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Dec 14, 2011
Safest Harbors In A Stormy Market
Stock & Fund Picks
Dec 8, 2011
Don't Be Fooled: The Euro Will Take Us All Down
Stock & Fund Picks
Nov 30, 2011
Short VMware (VMW) As Hedge For Euro Recession
Stock Picks And Pans
Nov 23, 2011
ETF vs Mutual Funds: The Winner Is...
Stock Picks and Pans
Nov 16, 2011
Forensic Analysis: Avoid Energy & Financial Stocks
Stock Picks And Pans
Nov 9, 2011
Cutting Thru the Smoke in the Energy Sector
Stock Picks And Pans
Nov 2, 2011
Utility Sector: Check the Ingredients Before Buying
Stock Picks And Pans
Nov 1, 2011
Feels Like 1999 All Over Again
Stock Picks And Pans
Oct 19, 2011
ETF Shoppers: Accounting Trickery Worst In Financial Sector
Stock Picks And Pans
Oct 11, 2011
Large-Cap Value Has 36 Aliases in ETF World
Stock Picks And Pans
Oct 5, 2011
Sell Starbucks - Still A Bad Stock
Stock Picks And Pans
Sep 28, 2011
Buy Lam Research: More Value Than Meets the Eye
Stock Picks And Pans
Sep 14, 2011
Sell Baker Hughes Before The Stock Goes Up In Fumes
Stock Picks And Pans
Sep 9, 2011
Should Directors Ignore Those One-Time Items?
Stock Picks And Pans
Aug 31, 2011
Buy Clorox: Management Focused On Shareholder Value
Stock Picks And Pans
Aug 24, 2011
Fed’s Bazooka: Final Policy Firepower in Jackson Hole
Stock Picks And Pans
Aug 18, 2011
S&P's Downgrade Did Us a Favor
Stock Picks And Pans
Aug 17, 2011
Financial Sector ETFs Are A Risky Gamble
Stock Picks And Pans
Aug 10, 2011
Don't Fall For the Market Headfake
Stock Picks And Pans
Aug 3, 2011
Energy Sector ETFs Could Incinerate Your Savings
Stock Picks And Pans
Jul 27, 2011
Avoid Utility Sector ETFs
Stock Picks And Pans
Jul 20, 2011
Sell Starwood Before FASB Closes Loophole To Boost EPS
Stock Picks And Pans
Jul 20, 2011
Tech Sector ETF Rankings
Stock Picks And Pans
Jul 18, 2011
Sector ETF Rankings: Chips and Dips Rise To The Top
Stock Picks And Pans
Jul 1, 2011
Highway Holdings, Ltd. (HIHO)
FREE Company Valuation Report - July 2011 Most ATTRACTIVE Small Cap Stock
Jun 29, 2011
Wal-Mart's Stock Is A Terrific Bargain
Stock Picks And Pans
Jun 23, 2011
PowerShares Leads The Most Attractive ETFs
Stock Picks And Pans
Jun 15, 2011
RIMM's Stock Offers A Free Option On a Comeback
Stock Picks And Pans
Jun 7, 2011
More Downside Than Meets The Eye for Finisar
Stock Picks And Pans
May 24, 2011
Lorillard's Profits Require No Smoke and Mirrors
Stock Picks And Pans
May 18, 2011
Sell Citigroup Before The House of Cards Folds
Stock Picks And Pans
May 18, 2011
Sell Morgan Stanley Before It Sells You Down the River
Stock Picks And Pans
May 11, 2011
A Little Good In Telecom Sector ETFs
Telecom Sector ETFs
May 11, 2011
Bad And Ugly Industrials Sector ETFs
Industrials Sector ETFs
May 11, 2011
Bad and Ugly In Materials Sector ETFs
Materials Sector ETFs
May 11, 2011
Bad and Ugly Utility Sector ETFs
Utility Sector ETFs
May 11, 2011
Lots of Ugly In Energy Sector ETFs
Energy Sector ETFs
May 11, 2011
Mainly Just Good In Health Care Sector ETFs
Health Care Sector ETFs
May 11, 2011
Many Tasty Choices in Consumer Staples Sector ETFs
Consumer Staples Sector ETFs
May 11, 2011
Nothing But Ugly Financials Sector ETFs
Financials Sector ETFs
May 11, 2011
Show Discretion When Choosing Cons. Disc. Sector ETFs
Consumer Discretionary Sector ETFs
May 11, 2011
The Good, Bad and Ugly In Tech Sector ETFs
Info Tech Sector ETFs
Apr 28, 2011
The Good, Bad and Ugly in Tech Sector ETFs
Tech Sector ETFs
- Stock Pick of the Week: the Best and Worst ETFs
Feb 28, 2011
Red Flag: Hidden One-Time Items
Raising Red Flags on Distorted Earnings
- Hidden one-time charges/income can mislead investors by
artificially decreasing/increasing GAAP earnings.
- Accounting rules allow companies to include one-time
charges/income as part of their normal operating earnings.
- We found 13,000+ one-time items buried in normal line items
like “Cost of Sales” by studying the Footnotes of 10-K filings.
- Companies concealed over $41 billion in one-time items
during the last reported fiscal year.
- 162 S&P 500 companies report earnings that are distorted by
hidden one-time items in their most recent fiscal year.
Feb 28, 2011
Red Flag: Hidden One-Time Items Premium Report
Raising Red Flags on Distorted Earnings
- Hidden one-time charges/income can mislead investors by
artificially decreasing/increasing GAAP earnings.
- Accounting rules allow companies to include one-time
charges/income as part of their normal operating earnings.
- We found 13,000+ one-time items buried in normal line items
like “Cost of Sales” by studying the Footnotes of 10-K filings.
- Companies concealed over $41 billion in one-time items
during the last reported fiscal year.
- 162 S&P 500 companies report earnings that are distorted by
hidden one-time items in their most recent fiscal year.
Jan 20, 2011
Red Flag: Asset Write-Downs
Raising Red Flags on Value Destruction
- Beware of companies with artificially high profits based on asset write-downs. Their stocks could collapse.
- Write-downs reveal management incompetence. They result from asset values falling below book values.
- Only 53 of the current S&P 500 companies have no write-downs. The other S&P 500 companies wrote down more than $920 billion. Buy our premium report for the complete list of S&P 500 companies with no write-downs and the 150 top offenders.
- 137 companies have written down more than $1 for each dollar on their balance sheets. Buy our premium report for the complete list of companies.
- Asset write-downs are hard to find and require expertise in Financial Footnotes to identify. They go by a wide variety of code names as shown on Page 2.
- Appendix A shows how we unearth write-downs buried in the Financial Footnotes.
- Asset write-downs cause accounting earnings to be an unreliable measure of corporate profitability.
- We reverse all accounting distortions, including over 43,000 asset-write downs, to reveal the true economic profitability of over 3,000 companies.
Jan 20, 2011
Red Flag: Asset Write-Downs Premium Report
Raising Red Flags on Value Destruction
- Beware of companies with artificially high profits based on asset write-downs. Their stocks could collapse.
- Write-downs reveal management incompetence. They result from asset values falling below book values.
- Only 53 of the current S&P 500 companies have no write-downs. See Appendix C. The other S&P 500 companies wrote down more than $920 billion.
- 137 companies have written down more than $1 for each dollar on their balance sheets. See Appendix D.
- Asset write-downs are hard to find and require expertise in Financial Footnotes to identify. They go by a wide variety of code names as shown on Page 2.
- Appendix A shows how we unearth write-downs buried in the Financial Footnotes.
- Asset write-downs cause accounting earnings to be an unreliable measure of corporate profitability.
- We reverse all accounting distortions, including over 43,000 asset-write downs, to reveal the true economic profitability of over 3,000 companies.
Oct 28, 2010
Red Flag: Alternative Fuel Mixture Credit Windfall
Raising Red Flags on Misleading Earnings
- The Alternative Fuel Mixture Credit (AFMC) Windfall is non-recurring income in the Paper Products Industry that can mask poor economic earnings with record-breaking accounting earnings.
- 16 companies reported an AFMC Windfall in 2009, averaging 8% of revenues and 161% of pre-tax income.
- Disclosure of the AFMC Windfall is highly inconsistent. Two companies received a failing grade.
- One company used aggressive and misleading accounting for the AFMC Windfall.
Oct 28, 2010
Red Flag: Alternative Fuel Mixture Credit Windfall Premium
Raising Red Flags on Misleading Earnings
- The Alternative Fuel Mixture Credit (AFMC) Windfall is non-recurring income in the Paper Products Industry that can mask poor economic earnings with record-breaking accounting earnings.
- 16 companies reported an AFMC Windfall in 2009, averaging 8% of revenues and 161% of pre-tax income. See Figure 1.
- Disclosure of the AFMC Windfall is highly inconsistent. Two companies received a failing grade. See Figure 4.
- One company used aggressive and misleading accounting for the AFMC Windfall.
Oct 20, 2010
Red Flag: Off-Balance Sheet Debt
Raising Red Flags on Misleading Earnings
- Over 2,900 companies have misleading earnings due to off-balance sheet debt.
- We analyze operating lease data in the Financial Footnotes of 50,000+ filings to determine off-balance sheet debt.
- The 10 S&P 500 companies with the most off-balance sheet operating leases are shown in Figure 1.
- Over $765 billion of income-producing assets and debt are hidden in the Financial Footnotes in the last fiscal year.
Oct 20, 2010
Red Flag: Off-Balance Sheet Debt Premium Report
Raising Red Flags on Misleading Earnings
- Over 2,900 companies have misleading earnings due to off-balance sheet debt.
- The 10 S&P 500 companies with the most off-balance sheet debt as a percent of total assets are shown in Figure 1.
- Over $509 billion of debt is buried in the Financial Footnotes of the S&P 500 in the last fiscal year.
- The 100 companies with the most misleading earnings due to operating leases are in the Appendices
- Appendix A reveals 21 companies that have more off-balance sheet debt than reported total assets.
- Appendix B reveals 40 companies whose market value is less than off-balance sheet debt.
Oct 15, 2010
New Constructs Client Presentation - 3Q10 Perf
Basics on New Constructs
Jul 29, 2010
Decoding Wall Street Propaganda
Learn How To Find The True Value of Companies
- Wall Street firms are in the business of selling stock not good research.
- Good research is in conflict with their investment banking business, which makes all the profits of the bank while research departments are pure cost centers.
- The depth and breadth of New Constructs’ research represents a Paradigm Shift in equity research.
- Our patented research system enables us to read, analyze and model the impact of data from the Financial Footnotes for 3000+ companies.
- No other research firm offers investors as complete or rigorous research on the profitability and valuation of companies.
May 14, 2010
Letter to Senator Corker - Requesting A Meeting
First letter to Senator Corker
May 13, 2010
Follow-Up Letter to Senator Corker
Second letter to Senator Corker to follow up on our meeting
May 13, 2010
Presentation to Senator Corker, the SEC, FDIC, COP and PCAOB
Details on how New Constructs helps restore integrity of the markets
Apr 14, 2010
Corporate Disclosure Trangressions
Report Delivered To Senate Banking Committee in Oct 2009
- The purpose of the report is to show Congress all the ways that companies obfuscate their profitability and manage earnings
- These Disclosure Transgressions will remain largely undeterred until investors hold companies accountable.
- Financial Regulatory reform should focus first on ensuring investors are able to access accurate information in the capital markets before adding more regulatory bureaucracy.
- We believe markets can self-regulate very effectively when investors are adequately informed.
Aug 22, 2006
Recession-Proof Stocks from New Constructs
Solid Investment Ideas, as seen on Squawk Box
- We present three "Recession-Proof" stocks that we believe will appreciate even if the economy goes into recession.
- These three stocks have target prices that offers as much as 40% upside.
- To make our "Recession-Proof" list, stocks must have valuations that already assume we are in a recession.
- We specifically design our valuation models to identify stocks whose market valuations imply that their cash flows will drastically decrease.
- Our analysis is based on studying SEC disclosures in 20,000+ annual reports for 3,000+ companies.
- For more information on how to find "Recession-Proof" stocks, go to www.newconstructs.com to access our reports and models on 3,000+ companies.
Jul 24, 2006
The Common Thread in Option Expense Scandals
How We Identified High-Risk Stocks Before They Blew Up
- This report provides a warning list of stocks that share a key Common Thread with companies under investigation.
- All companies now under investigation made option grants that resulted in unreported expense equal to at least 5% of revenues or 13% of earnings sometime in the past 5 years.
- See Figures 1-4 for stocks not under investigation, BUT had unreported options expense greater than those already under investigation during the past 5 years.
- Our analysis of 20,000+ option grants for 3000+ companies reveals unreported options expenses over the past 8 years.
- There are 1162 companies whose annual option grants in the past 5 years result in an unreported expense equal to 25% or more of revenues or 50% or more of earnings.
- For more information on how option grants affect profits, go to www.newconstructs.com to access our reports and models on over 3000 companies.
- Many of the stocks listed in this report are the most likely targets of potential SEC or Justice Department inquiry.
- These companies' stocks are at the greatest risk of declining because of regulatory inquiry, earnings restatement, or earnings disappointments.
Jul 20, 2006
Who Has The Most Off-Balance-Sheet Debt?
Our Study Shows Who Suffers Most If FASB Changes Lease Rules
- Nearly 650 companies have off-balance-sheet debt equal to 5% or more of their market capitalization.
- Our study reveals the Net Present Value of the operating lease obligations for over 2500 stocks.
- This report provides a list of the companies with the most off-balance-sheet debt. See Figures 1 and 2.
- Our analysis is based on studying operating lease disclosures in 20,000+ annual reports for 3000+ companies.
- If FASB forces operating leases onto corporate balance sheets, Continental Airlines and Borders may suffer most. See Figure 2.
- For more information on how off-balance sheet debt affects companies, go to www.newconstructs.com to access our reports and models on over 3000 companies.
- Figure 3 on page 4 shows the Top 100 companies with the most off-balance-sheet financing.
May 3, 2006
Top 300 Option Expense Offenders
Past Expenses Are Signs of Earnings Pain to Come
- Beware companies with heavy options expenses in the past. There are over 100 companies whose unreported option expense reduces profit margins by 25% or more.
- Companies will eventually have to pay the price of their options sins even if they report good first quarter results.
- Analyzing past option expenses helps investors prepare for the impact of options expensing on reported earnings.
- This report lists 300 companies whose earnings could be impacted worst when they report option expenses.
- We provide options expense analysis for over 3000 companies for up to ten years of history.
- We also outline the loopholes that companies can exploit to understate option expenses reported in earnings.
- This report ranks options grants for large and small cap companies via: (1) % of revenue, (2) % of Net Income, (3) gross $ amount, (4) % increase and (5) $ increase.
Aug 29, 2005
Helping Solve the Options Problems
Closing the Reporting Loopholes for Option Expensing
- We solve the analytical problems caused by companies that exploit the SEC's leniency regarding option expensing
- We implement FAS 123 consistently and accurately across 3400+ companies for up to 9 years of history
- Option grants cause two problems: (1) many companies do not report an expense for option grants and (2) companies value the grants inconsistently
- We provide a truer representation of the economic costs of issuing options as compensation than required by GAAP for 3400+ companies and up to 9 years of history
- We provide 100% visibility into the impact of option grants by presenting an accurate option expense along with all of the assumptions used to derive the expense
- Figure 1 highlights ten firms whose earnings suffer the most when options expenses are appropriately recognized
Jul 24, 2005
Don't Trust the Reported Option Expenses
SEC and FASB Provide Loopholes To Lower Options Expense
- Though requiring companies to report option expenses, FASB and the SEC have offered Corporate America a loophole to soften the blow to the bottom line.
- Current accounting rules allow companies to lower option costs by simply altering - without explanation - the assumptions that drive their option pricing models.
- Heavy option issuers, such as Juniper and Molson Coors, are exploiting the loophole to reduce ESO expenses considerably. See Figure 1 for details.
- The only way to assess the legitimacy of option costs is to analyze details from the Notes to the Financial Statements.
- As detailed in the July 25th edition of Forbes Magazine, New Constructs is the ONLY research firm that culls all important option (and other important) data from.
- Figure 1 highlights five (of 200+) firms that exploited the loophole to boost pro forma EPS the most. Figure 2 in the report shows there are 200+ companies doing.
Mar 20, 2005
What You Don't Know Can Hurt Performance
Why The Notes to the Financial Statements Are Important
- Reported earnings can be misleading because they omit important financial facts found only in the Notes.
- Analyzing the Notes can improve stock picking as shown by the performance of our Most Attractive (+16%) and Most Dangerous (+1%) Stocks vs the S&P (+7%).
- We analyze the Notes to the Financial Statements and use that insight to provide reports for over 3000 stocks.
- This report highlights companies with the most misleading earnings based on adjustments made using data from the Notes to the Financial Statements.
- Analyzing the Notes enables us to calculate economic earnings, potentially a more accurate measure of profits.
- Economic earnings are based primarily on the spread between ROIC and WACC, aka the Economic Profit Margin.
- Empirical evidence shows that Economic Profit Margins explain over 60% of the differences in the market valuation of companies in the S&P 500.
- The results in this report are based on 2003 10Ks. To learn results from 2004 10Ks, please contact us. We have already processed over 800 10Ks filed since March 1st.
Nov 30, 2004
Cash Is King ... When Measured Accurately
Back-testing Shows Our Free-Cash-Flow-Yield Outperforms
- Rigorous back-testing shows that companies with a FreeCash-Flow Yield greater than 10% have consistently outperformed the S&P 500 and peers by a wide margin.
- This report shows better data may improve stock picking.
- Over 5 years, our Model Portfolio (+215%) substantially outperformed the SP 500 (-27%). After removing survivor bias, our Model Portfolio (+96%) still bested the market.
- We believe our Model Portfolios superior results are driven by our more accurate measure of Free Cash Flow (FCF), which leverages data from Notes to the Financials.
- Our back-testing process is very simple. We buy stocks with a Free-Cash-Flow Yield averaging at least 10% for a minimum of 2 years. We hold these stocks for one year.
- Figures 1 and 2 compare the rebalanced performance of our Model Portfolio versus the S&P 500 over 5 years.
- Figure 4 shows the FCF and the FCF Yield for the S&P 500 over the past 5 years. Figure 6 shows the Russell 1000 companies with a 5-year average FCF Yield greater than 10%.
Aug 20, 2004
Will They All Cross the Chasm?
Google, eBay, and Yahoo Share Lofty Valuations
- If GOOG, YHOO and EBAY achieve the revenue growth implied by their valuations, their combined revenues would represent nearly 5% of GDP.
- It seems that the market is rewarding GOOG, YHOO and EBAY with expectations for market dominance and the strong economic profits that could result.
- There is a chasm between the economic futures implied by their stock prices and their economic histories.
- To justify $100 per share, GOOG must grow revenues at 30% and achieve a 25% economic profit margin for 15 years.
- To justify $28 per share, YHOO must grow revenues at 30% and achieve a negative 2.8% economic profit margin for 22 years.
- To justify $80 per share, EBAY must grow revenues at 30% and achieve a 7.6% economic profit margin for 21 years.
- For each of these companies, reported profits meaningfully overstate economic profits.
- Along with aggressive revenue growth expectations, GOOG, YHOO and EBAYs valuations imply formidable improvement in economic earnings.
Aug 4, 2004
Valuing Google
Are Investors Getting a Fair Price?
- With an expected IPO value in the $29-36 billion range,Google offers investors an expensive and risky investment.
- Relative to peers, such as Yahoo and eBay, Google's valuation seems reasonable.
- The report details the future financial performance requirements reflected by three potential market values:(1) $25 Billion, (2) $35 Billion and (3) $45 Billion.
- We do not predict the future value of Google. Instead,we provide investors with critical information needed to assess the accuracy of the markets valuation.
- Google's reported profits overstate its economic profits.
- Accounting-based metrics underestimate the aggressivemarket expectations imbedded in Googles valuation.
Jul 22, 2004
Option Costs: Should They Be Reported?
No Matter the Disclosure Rules, Options Impact Shareholder Value
- Undisclosed stock option expenses erase 10% of the earnings of the S&P500 in 2003.
- The earnings of many companies would not be affected by a disclosure rule change. Many other companies, especially technology, would be substantially impacted.
- This report provides investors with a list of the companies whose earnings would be most affected if all stock option expenses were disclosed.
- Regardless of the politics of disclosure rules, many investors believe stock options impact the profitability and value of companies.
- A list of the 20 companies with the highest stock option expense in the S&P500 is on page 2.
Jul 9, 2004
JP Morgan Chase: Weak Competitive Position
Weak Competitive Position Results in Low Market Expectations
- Market expectations for the future financial performance of the company are low, consistent with a weak competitive position relative to peers.
- Despite positive GAAP earnings, JPM's economic profits have suffered over the past 5 years.
- Acquisitions and falling profits have depressed ROIC.
- Improving economic profit margins can result in substantial upside for shareholders.
- Capital efficiency offers more opportunity for improvement than operating efficiency.
Jul 2, 2004
JP Morgan Chase: Low ROIC
Low ROIC Results in Weak Competitive Position
- An Overall Neutral Risk/Reward Score means the Index does not have particularly Dangerous or Attractive Profitability or Valuation characteristics.
- JPM has among the lowest Returns on Invested Capital (ROIC) in its peer group.
- This report provides a summary of our investment Risk/Reward analysis for all ten sectors in the market as well as comparisons to the S&P 500 and Russell 1000.
- Key to improving its competitive position and valuation is raising its ROIC.
- Both Operating and Capital Efficiency drive ROIC. Assessing the impact of each on the profits of the company can offer incremental analytical insight.
- JPM's capital efficiency is lower than its peers, while profit margins are competitive.
- The relationship between economic performance and market valuation is strong.
