New Constructs
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Stock Pick of the Week: Buy Analog Devices Inc (ADI) – Very Attractive Rating

HIDDEN GEMS: 1. About $15 million in non-operating expenses (after-tax) cause reported earnings to be understated. 2. Our dis­counted cash flow analy­sis shows that ADI’s cur­rent val­u­a­tion (stock price of $37.18) implies that the company’s prof­its will decline by 10% and never grow again. 3. The com­pany grew its eco­nomic earn­ings by $283mm dur­ing its last fis­cal year. 4. Excess cash of $2,462.5mm or nearly 25% of its market cap
by David Trainer, Founder & CEO
New Constructs
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Buy The Travelers Co (TRV) – Very Attractive Rating

HIDDEN GEMS: 1. About $29 million in non-operating expenses (after-tax) cause reported earnings to be understated. 2. Our dis¬counted cash flow analy¬sis shows that TRV’s cur¬rent val¬u¬a¬tion (stock price of $55.49) implies that the company’s profits will decline by 30% and never grow again. 3. The company grew its economic earn¬ings by $827mm during its last fiscal year.
by David Trainer, Founder & CEO
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Red Flag Report: Alternative Fuel Mixture Credit (AFMC) Windfall

The second report in our Red Flag series focuses on a little-known earnings Windfall in the Paper and Products Industry. This report is another example of the deep analysis New Constructs performs on all 3000+ companies under coverage. Our expertise is in navigating poor and confusing disclosure in the Financial Footnotes to find the truth about corporate profitability and valuation.
by David Trainer, Founder & CEO
New Constructs
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Stock Pick of the Week: Sell/Short Capital One Financial (COF)

The Risk/Reward of invest­ing in Capital One’s stock looks Very Dan­ger­ous to me. There is lots of down­side risk given the Mis­lead­ing Earn­ings and there is lit­tle upside reward given the already-rich expec­ta­tions embed­ded in the stock price. RED FLAGS: 1. Mis­lead­ing Earn­ings: COF reported a $399mm increase in GAAP earn­ings while our model shows eco­nomic earn­ings declined by $1,783mm. 2. The company’s ROIC is in the Bot­tom Quin­tile of all the com­pa­nies we cover. 3. Stock price of $40.69 implies COF must grow its NOPAT at 15% com­pounded annu­ally for 15 years.
by David Trainer, Founder & CEO