In our e-letters to clients, we often talk about the importance of diligence. This report shows how diligence pays.

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 35% from the start of 2021 through 2024. See Figure 1.

This outperformance underscores just how important reliable fundamental research is in all markets.

Buy the Focus List Stocks: Long Model Portfolio

Buy the Focus List Stocks: Short Model Portfolio

Figure 1: Focus List Stocks: Long/Short Performance vs. RFR: 2021 Through 2024

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.

In 2024, the Focus List Stocks underperformed the Risk-Free Rate as a long/short portfolio by 27%. See Figure 2. The long portfolio was up 6% while the short portfolio was down -29% for a net return of -23% compared to the Risk-Free Rate at +4.0% in 2024.

Figure 2: Focus List Stocks: Long/Short Performance vs. Risk-Free Rate: 2024

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 2024.

Figure 3: 2024 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.

We’re here to help you navigate these turbulent times. Our uniquely rigorous fundamental research consistently earns #1 rankings in several categories on SumZero.

This article was originally published on January 23, 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.

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