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17 February 2012

The Real Earnings Season Begins Now

Nearly all of the investing world ignores 10-K season. You rarely hear anything about 10-Ks in Wall Street research. Coverage by the media is light to say the least.

Yet, 10-Ks* contain the most important financial information that companies provide all year. Unlike press releases and 10-Qs, only the 10-Ks contain a complete set of the Financial Footnotes. And only in these footnotes can one find the full set of data required to assess the true profitability and valuation of stocks.

We, at New Constructs, will research the footnotes of 2000+ new 10-Ks in the next couple of weeks.

From this mountain of data, we will derive proprietary research that delivers some of the best stock picks of any research firm. Just as we did last year.

For example, after reviewing Eastman Kodak’s (EKDKQ.PK) 2010 10-K in March of 2011, I was able to predict it would go bankrupt. See “Dead Company Walking“. For similar reasons, we told clients that the same would happen to American Airlines (AAMRQ.PK). I was proven right about 10 months later on both companies. Why did it take 10 months? Probably because that is how long the companies were able to massage their quarterly accounting results to cover the truth.

Cash is a fact, earnings are an opinion. And the footnotes are the only place to get the facts. My free stock screener delivers my quality-of-earnings and valuation ratings on 3000+ stocks – updated daily.

Other examples of how analyzing the complete 10-K for companies enabled me to make strong stock predictions. Note the articles below are just a sample. We provided clients with more.

Maybe it is time more people started paying attention to 10-Ks, or, at least, to research that focuses on analyzing the financial footnotes in 10-Ks.

It is not an easy task. My firm, New Constructs, has developed proprietary technology and patented systems around doing it efficiently.

Our fund research leverages our top-ranked stock picking in our Predictive Fund ratings on 7400+ ETFs and mutual funds. We also offer a free Fund Screener and reports on all 7400+ funds we cover.

*10-Ks are the official version of the annual report filed with the Securities and Exchange Commission (SEC). These documents are anywhere from 100 to 1000 pages and contain the most important financial data available on publicly-traded companies. No other reports come close to rivaling the amount of relevant information in 10-Ks.

Disclosure: I am long INTC, LO, LLY and LRCX.

Browse General Market Comments

Featuring Top 10/89 of General Market Comments

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4 thoughts on “The Real Earnings Season Begins Now

  1. Nice selective facts you are posting David!!
    “Vir­netX Hold­ings (VHC) dropped about 40% a few months after I posted the April 12, 2011 arti­cle on my blog”

    April 12 close was $21.71. On July 11 it closed at $39.88. THEN you get your 40% drop in August.

    How many people are going to hold a short position through a 90% rise in stock price to realize your 40% gain.

  2. You state that VHC declined 40% a few months after you posted the April 12, 2011 article. However, the stock nearly doubled from the closing price on the date of your article over the following three months, before it declined. Did you recommend a short in that article, before the price doubled? Did your short recommendation have a stop-loss target attached? Just trying to understand how your service works.

  3. Why do you delete comments? Are they not what you want to hear? Perhaps you should write about it in your “Decoding Propaganda” section!

  4. Anyone buying or shorting VHC should expect a wild ride. It is a very volatile stock.

    Given how ridiculously overpriced it got, it would be naive for anyone to expect it to suddenly trade at a rational level.

    The takeaways:
    (1) investors who followed my advice on VHC and many other stocks enjoyed outstanding returns

    (2) mining the footnotes for key financial details that no one else knows is a profitable endeavor.

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