Do you know the true earnings of the companies you follow?
Research from the Journal of Financial Economics says that you do not. In fact, that research says investors get earnings so wrong that a hedge fund could beat the market simply by:
- Owning stocks with understated earnings and
- Shorting stocks with overstated earnings.
Where Can You Find True Earnings?
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 beats the S&P 500 over the past year and five years. More details on index construction are here.
The alpha in the strategy above is possible only if you have access to the true Core Earnings of all companies in the Bloomberg 1000. Getting Core Earnings on that many companies requires a lot of work, more than humans can do. By work, we mean reading millions 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.
But, we do the work, and we have the alpha to prove it.
True Core Earnings Identifies Opportunities
With a superior measure of profitability, investors can find opportunities the market misses.
Below we detail two companies whose Core Earnings exceed GAAP earnings and, as a result, were added to the index when it rebalanced on July 17, 2026. As a bonus, their stocks also get our Attractive or Very Attractive Rating. A Core Earnings Leader with a cheap valuation is a rare combination in this expensive market.
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