Frequently Asked Questions
New Constructs leverages the latest in machine learning to analyze structured and unstructured financial data with unrivaled speed and accuracy. The firm’s forensic accounting experts work alongside engineers to develop proprietary NLP libraries and financial models based on the best fundamental data in the business for stocks, ETFs and mutual funds. Clients include many of the top hedge funds, mutual funds and wealth management firms. Partnerships with Thomson Reuters, Scottrade, Interactive Brokers and Ernst & Young provide leveraged distribution into multiple markets. David Trainer, the firm’s CEO, is regularly featured in Barron’s, Marketwatch.com, The Wall Street Journal and on CNBC as a thought leader on earnings quality, valuation and investment strategy.
New Constructs’ stock ratings and company models are updated daily based on the prior day’s closing price. All valuation metrics (including those used in our ratings: FCF Yield, Price-to-EBV Ratio, and Growth Appreciation Period) reflect the latest closing price.
We also review corporate actions and other non-financial events daily and will not hesitate to suspend our ratings for a stock if we believe our models do not adequately represent the risk/reward of the stock.
Our Valuation Models are updated for the latest 10-Ks and 10-Qs, usually within 24 hours of companies submitting the filings to the SEC. The Quality of Earnings metrics in our ratings (Economic Earnings and ROIC) tend to be affected only when we add new filings to our models. We also update the forecasts for our reverse DCF models at least once a quarter.
Like stock ratings, New Constructs ETF and mutual fund ratings are updated daily. Our ETF and mutual fund ratings are based on the holdings of the fund and, as such, will be updated whenever updates are made to company models. Additionally, pricing information is updated daily.
Our models show raw, original line items and calculations for every fiscal period for which filings are available in electronic form. See this video for more details on our models.
We send email alerts daily to inform clients anytime our models are updated.
A Suspended Rating indicates that we feel the company's latest reported financials are not reliable or indicative of the risk/reward of the stock. For example, an announcement of a large acquisition or spin-off means the current financial results may change significantly in the future. Until the company provides updated financials, we have no way of reliably modeling the current business. We continue to make our models available based on the most recently available data, but we suspend our rating to let clients know that the model may be less reliable than normal models.
We also suspend our rating when certain events cause a stock to be driven by news instead of fundamentals. We do not remove these stocks from coverage so that clients can still see our assessment of the risk/reward of the stock before the event that caused us to suspend the rating. For more details on Suspended Ratings, click here.
Even when the Overall Rating is suspended, we provide the latest results of our model, which include Quality of Earnings and Valuation ratings. The Quality of Earnings ratings are most at risk of change during a Suspension. The Valuation Ratings are less likely to change and have more analytical value.
The New Constructs overall rating is a function of 5 underlying metrics. We divide these metrics into two categories: Quality of Earnings Metrics and Valuation.
All valuation metrics in our ratings (FCF Yield, Price-to-EBV Ratio, and Growth Appreciation Period) incorporate the stock’s daily closing price. These metrics change as prices change - sometimes causing a ratings change. Growth Appreciation Period can also change when we update the forecast in our models with new consensus revenue estimates. We update our forecasts at least once a quarter.
We review all the public company filings with the SEC daily. Anytime a new 10-K, 10-Q or amended filing comes out, we update our models immediately.
Review the details on our stock ratings and their meanings here.
- Generally, our estimates aim to provide the most reasonable extrapolation of historical results possible. We are not in the business of making wild forecasts for the future. Quite the opposite, we focus on quantifying what the market’s expectations are for the future.
- Revenue forecasts: consensus estimates where we can get them. In later years, we normalize down to long-term GDP growth or the highest the company has achieved in the past- whichever is lower.
- NOPBT (Pre-tax) Margins: extrapolate historical margins
- Cash tax rate: extrapolate past tax rate
- Incremental working capital: extrapolate historical working capital needs
- Incremental fixed capital: extrapolate historical fixed assets needs with a slight bias to assuming slightly more efficiency going forward
- Overall, most of our forecasts assume a slight increase in ROIC over time. There are, of course, many exceptions to this rule given the wide differences in companies and historical performance.
The main incremental benefits of our Institutional offerings to our Gold, Platinum, Pro, & Unlimited packages are access to:
- Unlimited research (reports, ratings and alerts) on the stocks, ETFs and mutual funds we cover
- Company valuation models(most popular)
- Direct access to our database and custom reports
- Unlimited stock, ETF and mutual fund screening capabilities
- All model portfolios and special offers
If you have not already reviewed the following pages, we highly recommend them to you.
To learn more about our investment philosophy, we highly recommend this report, ROIC: The Paradigm For Linking Corporate Performance To Valuation and the reports here.
Portfolio Alerts can be updated directly from the My Portfolio page, using the “Alert Emails” icon.
After clicking on the “Alert Emails” badge, you can choose which type of alerts you’d like to receive. We currently offer the following alerts:
- Daily and weekly alerts to any ratings changes or model changes to tickers in your portfolios.
- A weekly alert of all companies, ETFs, and mutual funds added to coverage.
We publish reports throughout the week to the Research section of our site. A general schedule of reports is as follows:
- Most Attractive & Most Dangerous Stocks Model Portfolio - first week of the month
- Exec Comp Aligned With ROIC Model Portfolio – second week of the month
- Safest Dividend Yields Model Portfolio – third week of the month
- Best & Worst ETFs & Mutual Funds – beginning of quarter, as each report is finished
- Danger Zone – Monday
- Long Idea – mid-week
To access your New Constructs Gold Membership, you'll first need to login to your TD Ameritrade account. Then, click on the New Constructs logo in the “Research & Ideas" menu dropdown.
After clicking this link, you will be taken to a New Constructs login page.
Every TD Ameritrade account is eligible for a free Gold Membership from New Constructs. Each New Constructs account is linked to a specific TD Ameritrade account, so you'll need to register for each account separately. Each New Constructs account requires a unique email address. You cannot use the same email address for multiple New Constructs accounts.