Our Focus List Stocks: Long Model Portfolio, the best of our Long Ideas, and our Focus List Stocks: Short Model Portfolio, the best of our Danger Zone picks, beat the Risk Free Rate (RFR) [1] as a long/short portfolio by 13% in 1Q25. See Figure 1.
The long portfolio was up 0.1% while the short portfolio fell 14% for a net return of +14% compared to the Risk-Free Rate at +1.0% in 1Q25. Note that short portfolios outperform when they fall more than the benchmark.
Figure 1: Focus List Stocks: Long/Short Performance vs. Risk-Free Rate: 1Q25
Sources: New Constructs, LLC
Note: Gain/Decline performance analysis excludes transaction costs, dividends and rebates. The Risk-Free Rate is based on the 3-month T-bill.
The Focus List Stocks Long & Short beat the RFR as a long/short portfolio by 43% from the start of 2021 through 1Q25. See Figure 2. This outperformance underscores just how important reliable fundamental research is in all markets.
Figure 2: Focus List Stocks: Long/Short Performance vs. RFR: 2021 Through 1Q25
Sources: New Constructs, LLC
Note: Gain/Decline performance analysis excludes transaction costs, dividends and rebates. The Risk-Free Rate is based on the 3-month T-bill.
Figure 3 provides more details on the Model Portfolios’ performance, which includes all stocks present in the Model Portfolios at any point in 1Q25.
Figure 3: 1Q25 Long/Short Performance of Stocks in the Focus List Model Portfolios
Sources: New Constructs, LLC
Professional and Institutional members get real-time updates and can track all Model Portfolios on our site. The Focus List Stocks: Long Model Portfolio leverages superior fundamental data, which provides a new source of alpha.
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Check Out the Indices Based on New Constructs Research
While we’re writing about how our Focus List Stocks: Short Model Portfolio finds overvalued stocks, we should highlight the indices we’ve developed with Bloomberg’s Index Licensing Group. Both outperformed the S&P 500 in 1Q25. See Figures 4 and 5.
- Bloomberg New Constructs Ratings VA-1 Index (ticker: BNCVA1T:IND)
- Bloomberg New Constructs 500 Index (ticker: B500NCT:IND)
Figure 4 compares the performance of the Very Attractive Stocks Index, managed by Bloomberg, to the S&P 500. In 1Q25, the Bloomberg New Constructs Ratings VA-1Index (ticker: BNCVAT1T:IND) was up 4.6% while the S&P 500 was down 4.6%.
Figure 4: Very Attractive-Rated Stocks Strongly Outperform the S&P 500 in 1Q25
Sources: Bloomberg
Note: Past performance is no guarantee of future results.
Figure 5 compares the performance of the Bloomberg New Constructs 500 Total Return Index, managed by Bloomberg, to the S&P 500. In 1Q25, the Bloomberg New Constructs 500 Total Return Index (ticker: BNCVAT1T:IND) was down 3.6% while the S&P 500 was down 4.6%.
Figure 5: Bloomberg New Constructs 500 Index Strongly Outperforms the S&P 500 in 1Q25
Sources: Bloomberg
Note: Past performance is no guarantee of future results.
This article was originally published on April 16, 2025.
Disclosure: David Trainer, Kyle Guske II, and Hakan Salt, receive no compensation to write about any specific stock, sector, style, or theme.
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[1] The Risk-Free Rate is based on the 3-month T-bill.