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Highlights From New Constructs Investment Research

Danger Zone: Value Investors

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Check out this week’s Danger Zone Interview with Chuck Jaffe of Money Life and MarketWatch.com.
Value investors are in the… Read more >>

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Danger Zone 11/4/13: XBRL (eXtensible Business Reporting Language)

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The potential utility of XBRL as a tool for regulators to fight fraud and investors to better analyze companies makes its numerous flaws that much more of a shame. I can only hope that the SEC realizes the value of XBRL and makes a commitment to ensuring the accuracy and validity of XBRL data.

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Reported Net Non-Operating Items – NOPAT Adjustment

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Income statement adjustments include financing items like interest expense/income, preferred dividends and minority interest income. These items are related to the financing of a company’s operations, not the operations themselves. We always calculate NOPAT on an unlevered basis.

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Net Deferred Tax Assets and Liabilities – Valuation Adjustment

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We subtract net deferred tax liabilities (DTLs minus DTAs) from our calculation of shareholder value as they are real future cash obligations that limit the amount of money available for distribution to shareholders.

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Accumulated Goodwill Amortization and Unrecorded Goodwill – NOPAT Adjustment

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Converting GAAP data into economic earnings should be part of every investor’s diligence process. Performing detailed analysis of footnotes and the MD&A is part of fulfilling fiduciary responsibilities.

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Non-Operating Tax Adjustment – NOPAT Adjustment

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Without removing the tax impact of non-operating items, one still gets distorted picture of a company’s operating profitability.

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Change in Total Reserves – NOPAT Adjustment

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Reported earnings don’t tell the whole story of a company’s profits. They are based on accounting rules designed for debt investors, not equity investors, and are manipulated by companies to manage earnings. Only economic earnings provide a complete and unadulterated measure of profitability.

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The Truth Behind AAPL’s Numbers

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This article provides some empirical evidence behind my putting Apple (AAPL) in the Danger Zone last week because its return on invested capital (ROIC) is outrageously high. That fact underscores why valuing this company or any other with the expectation that such a high ROIC was sustainable would be a mistake.

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Danger Zone 2/11/2013: Energy Sector

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Investors who want exposure to this sector should buy a basket of Attractive-or-better rated stocks and avoid paying undeserved fees. Get the list of my top 20 Energy stocks to build your own portfolio.

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Best & Worst ETFs & Mutual Funds: Energy Sector

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The Energy sector ranks fifth out of the ten sectors as detailed in my Sector Rankings for ETFs and Mutual Funds report. It gets my Neutral rating, which is based on aggregation of ratings of 20 ETFs and 73 mutual funds in the Energy sector as of January 25th, 2013.

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How To Find the Best Style ETFs

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Finding the best ETFs is an increasingly difficult task in a world with so many ETFs to choose from.

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How To Avoid The Worst ETFs

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The focus of this article is investing risk or the relative investment potential of the ETF. This risk is much more difficult to asses because it requires researching the investment potential of the ETFs holdings.

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Fox Interview: Street Fight and Market Outlook

Fox Interview: Street Fight and Market Outlook

In my recent interview, Fox Business’ David Asman digs into the details of what makes a good stock in the current market environment.

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Free report for Ask Matt, Exxon Mobil (XOM) – Very Attractive Rating

Free report for Ask Matt, Exxon Mobil (XOM) – Very Attractive Rating

Exxon was my Stock Pick of the Week last week. Here is an excerpt from my article: “Buying Exxon Mobil (XOM) now is one of the easiest calls in the market these days…”

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Slow & Steady Wins The Race: Buy XOM

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Sometimes, picking stocks is easy if you focus on the basic principles of cash flows, valuation and competitive advantage.

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Fox TV Interview: How To Make Money In This Market

Fox TV Interview: How To Make Money In This Market

Yesterday, on Fox Business’s After The Bell, I shared my market outlook and strategy for making money in the current market. Here is the interview.

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Low-Cost Funds Dupe Investors: 3Q12

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Fund holdings affect fund performance more than fees or past performance. A cheap fund is not necessarily a good fund. A fund that has done well in the past is not likely to do well in the future (e.g. 5-star kiss of death). Yet, traditional fund research focuses only on low fees and past performance.

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Best & Worst ETFs and Mutual Funds: All-cap Growth Style

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The all-cap growth style ranks fifth out of the twelve fund styles as detailed in my style roadmap. It earns my Neutral rating, which is based on aggregation of ratings of 2 ETFs and 436 mutual funds in the all-cap growth style as of July 18, 2012.

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Best & Worst ETFs and Mutual Funds: All-cap Blend Style

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The all-cap blend style ranks third out of the twelve fund styles as detailed in my style roadmap. It gets my Neutral rating, which is based on aggregation of ratings of 33 ETFs and 669 mutual funds in the all-cap blend style as of July 17, 2012.

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How To Survive the Euro Crisis

How To Survive the Euro Crisis

As I wrote in “Don’t Be Fooled: Get Short Now”, the euro is not that different from Enron, WorldCom or the Madoff fund. All of these organizations were able to pretend they were profitable or solvent long after they were insolvent.
Now markets are finally acknowledging the intractability of the Euro debacle.

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