Skechers Update: Don’t Overreact To One Quarter

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Shares of Skechers (SKX) plummeted over 20% last week. We think the markets are overreacting to a limited data set. Not only do quarterly results tend to be volatile, one three-month reporting period is rarely enough to establish a clear trend.

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LUV Earnings: Market Overreaction Creates Buying Opportunity

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After announcing 2Q16 earnings, LUV fell nearly 12%, as investors seemed to care more about Southwest’s ability to hit analyst expectations, which have inherent flaws, and less about the company’s record profits.

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The Future of Wealth Management And Morgan Stanley’s $28 Billion Opportunity

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The big banks still have significant advantages. Their brand names, financial capital, advisor networks, and large client bases give them the opportunity to leverage the innovations of startups and become the biggest winners in this new wealth management model.

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New Stocks on Exec Comp & ROIC Model Portfolio: July 2016

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Our Linking Exec Comp to ROIC Model Portfolio (+5.0%) outperformed the S&P 500 (+3.9%) last month. The best performing stock in the portfolio was Hawaiian Holdings (HA), which was up nearly 20%.

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Linking Exec Comp to ROIC Model Portfolio: July 2016

Platinum Members and higher can access July’s Linking Executive Compensation to ROIC Model Portfolio as of Friday, July 15.

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Bailing Out SolarCity Costs TSLA Investors $7.4 Billion

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Just how bad is this deal? We crunch the numbers and show that, even in the most optimistic cash flow scenario for SCTY, Tesla should pay no more than $332 million, or $3/share for SolarCity

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Alphabet Should Pay No More Than $1.1 Billion For Twitter

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The bottom line is that there is a limit for how much Alphabet should pay for TWTR in order for the deal to be economically profitable. Even in the most optimistic scenario for TWTR’s future cash flows, Alphabet should pay no more than $1.1 billion, or $1.55/share, for Twitter.

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Linking Exec Comp to ROIC Model Portfolio: June 2016

Platinum Members and higher can access June’s Linking Executive Compensation to ROIC Model Portfolio as of Wednesday, June 15.

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Building The Best Model Portfolio: Linking Executive Compensation to ROIC Webinar

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In this webinar, CEO David Trainer, will discuss the importance of return on invested capital (ROIC), why linking executive compensation to ROIC is beneficial, and how New Constructs’ tools can be used to create the best Model Portfolio.

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Salesforce.com Investors Lose Big In Demandware Acquisition

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Under even the most optimistic integration scenarios, we believe that Salesforce.com’s proposed acquisition of Demandware for $75/share or $2.85 billion represents an unacceptable transfer of wealth from CRM to DWRE shareholders.

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Pure Storage: Trouble Arises After Fiscal 1Q17 Results

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PSTG has fallen nearly 18% after announcing fiscal first quarter results that largely continue the concerning trends we pointed out when we placed PSTG in the Danger Zone in February 2016.

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Linking Executive Compensation to ROIC: A New Model Portfolio

This model portfolio only includes those companies that not only receive our Very Attractive rating, but also tie executive compensation to ROIC.

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Model Portfolio: Linking Executive Compensation To ROIC

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We’ve created a new Model Portfolio, one that only includes those companies that not only receive our Very Attractive rating, but also tie executive compensation to return on invested capital (ROIC). Tying executive compensation to ROIC is important as ROIC is the primary driver of shareholder value creation.

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Identifying Good And Bad Activist Investors

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There are some genuinely good examples of shareholder activism out there. In the right context, activist investors hold management accountable and play a beneficial role in the market by ensuring that poor corporate governance and strategy don’t persist.

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Beware Profiteers Masquerading As Activists

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In this special report, we identify and provide specific examples of the red flags you should be on the lookout for when activist investors begin building a large position in a company.

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Return On Invested Capital (ROIC): Explanation & Examples

The formula (see Figure 1) for calculating ROIC is easy. The hard part is finding all the data, especially from the footnotes and MD&A, required to get NOPAT and Invested Capital right. When we calculate ROIC, we make numerous adjustments to close accounting loopholes and ensure apples-to-apples comparability across thousands of companies.

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How General Electric Can Prevent A $125 Billion Decline In Market Value

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Based on the linear equation within, the stock is worth ~$18/share if we assume that GE can maintain its current ROIC of 3% and not accelerate growth. That downside translates into a loss of $125 billion in market cap or $13 per share (43%) for investors.

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How To Calculate Invested Capital Webinar

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In this webinar, we provide details and models showing how to calculate Invested Capital and how it relates to Net Operating Profit After Tax (NOPAT) and return on invested capital (ROIC).

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Case Study: Shareholder Risks of Loss From Misaligned Executive Compensation

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Even though most acquisitions destroy value, this deal stands out for just how quick and large the value destruction was. This case study details the acquisition and includes a warning on another deal that we think may follow the same path as the one in the case study.

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Danger Zone: Compensation Committees

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We know that Valeant is not the only company with misaligned executive incentives. There are many others, many of which have already been put in the Danger Zone and some who will go into the Danger Zone soon. This week, however, compensation committees land in the Danger Zone because of the role they play in creating the problems that lead to shareholder value destruction.

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