In theory, investing is simple: buy companies that are more profitable than the market realizes.
In reality, investing is hard. 75% of active managers fail to beat their benchmark every year. Less than 1% of managers beat their benchmark for more than 4 years in a row.
Why is outperformance so rare?
It’s rare because real due diligence is rare. And, diligence is rare because it requires deep expertise and hard work, including reading thousands of pages of financial filings, particularly the footnotes, to remove non-operating and non-recurring items to calculate true Core Earnings.
Wall Street can’t, or won’t, do this work, because it’s easier to calculate adjusted “EBITDA” or other metrics that help sell IPOs.
Where Can Investors Get Diligence?
We do the work, and we have the alpha to prove it.
Start with the Bloomberg New Constructs Core Earnings Leaders Index (BCORET:IND). This index holds stocks where deep diligence reveals businesses that are more profitable than the market realizes, i.e. Core Earnings[1] are higher than GAAP earnings. It beat the S&P 500 by 9% (27% vs 18%) in 2025. More details on index construction are here.
How To Find Good Stocks
With a superior measure of profitability, investors can identify opportunities the market misses.
Below we detail two companies that were recently added to the index because their Core Earnings exceed GAAP earnings. As a bonus, their stocks trade at discounted valuations. A Core Earnings Leader with a cheap valuation is a rare combination in this increasingly expensive market.
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