Proof Is In Performance Thru 4Q10

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!!). See our lat­est Proof Is In Per­for­mance Thru 4Q10 Report for more details.

As you can see in my post on our stock-picking acco­lades, we have plenty of inde­pen­dent, 3rd-party val­i­da­tion of our stock-picking suc­cess. So, you don’t just have to take our word for it.

Our suc­cess comes from being able to iden­tify groups of stocks that are most likely to be re-priced as the mar­ket, over time, rec­ti­fies mis­per­cep­tions of eco­nomic value cre­ated by investors employ­ing less ana­lyt­i­cal rigor than we. We derive our advan­tage from the in-depth analy­sis of finan­cial state­ments, espe­cially the notes to the finan­cial state­ments, which we apply to the analy­sis of the under­ly­ing eco­nomic value of 3000 firms. We believe our exact­ing approach to research gives us advan­tage in the selec­tion of indi­vid­ual secu­ri­ties for our long and short portfolios.

The Proof Is In Per­for­mance:

The returns of our rec­om­men­da­tions during 4Q10 and for 2010:

Long/Short Strat­egies:

  • Most Attractive/Dangerous (Large and Small stocks): -8%/+1%
  • Most Attractive/Dangerous (Large cap stocks only):  -10%/-8%
  • Most Attractive/Dangerous (Small cap stocks only): -7%/+10%

Long Strat­egies:

  • Most Attrac­tive  (Large and Small stocks): 11%/30%
  • Most Attrac­tive (Large cap stocks only): 10%/21%
  • Most Attrac­tive (Small cap stocks only): 12%/39%

Short Strat­egies:

  • Most Dan­ger­ous (Large and Small stocks): -18%/-25%
  • Most Dan­ger­ous (Large cap stocks only):  -19%/-26%
  • Most Dan­ger­ous (Small cap stocks only): -17%/-24%

These returns com­pare well to the major indices over the same time frame:

  • S&P 500: 10%/12%
  • Rus­sell 2000: 16%/25%
  • Risk-Free Rate: less than 1% in 4Q10 and for the full year

The cumulative returns of our rec­om­men­da­tions since Jan­u­ary 2005:

Long/Short Strat­egies:

  • Most Attractive/Dangerous (Large and Small stocks): 51%
  • Most Attractive/Dangerous (Large cap stocks only):  65%
  • Most Attractive/Dangerous (Small cap stocks only): 60%

Long Strat­egies:

  • Most Attrac­tive  (Large and Small stocks): 65%
  • Most Attrac­tive (Large cap stocks only): 53%
  • Most Attrac­tive (Small cap stocks only): 71%

Short Strat­egies:

  • Most Dan­ger­ous (Large and Small stocks): -27%
  • Most Dan­ger­ous (Large cap stocks only):  -15%
  • Most Dan­ger­ous (Small cap stocks only): -41%

These returns com­pare well to the major indices over the same time frame:

  • S&P 500: 8%
  • Rus­sell 2000: 30%
  • Risk-Free Rate: 15%

Click here to download a PDF of this report.

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