There are so many misperceptions about fundamental data.
In “The Fundamentals of Fundamentals”, Tim Baker excellently lays out the good, the bad and the ugly in a simple, easy-to-consume review of a very complex and nuanced part of the investing business.
As co-founder of viaNexus and previous head of content strategy, acquisitions and innovation for Thompson Reuters, Tim Baker knows all aspects of the data business. He’s recently made the “buy vs build” decision for fundamental data and other data sets.
Tim starts his breakdown of the fundamental data business with explanations of the different types of fundamental data.
The first type, “As-Reported Financials”, is a raw scrape of SEC filings. It is easy and fast to collect this data, but it’s very inconsistently labeled and not reliable for any kind of modeling. The inconsistency makes it nearly impossible to create an apples-to-apples comparison between companies.
The second type is “Normalized Financials”, where the data is classified and mapped to a standard taxonomy. This type of data can be reliable enough for modeling. But, it is very difficult to find examples of taxonomies robust enough to work for all companies in all sectors. It is also very difficult to find companies that can assure consistent application of a given taxonomy. In other words, when humans are involved in parsing data into the taxonomy, they tend to make too many judgement calls, which leads to inconsistency.
The best type is “Normalized + Adjusted Financials”, which boasts reliable application of a robust taxonomy for both financial statements and footnotes. This data set captures all relevant financial information in filings and provides investors with the ability to accurately measure earnings and cash flow. This type of data is best for serious analysis and is the most consistent and comprehensive.
Here at New Constructs, we provide investors with the Normalized + Adjusted Financials type of fundamental data, as Tim Baker notes in this report. Most importantly, we have empirical proof of the accuracy, reliability and novel alpha in our data via these published studies and the strong outperformance of the live-traded indices based on our data.
Check out Tim Baker’s full report.
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This article was originally published on July 28, 2025.
Disclosure: David Trainer, Kyle Guske II, and Hakan Salt receive no compensation to write about any specific stock, style, or theme.
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