 101,
the Notes hold the clues to decoding misleading accounting data.
What are economic earnings?
Economic earnings are simply the true, underlying cash flows of a business that the equity owners should care about.
The term, economic earnings, was first referenced in Adam Smith's 19th-century Wealth of Nations.
He used the term to explain that investors need to focus on the true cash flows of a business in order to assess its value with any confidence,
not the reported accounting earnings. Even back then, it was clear that reported earnings are unreliable.
For more details on how economic earnings compare to accounting earnings,
see Economic Versus Accounting Earnings.
Why are reported, accounting earnings unreliable?
- Per Accounting 101, accounting rules were never designed for stock investors. They were designed for debt investors. As a result, there are many large loopholes in the accounting system that enable companies to manipulate their earnings.
- Exploitation of accounting rules is widespread. Even the good companies succumb to exploiting accounting rules in order to keep their earnings growth on par with companies that are already exploiting.
- The market's obsessive focus on earnings reports endows these reports with unwarranted importance. As a result, companies feel pressured to report as high a number as possible, or, at a minimum, meet analyst estimates. If companies' competitors are showing more earnings growth because they are exploiting accounting rules, then other companies are pressured to exploit in the same way to keep pace.
As explained in Finance 101, the Notes hold the clues to decoding misleading accounting data.
How do you do the work to determine economic earnings yourself?
See Do It Yourself Guide To Finance.
Why are price-to-earnings ratios unreliable?
If earnings are unreliable, then ratios dependent on them are too. See "The Truth about Price-to-Earnings and Multiples Analysis" and "The Disconnect Between Valuation Theory and Practice" in our Help section for more detail.
How do so many companies get away with exploiting accounting earnings:
- Based on experience working with the SEC, Senate Banking Committee, FDIC, Senator Corker, and the Congressional Oversight Panel, we believe financial markets regulators are under-equipped. Our presentations to congress and regulators explained how they needed better tools to keep up with the private sector on Wall Street.
- Most investors do not care about economic earnings
For the SEC and certain members of Congress, I highlighted several major breaches of financial disclosure rules that had gone undetected and remain uncorrected by the SEC. For example, over the last 5 years we found 10 companies whose income statements do not add up correctly and 20 companies in the last 11 years whose balance sheets do not balance. For more examples, see the Corporate Disclosure Transgressions report I submitted to the SEC and the Senate Banking Committee. What you read in that report will surprise you.
Why do we believe our profitability analysis is superior?
Our research goes the extra miles and incorporates more financial data than traditional research, which often relies only on reported earnings found in press releases. That information is not only incomplete but also misleading. We do the hard work required to gain a complete and accurate understanding of corporate profitability. And our track record indicates that the extra work pays off.
Is New Constructs affiliated with a hedge fund?
Yes. See Disclosures for more information.
Do our employees ever trade in their own accounts?
Yes, but with several limitations. No trading in the Most Attractive or Most Dangerous Stocks is allowed until 15 days after a report is published. See Disclosures for more information. In general, our employees do almost no trading in individual stocks. Most of our employees do not own any individual stocks.
Do we offer free trials?
Yes, in the form of the multiple free reports on our home page and in our Free Archive.
What we charge for a subscription?
We have several subscription packages. Email us at subscriptions@newconstructs.com for more information.
Who owns New Constructs, LLC
We are a privately-held firm
