What should you do if you can’t be confident that your research on a stock in your portfolio is 100% reliable? What happens when YOLO and MOMO are no longer driving markets to new highs?
With both the S&P 500 and Nasdaq down over 1% on Tuesday, the last few weeks have not been kind to equity markets. I think the consensus amongst the “smart money” folks is that 2025 will not be a great year for the stock market. If so, investors need to buckle down to be sure their portfolios are in good shape.
So…how, exactly, do investors buckle down and get confident that their stocks are in good shape?
That’s a tough question, especially since nearly every Wall Street report tells you to buy every stock and claims their research is the best even though there are countless studies showing the flaws and conflicts in Wall Street research.
Your choices are to (1) do the work yourself or (2) find someone you can trust to do it for you.
If you don’t have the time to check all the numbers and build the models, you must rely on respected third parties to find someone trustworthy to do it for you, i.e. vet research providers.
We’re very grateful at New Constructs that Harvard Business School, MIT Sloan, and Ernst & Young have vetted our research, stock ratings, and data over the years. But, today, I want to share a new third-party vetting of our research from MarketWatch: 10 stocks making best use of investors’ money. Here’s who beats Nvidia.
This article lists the companies with the best 5yr average returns on invested capital (ROIC) in the S&P 500, and you might be very surprised who is at the bottom of or not even on the list, such as Nvidia (NVDA), Amazon (AMZN), Netflix (NFLX), Google (GOOGL), Meta (META), and Apple (AAPL).
Just a few short years ago, the FAANG stocks would’ve dominated the list of stocks with the best ROICs. But, the times they are a changing. That’s what happens in a free market where companies are allowed to compete with one another.
Now, do not be surprised if the ROIC numbers in this article differ wildly from the numbers your get from other sources or from your own models. The article specifically states:
“Making the best use of ROIC means taking into account all the ways the data can be distorted under standard accounting practices, which is where New Constructs comes in.”
In other words, if you’re not doing the work to scrub the numbers before you calculate ROIC, then you can't trust the results.
What do we mean by “scrubbing the numbers”? The answer from the article: New Constructs makes 30+ adjustments “as part of its investment analysis and ratings service.”
As I like to say, don't take my word that our research is proven-superior when you can easily see how respected institutions use our research. If it is good enough for Harvard Business School, Ernst & Young, MIT Sloan School of Management, and MarketWatch, it’s probably good enough for anyone, to say the least.
P.S. If you’re interested in getting ROIC right, sign up for our next training on January 21st at 1pmET. And, be on the lookout for a special offer for access to our site in the next couple of weeks.
This article was originally published on January 9, 2025.
Disclosure: David Trainer, Kyle Guske II, and Hakan Salt receive no compensation to write about any specific stock, style, or theme.
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