Hidden Gems and Red Flags in the Stock Market

ETF Research

Sector Rankings For ETFs & Mutual Funds

At the outset of the second quarter of 2013, only a single sector earns an Attractive rating. My sector ratings are based on the aggregation of my fund ratings for every ETF and mutual fund in each sector. Read More

General Market Comments

Tackling Big Data For Due Diligence in Footnotes

The fact that my analysts read all the 10-Ks means our clients do not get blindsided for not reading the fine print in corporate disclosures. Read More

Stock Picks and Pans

See How Diligence Paid In 2012

Everyone wants diligence. The problem is that diligence is expensive. I make diligence cost-effective. See how my resear Read More

Apple Inc (AAPL) — Attractive Rating — for Ask Matt Readers

Posted By David Trainer, October 20, 2010 – 2:36 pm

HIDDEN GEM: AAPL’s economic earnings rose more than its accounting earnings during the last fiscal year. Economic earnings rose by $3,576 while accounting earnings rose by $2,401. And the company has $31,849mm in Excess Cash, a reflection of the strong profitability of the business.

Posted in:

Stock Picks and Pans

Tagged:

attractive Rating, dynamic discounted cash flow model, economic earnings

Comments (0)

New Special Red Flag Report on Off-Balance Sheet Debt

Posted By David Trainer, October 20, 2010 – 7:05 am

The first in a series of upcoming reports on Red Flags and Hidden Gems, we published our Red Flag Report on Off-Balance Sheet Debt. This report delivers:
1. Measurement of the impact of the operating lease accounting loophole on the entire stock market and all 3000 companies we cover.
2. Explanation of exactly how the off-balance sheet debt from operating leases affect economic earnings.

Posted in:

Forensic Accounting Whitepapers

Tagged:

economic earnings, off balance sheet debt, operating leases

Comments (2)

Stock Pick of the Week: Sell/Short CB Richard Ellis Group, Inc. (CBG) — Very Dangerous Rating

Posted By David Trainer, October 19, 2010 – 7:54 am

RED FLAGS:
Misleading Earnings: CBG reported a $1,045mm increase in GAAP earnings while our model shows economic earnings declined by $358mm.
Very Dangerous Valuation: Stock price of $19.06 implies CBG must grow its NOPAT at 20% compounded annually for 15 years. Has any company ever done that, much less a commercial real estate company?

Posted in:

Stock Picks and Pans

Tagged:

dynamic discounted cash flow model, economic earnings, NOPAT, ROIC, Very Dangerous Rating

Comments (2)

Proof Is In Our Performance thru 3Q10

Posted By David Trainer, October 18, 2010 – 12:26 pm

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 (especially for the price!!).

Posted in:

Proof Is In Performance

Tagged:

Most Attractrive Stocks, Most Dangerous Stocks, performance, Proof Is In Performance

Comments (0)

Google Inc Cl A (GOOG) – Attractive Rating – for Ask Matt Readers

Posted By David Trainer, October 15, 2010 – 8:55 am

HIDDEN GEM: GOOG has over $24,100mm in Excess Cash, a reflection of the profitability of the business and a 64% deduction to Reported Net Assets for our Invested Capital calculation.

Posted in:

Stock Picks and Pans

Tagged:

attractive Rating, dynamic discounted cash flow model, economic earnings

Comments (0)

Seagate Technology PLC (STX) – Up over 15% Today – one the Most Attractive Stocks for October

Posted By David Trainer, October 15, 2010 – 8:30 am

One of October’s Most Attractive Stocks, Seagate Technology PLC (ticker – STX) is up over 15% today. STX was added to our list of Most Attractive Stocks in September, shortly after we reviewed the company’s latest 10K and found HIDDEN GEMS.

Posted in:

Stock Picks and Pans

Tagged:

Free Archive, Most Attractive Stocks, Very Attractive Rating

Comments (1)

Private Sector to the Rescue Part 1: The Google Price Index and Better Markets, Inc.

Posted By David Trainer, October 14, 2010 – 11:16 am

At a time when most of the public believes political leadership to be weak, we should not focus on finding scapegoats but rather on assuming accountability to help fix problems.

Posted in:

Financial Reg Reform, General Market Comments

Tagged:

accounting loopholes, dynamic discounted cash flow model, economic earnings, market integrity, SEC, Senator Corker, Wall Street

Comments (0)

Wall Street Compensation Does Not Lie

Posted By David Trainer, October 14, 2010 – 10:34 am

For anyone who questions whether or not the rules of the game are controlled by those wuith the most money not the most ability, look no farther than Wall Street’s compensation.

Posted in:

General Market Comments

Tagged:

intergrity, Wall Street

Comments (0)

Proof Is In Performance Thru 3Q10 for Most Attractive and Most Dangerous Stocks

Posted By David Trainer, October 13, 2010 – 7:09 am

The performance of the Most Attractive and Most Dangerous Stocks continues to beat relevant benchmarks by a wide margin. Our Long/Short strategy returns 80.5% from April, 2006 through September, 2010, beating the S&P 500 by 91%, the Russell 2000 by 89.9% and the risk-free rate by 70.2%. All the details are in the report.

Posted in:

Proof Is In Performance, Stock Picks and Pans

Tagged:

accolades, economic earnings, Most Attractive Stocks, Most Dagnerous Stocks, performance, track record

Comments (1)

Stock Pick of the Week: Buy Schiff Nutrition Intl (WNI) — Very Attractive Rating – Small Cap Special

Posted By David Trainer, October 12, 2010 – 7:23 am

HIDDEN GEMS:
1. Our discounted cash flow analysis shows that WNI’s current valuation (stock price of $7.89) implies that the company’s profits will decline by 25% and never grow again.
2. The company grew its economic earnings more than its reported earnings. Economic earnings rose by $9.1mm (506% increase) while Net Income rose by only $8.1mm (79% increase) during its last fiscal year.
3. The company has $42mm in Excess Cash, which we remove from our Invested Capital calculation. $42 million is 20% of WNI’s market cap.

Posted in:

Stock Picks and Pans

Tagged:

dynamic discounted cash flow model, economic earnings, excess cash, NOPAT, ROIC, Very Attractive Rating

Comments (0)

About David Trainer

David is a Wall Street veteran and corporate finance expert.

He specializes in reversing accounting distortions in business performance and stock valuation.

He is a member of FASB's Investors Technical Advisory Committee.

He is author of Modern Tools for Valuation (Wiley Finance 2010).

His stock-picking success has been well-documented since 2005, including features on CNBC, in Institutional Investor Magazine and in Barron’s. Read More
Stock Pick of the Week
Sell Apple (AAPL)
Apple's 270% return on invested capital (ROIC) is not sustainable. With no groundbreaking innovation on the horizon, Apple's ROIC, and its stock price, should decline to a level closer to its competitors.
Reports
From New Constructs

Proof Is In Performance: Jan 2005 - Mar 2013
	Since Inception	2013 YTD
Most Attractive	80%	5%
Most Dangerous	-42%	-8%
Most Attractive/Dangerous	56%	-3%
S&P 500	32%	6%

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