There are many ways to define the quality and merit of equity research. One measure stands tallest: performance of stock recommendations. And by that measure, New Constructs’ research is of very high quality. See our latest Proof Is In Performance Thru 4Q13 Report for more details.
As you can see in the post on our stock-picking accolades, we have plenty of independent, 3rd-party validation of our stock-picking success. So, you don’t just have to take our word for it.
Our success comes from being able to identify groups of stocks that are most likely to be re-priced as the market, over time, rectifies misperceptions of economic value created by investors employing less analytical rigor than we. We derive our advantage from the in-depth analysis of financial statements, especially the notes to the financial statements, which we apply to the analysis of the underlying economic value of 3000 firms. We believe our exacting approach to research gives us advantage in the selection of individual securities for our long and short portfolios.
For the whole year of 2013, our Small-Cap Long strategy (39.4%) beat the Russell 2000 by 7.8% and our combined Large and Small-Cap Long strategy (32.6%) beat the combined S&P 500 and Russell 2000 by 3.9%%. In 4Q13 our Large-Cap Long/Short Strategy (5.1%) beat the Risk-Free Rate by 5%.
The cumulative returns of our recommendations since January 2005:
- Most Attractive/Dangerous (Large and Small stocks): 61.0%
- Most Attractive/Dangerous (Large cap stocks only): 59.3%
- Most Attractive/Dangerous (Small cap stocks only): 53.1%
- Most Attractive (Large and Small stocks): 128.5%
- Most Attractive (Large cap stocks only): 121.6%
- Most Attractive (Small cap stocks only): 124.4%
- Most Dangerous (Large and Small stocks): -53.3%
- Most Dangerous (Large cap stocks only): -47.6%
- Most Dangerous (Small cap stocks only): -61.0%
These returns compare well to the major indices over the same time frame:
- S&P 500: 56.1%
- Russell 2000: 89.7%
- Risk-Free Rate: 15.5%