July’s Most DANGEROUS Stocks Available to Subscribers Today

Paying customers can access July’s 40 Most Dangerous Stocks as of midnight last night.

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July’s Most Attractive Stocks Available to Subscribers Today

Paying customers can access July’s 40 Most Attractive Stocks as of midnight last night.

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Off-Balance Sheet Reserves – Invested Capital Adjustment

Reported assets don’t tell the whole story of the capital invested in a business. Accounting rules provide numerous loopholes that companies can exploit to hide issues and obscure the true amount of capital invested in a business over its life.

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Danger Zone 7/1/13: Callaway Golf (ELY)

ELY is priced for significant profit growth despite declining revenues, increased pressure from competitors, and limited growth potential in the golf equipment industry.

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Footnotes Adjustments for Earnings & Valuation Diligence

This article details the uniquely rigorous diligence behind each of our ratings on 3000 stocks, 7000 mutual funds and 400 ETFs. It contains reports on all the adjustments we make to convert GAAP data to economic earnings and derive true shareholder value in a discounted cash flow model.

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Employee Stock Option Costs and Goodwill Amortization – NOPAT Adjustment

Converting GAAP data into economic earnings should be part of every investor’s diligence process. Performing detailed analysis of footnotes and the MD&A is part of fulfilling fiduciary responsibilities.

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McDonald’s Is Still on the Value Menu

The stock market is giving MCD no credit for the company’s proven track record of value creation and strong growth potential. Instead, the market predicts MCD’s profits will permanently drop. I think it is pretty clear the market’s expectations are too low for MCD. Investors should take advantage.

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Non-Operating Tax Adjustment – NOPAT Adjustment

Without removing the tax impact of non-operating items, one still gets distorted picture of a company’s operating profitability.

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Growth Appreciation Period (GAP)

The Growth Appreciation Period is the number of years that a business is expected to earn an ROIC greater than WACC on new investments.

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Free Cash Flow (FCF) and Free Cash Flow Yield

Free cash flow (“FCF”) equals NOPAT minus change in Invested Capital.

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Implied Interest For Operating Leases – NOPAT Adjustment

Converting GAAP data into economic earnings should be part of every investor’s diligence process. Performing detailed analysis of footnotes and the MD&A is part of fulfilling fiduciary responsibilities.

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Danger Zone 6/24/13: REITs

Even with this recent price drop, the current valuations of REITs look disconnected from their fundamentals.

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Income and Loss from Discontinued Operations – NOPAT Adjustment

We remove all income and losses from discontinued operations in calculating operating profit because this income/loss will not recur in the future, and we are looking for the true profitability of the continuing and core operations of a company.

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How To Avoid the Worst Style Mutual Funds

Picking from the multitude of style mutual funds is a daunting task. In any given style there may be as many as 979 different mutual funds, and there are at least 6100 mutual funds across all styles.

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Change in Total Reserves – NOPAT Adjustment

Reported earnings don’t tell the whole story of a company’s profits. They are based on accounting rules designed for debt investors, not equity investors, and are manipulated by companies to manage earnings. Only economic earnings provide a complete and unadulterated measure of profitability.

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Danger Zone 6/17/13: Citigroup (C)

As the market bulls continue to look to rising interest rates as a sign of future strength for Citi, they ignore the fundamentals of the market and of Citi’s weak profit history.

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Non-Operating Income Hidden in Operating Earnings – NOPAT Adjustment

Non-operating items in operating income are unusual gains that don’t appear on the income statement because they are bundled in other line items. Without careful footnotes research, investors would never know that these non-recurring income items distort GAAP numbers by artificially raising operating earnings.

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How to Find the Best Style Mutual Funds

There are at least 980 different large cap blend mutual funds and at least 6100 mutual funds across all styles. Do investors need that many choices? How different can these thousands of mutual funds be?

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June’s Most DANGEROUS Stocks Available to the Public

New Constructs released June’s Most Dangerous Stocks report to the public today.

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June’s Most Attractive Stocks Available to the Public Today

New Constructs released May’s Most Attractive Stocks report to the public today.

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