The Secret Metric To Find Hidden Gems In the Stock Market – March 2024 Training

Thanks everybody for joining us today. We're very excited to have you all. We got a, a big crowd, I think, for a big occasion. We're excited. I think we've got probably one of our, our best webinars ever. We certainly got an all-star cast. John Rotanti here. And with that, I'm going to, I'm going to jump into this because we got a lot to cover and I want to make sure we got a chance to, to get to it all. So let's talk about the secret metric to finding hidden gems in the stock market and why it's invisible to so many folks. And if you stay to the end, I want you guys to know we're going to reveal 3 stock picks. These are specific case studies that show exactly why this Secret metric or special metric works, and we're going to also show you how you can actually use this metric in your own investment process, as well as screen the entire market for this metric. And then we're going to give you at the end Kyle's going to go over a special bonus and show you the seven worst performing stocks in last month's most dangerous stocks portfolio. We always got to hit the disclosures and disclaimers. We're not giving out any advice. We don't intend to. We don't want to. You need to consult your own advisor and tax consultant for all those kinds of questions. Most of you all know me. I'm the founder of New Constructs, and I will be your instructor today. I've been working on machine learning and robo analytics for over 25 years. Importantly, New Constructs data has been proven superior by independent third-party folks. So when we talk about what we do being unique, it's truly unique and proven superior. By prestigious institutions, I don't think there's another research platform in the world that's ever had papers published proving the superiority of their data or their analytics or their research, and certainly no no one for all three.

Now, David, call those out though: Harvard, MIT, like huge brand name pedigree. Global institutions.

Yeah, that's right. Uh, you know, I almost get tired of saying it. I appreciate that, John. You're, you're right. I mean, this is a— it's a big deal. It's a big deal. And again, it's never happened before, as far as I can tell, in the, in the history of the business. And it doesn't hurt either that our, our stock, stock picks have been ranked number 1 by SumZero for nearly 3 years straight, every month. And we will share the We will share the slides on our network or on our society later. And actually, they'll be, they'll be, they'll be shared later in general. But more than, more than just talking about how good our stock picks are, why don't we go through some specific examples? And I think we want to really want to be heavy on examples today. I think that's, that's important because we've got the ability to prove our research is superior, which is why firms are willing to write papers published to that effect. So let's talk about stock pick number one, Williams-Sonoma. We recommended this a while ago. Great example of a stock that's been a major outperformer. You don't hear a lot of people talking about Williams-Sonoma, but it's something that our deeper analysis and research has helped us find. Jabil, another great call we made just a few years ago, up 266% over the last 4 years while the S&P is up just 55%. Again, an example of where superior detailed fundamental analysis and better valuation analysis led us to find something other people were not paying attention to. Interesting question here. When you say data, are you talking about raw fundamental data and hence competitive products to competitive products like S&P CopyStat North America? Yes. The, the, the paper from Harvard Business School and MIT Sloan that was published in the Journal of Financial Economics does a horse race expressly against the S&P data. They specifically named Compustat, and the professors I know specifically did work against everything in the S&P 500 portfolio when it comes to data. They were embedded with S&P while doing this paper as a way to ensure that we indeed have something different— indeed had something different than what they had. Let's talk about another stock pick, Sprouts Farmers Market. It's gotten a lot of publicity since we wrote about it back in November of 2020. Huge outperformer. People have kind of jumped on board here more recently, but we were way ahead because we were seeing things in the fundamentals that other folks did not see. KLA-Tencor and Lam Research— these were, these were written right around the same exact time, the summer of 2017. Again, we saw this as a pick-and-shovel type play in, in the tech space that— and for both of these that ended up doing really, really well. Big outperformers over the last 3 years. versus the S&P. And look, our focus list long has been a tremendous outperformer since 2021, beating the S&P by 28%. Again, you know, credibility here is really strong for New Constructs, not just for people writing papers about how our data analytics and, and stock ratings are superior, but we've got the published research to prove it as well. And then on the short side, focusless stock— focusless stocks on the short side has been a great outperformer too. We call it as we see it. We're independent. We're not just all buy, buy, buy like you see mostly on the sell side. We believe in warning our clients about the stocks to avoid just as much as we talk about great stocks to buy. John, this is where I get to introduce you, my friend. You already jumped in. I loved it. Great comment. John, why don't you give us a few words about yourself?

Thanks for having me, Kyle and David. I'm an investor. I'm an intrinsic value investor. I've been doing this for over 20 years. For the last 9, I was a senior analyst, a portfolio lead, and the head of investor training and development at The Motley Fool. And then almost a year ago, I left The Fool to start The JRO Show. And so now I'm just doing that, trying to do my podcast, which explores investing process and structures at leading buy-side firms.

And John and I met, I don't know, man, how many years ago was it? 3, 4 years ago? 5, 6? At least.

Yeah.

Yeah.

And, you know, we just were immediately fast friends because we are believers in doing your homework. and not believers in hype and believers in discipline and believers in hard work. Yeah. And not just in our, in our business lives, but our personal lives.

Yeah.

And this is what it takes to be success. I'm not, I'm not out here to throw Hail Marys. I'm not here to play the lottery. I'm about ways I can sustainably generate the best risk reward for myself to be a successful human being. And, and we believe in that and we believe that we believe, have, have a lot of shared belief around what that takes in the investing business.

Yeah.

Our mission at New Constructs is to help people make more informed decisions. The original title of my business plan that I wrote in July of 2002, 21, 22 years ago, almost 22 years ago, right, was to improve the integrity of the capital markets. And I believe we do that by helping people have a truer measure of profitability and valuation so that capital can flow to its highest and best use. If you don't understand how good, how good the company is doing, how well the company is doing at allocating capital and earning returns on capital, then you can't allocate capital to its highest and best use. Just can't be done. And so we're here to do that for folks.

And society suffers when that doesn't happen. If, if there's a, if there's a gross, almost negligent misallocation of capital, you know, then it's going to pet projects instead of things that create real economic value for cities, for states, for countries, and for the world and for all those people that live in those places.

100%. I mean, we have a limited amount of capital, and if that capital gets siphoned off to bad businesses, and bad businesses just means that capital's going to executives, Wall Street and Wall Street bankers, they're making money. Look at WeWork, right? That company effectively went bankrupt. Who made money on that deal? SoftBank made money. Wall Street made money. Executives made a lot of money. Investors lost. It's a grift from unsuspecting investors to the Wall Street insiders and the corporate execs. And that's why we're out here trying to give you the truth so you don't fall for it. We were really early on WeWork. We told you that was going to happen. It did. And that's what we do with our zombie stocks and a lot of our most dangerous stocks. I mean, it's about helping you avoid the landmines as well as finding the best stocks. And so before we get to the training, to kind of lead in to or build on what John was just saying, look, if you're looking for somebody who's going to give you the next meme stock or the next Momo YOLO stock that's being hyped by the media, or how to trade options or crypto, I'm not your guy. We are not your people. On the other hand, if you are an investor, not a speculator, if you're an individual who wants to build wealth and retire comfortably and understand risk-reward, we can help you. A financial advisor who wants to engage in proper due diligence and be a reliable steward of your client's money, we can help you. If you're looking for steady income and growth from stocks that have great fundamentals, we can help you. You're in the right place. And that's, that's a big deal to us. We're very forthcoming and transparent about what it is we do and what we're here for. And I think that's hopefully something, you know, you can trust. So let's talk about the secret metric that can help you uncover hidden gems in the stock market. Why is this overlooked? Because Wall Street doesn't really want you to know about it. Because in the same way it helps you find the secret gems, you know, it, it helps you identify the bad stocks. And that helps you, that helps you avoid buying into the IPOs and things that make bankers a lot of money. But people aren't looking for it because Wall Street doesn't want you to know about it. They're not, they're not putting it out there. Other research firms don't know how to do the work or don't have the discipline to want to do the work. This is not necessarily like a panacea for profits, right? But it's definitely a big driver for profits, and it's extremely rare for this to actually happen, which is why we're so excited about sharing it. And I got to give John credit because he's the one who emailed me early this year or late last year and said, David, we should do a webinar on the secret metric because it's a really great accomplishment for companies. It means an excellent long-term future potentially, and it's super rare, and it's a pretty amazing feat. So what is it? What am I referring to? The secret metric is when economic earnings are greater than accounting earnings. This is a difficult thing to achieve because economic earnings tend to take into account a lot more costs than reported accounting earnings or GAAP earnings. The 2 are different from each other in a lot of ways, but the main thing is that the, the, the GAAP data or accounting was not even designed originally for equity investors, but for debt investors. So you're missing a lot. And the net income that we find at the bottom of the income statement is based on a lot of rules that don't necessarily help individual investors. Or investors in general, and those rules also have a lot of gray area for companies to wiggle things around. Economic earnings, on the other hand, represents the true earnings for shareholders. Why are economic earnings better? I mean, you go back and you read all of the greats, and and you know that that are with us today and that have been around before. John quotes these people all the time. If you're not familiar with John's podcast. Take a listen because he is beating the drum on this and talking to the smartest minds in the business about how they employ so many of these same concepts and have made discipline and rigor work for them. But the main 3 things about economic earnings that make it better are that they're based on the complete set of financial information, not just the income statement— income statement, balance sheet, cash flow statement, and footnotes. And it's the footnotes to the question before about how we have superior data. It's the footnotes that makes our data better than every other data source out there. No one else has the footnotes. The other thing that's good about economic earnings is that they're apples to apples for all companies. One of the biggest problems with accounting earnings is that different companies can choose different rules or follow rules in different ways, which means that their, their net income may just be very different from another company, not because the economics of the business are different, but because they chose to follow different rules. One of the biggest ones over the years is— was, was operating leases, uh, and it's still an issue because they can choose what discount rate they use on their operating leases. So, you know, some companies can have an operating lease or they can have a finance lease, which means one's on balance sheet and one's off balance sheet. Other companies can choose to follow successful efforts method of accounting Versus full cost. Successful efforts means they just write down every asset that doesn't go well, or every investment that goes well, they make it go to zero and they wipe it right off the balance sheet. So you don't know that they maybe had to drill 10 holes in the ground to find that 11th profitable oil well. The capital on the balance sheet only represents what they invested in that last and successful oil well, not the fact that they took them going through 10, when in reality investors need to know They had to go through 10 to find the 11th. We fix all that. The last and most important element for economic earnings is that it is a more accurate representation of the true underlying cash flows of the business. It's a better metric. The bottom line, if the company is not generating positive economic earnings, it is not creating shareholder value. So let's get into some case studies. This is important.

Hey David, really quickly, I just want to emphasize If a— what you just said, if a company is generating GAAP earnings, GAAP profitability, that's good, but it doesn't mean it's creating shareholder value. It does not. GAAP profitability is not an indicator in and of itself that a company is creating shareholder value. Economic profit or economic earnings or EVA, whatever we're calling it, is an indicator that a company is creating true shareholder value.

Extremely important point. So let's, let's do a case study on why the secret metric matters. And this speaks to a question we got about time horizon. Time horizon is, I think, in these— this day and age is flexible. Sometimes it takes a long time for the thesis to come true. Sometimes it can happen overnight. But if the stock is up 1,000%, it's no longer attractive, you got to make a decision. So I don't think that we're of the mind that you hold every company you ever long. You don't need to hold that forever. You got to be opportunistic and understand when value's been realized and when it hasn't. So first case study, Domino's Pizza. Back in 2005, we saw that economic earnings flipped to greater than accounting earnings. This is a picture directly from our model. And you can see we identified the inflection point, and here we are years later. It's up 2,300% while the S&P is up just 331%. I'd say that worked out pretty well. Great example. How about another one?

Those inflection points are so critical if you can identify them and get in at the beginning of that Like profit cycle, the beginning of that economic profit cycle right at the inflection point. That's how you get 2,300% returns.

Exactly. Thank you, John. Inflection point is everything investing, right? You got to find the, the time when, when value and price are most disconnected. Otherwise, you're just, you're just, you're speculating. Case study number 2, Extenture. Even earlier, we found that they, they flipped over for positive economic earnings. I'm sorry, economic earnings greater than net income by a wide margin. A really profitable business. And you can see this guy's up 1,500% while the S&P is up around 400%. Another huge outperformer and consistently great stock over the last 10 years or so. These are these super compounders that make people's portfolios. I mean, this is the kind of trades that are investments that That they're the home runs that people want to find. AutoZone, another one. This one flipped a little more recently. August, late summer of 2012 is when we first saw it. And you can see huge outperformer, nearly, you know, nearly tripling the S&P over the last 10 years. Again, another great, a great performer. A couple questions here real fast. We, we spoke to time horizon. A question on capitalizing R&D and marketing spend. We do not make those adjustments. We actually wrote a white paper on how that distorts the economics of the business. Whether you capitalize the expense or not doesn't affect free cash flow. And mostly capitalizing expenses just pushes margins up artificially for a short amount of time. So we don't do that kind of work, especially since companies are doing it some, all the, sometimes themselves. And especially since everyone's got different sets of assumptions in terms of the number of years over which the expenses should be amortized. So I think it's kind of a— I think it's a sexy thing that Wall Street likes to do because it's a way to make companies look more profitable. I've had plenty of conversations with portfolio managers who love to do that and then ignore the balance sheet. So we don't fall— we don't fall prey to that trap is the way I like to put it. And there's a great paper on our website called To Expense or Not to Expense, It Doesn't Matter, that shows the math with specific Excel file samples on how capitalizing expenses just distorts returns on invested capital while having zero effect on free cash flow. Are we using large language models to parse filings? No, we're not. We're using our own proprietary natural language processing and machine learning, but mostly humans doing the work augmented by machines, but it's mostly human experts. There's no way you can get a machine to do this. Someone's gotta figure this out how to do it. Someone's gotta teach the machine. The machine can't learn it on its own. Teaching the machine is like harder than teaching a baby, right? Or a toddler because they don't even, they don't even know what way is right, you know, which way is up. And so we've had to build this very, very diligently and carefully over time. And You know, after 20 years, we've got a really powerful technology. We're able to do a lot. So let's get down into some nitty-gritty in terms of the difference between traditional P&L, an accounting P&L, and an economic P&L. 2 big differences, 2 big problems. The GAAP numbers are missing the footnotes. They're also missing the capital charge. All that capital that goes in the business There's no charge for that, especially on the equity side. So typically the economic earnings are a lot lower than the accounting earnings, which is why it's so unique whenever you see a firm with economic earnings greater than accounting earnings. And when it comes to footnotes, there's a lot of stuff you got to go through. We've got 12 on this list. We have probably over 30 white papers On our site that will show you exactly how we deal with all these. I think that's one of the hallmarks of new constructs. I think it's one of the things that I think John appreciates as well, in particular all our clients for that matter, because we show you exactly how we make these adjustments. I'm not worried about you looking up the report on loan loss and LIFO reserves and like making that adjustment in your model because You aren't going to be able to do it on 7,000 stocks as we have over the last 15, 20 years. It's just the, the technology is necessary to scale this. I'm speaking from experience. I built these models by hand for many years. You need technology to scale this. We want people to know the work that we're doing because we don't want you to think we're a black box because we are not. And there's no substitute to getting this footnotes data than going to the, the actual 10-Ks and 10-Qs. You can't get it from anyplace else. You can't get it from any of the other data providers. That's a big part of what Ernst Young, Harvard Business School, and MIT Sloan have proven. Here's the list of all the white papers in the education section of our site. Take a look. And now let's get now into some more of the nitty-gritty on, on how you actually measure economic earnings. The first thing you got to do is to convert all that accounting data— balance sheet, income statement, cash flow, footnotes— into what I like to call economic statements. And there are 3 of these economic statements. They are NOPAT, which is your core operating earnings after tax, effectively unlevered operating earnings after tax. Unlevered means it's not affected by debt financing. That's your NOPAT, net operating profit after tax. Invested capital is all cash invested in the business. And then WACC, or the weighted average cost of capital. is effectively the rent that management has to pay for the use of capital. Capital is not free, right? Do you guys— does any of you give away your money for free, or do you expect some sort of return, right? Same is true for investors, whether you're a debt investor or an equity investor, right? The debt investor, your cost of capital is explicit. It's your interest rate. Your equity investor, it's implicit. But it's still there. So the weighted average cost of capital looks to find the cost of all fund sources, and that can improve— include equity, common equity, preferred equity, all of it. Once you have these economic statements in place, you can calculate return on invested capital, which to me— and I know John, a believer in this too, Kyle, of course, everybody at New Constructs, uh, everybody really cares about rigorous fundamentals— return on invested capital is one of the all-time great metrics. It's how much cash flow do you generate relative to how much capital's gone into the business. We have to know these things. We don't know these things, we don't understand the business at all. And then when it comes to economic earnings, the ratio— the formula is pretty straightforward. It's ROIC minus WACC times invested capital. Or there's an even simpler way: NOPAT minus WACC times invested capital. Same thing. You can do it both ways. One of the things I know that John has always loved about our models is that, is that for every one of these formulas, whether it's NOPAT, invested capital, economic earnings, if we can calculate it from multiple approaches, we always do because it helps, it helps prove the integrity and accuracy of the data.

It's like a mathematical proof. Everything, you can do it from the operating side and the financing side. Can you go back one slide, David? I just want to highlight really quickly the NOPAT. Yep. So return on invested capital, NOPAT divided by invested capital, economic earnings, ROIC minus WACC times invested capital. These are all the same metrics. NOPAT, invested capital, ROIC. They're the same exact metrics you need to calculate ROIC and economic earnings, which are 2 of the key intrinsic value drivers. We could put another one there. Free cash flow. Free cash flow is NOPAT minus New invested capital or incremental invested capital. Literally the 3 value drives, the only 3 metrics that really drive value at all other than revenue are all calculated using NOPAT, ROIC, or invested capital. The only thing that economic earnings does is add whack to the equation. So I mean, it, you cannot get ROIC, you cannot get economic earnings, you cannot get free cash flow. It's impossible. You cannot get it correctly unless you get NOPAT correct, unless you get invested capital correct. And just to show how linked these numbers are, if you discount free cash flow or if you discount economic earnings, assuming you do it correctly and you have the same assumptions, you will get the exact same estimate of intrinsic value. The exact same estimate of intrinsic value if you discount economic earnings calculated properly or free cash flow calculated properly. Last thing I'll say, the cool thing about economic earnings— no, NOPAT is not the same as free cash flow. Free cash flow is NOPAT minus all of the new invested capital in that period. So it's NOPAT minus— what's that?

The change in invested capital.

Yeah, the change in invested capital. Exactly. So it's not the same. I'm not using them interchangeably. Yeah. NOPAT is an input into free cash flow. It's NOPAT minus the change in invested capital. Here's the cool thing. Economic earnings really quickly. No one thinks about invested capital or invested capital growth. I talk to a lot of investors. You know, non-professional investors, very few are looking at invested capital growth or what that invested capital base is. But here's the thing. If you take a company that has an ROIC minus WACC, that's called the— you know, I've heard it called the economic spread, the economic profit spread, the excess return spread, whatever you want to call it. That spread, ROIC minus WACC, assume it's only 1%. So assume this is a hypothetical company where the ROIC is 12% and the WACC is 11%, and so the spread is only 1%. Okay. So you take that 1% and you multiply it by the invested capital base. Assume that invested capital base is $1,000. Okay. What do you get? You get 100. Now, now assume you have a company with a 10% spread. ROIC is 10% higher than WACC, but the invested capital base is only $100, not $1,000. I'm sorry, 10. You get the exact same, you get the exact same economic value of 10. So a 1% ROIC minus WACC spread on $1,000 of invested capital. Only a 1% spread gives you $10 of economic earnings. A 10% spread on only $100 of invested capital gives you the exact $10 in economic earnings. The exact. So you can have a company with a small spread, but on a large invested capital base and earn the exact same economic profit as a company with a much, much, much, much, much larger spread. People don't think about this.

That's where Walmart is more attractive than people think. Not a huge spread, super consistent return on capital, and not a super high return on capital, but a huge economic earnings generator compared to, you know, the fancier stocks, even Nvidia or Apple, etc. I mean, Walmart is, is going to be generating comparable or even more economic earnings because it's able to do it at more scale. That's great, John. Thank you. You can't emphasize enough how important it is to get NOPAT and invested capital right.

You can't.

That's where all, that's where the real work is done. You know, to John's point, that's where the real work is done. And weighted average cost of capital, we have a, I shared a page on our site where we show you the calculation for that. And we do a lot of work on weighted average cost of capital to make sure it doesn't get in the way of how to calculate WACC. And which means we do a lot of normalization. And I've been doing this for 25 years.

The main thing is that you need to capture something.

something for cost of equity and get it somewhat right and not try to get it too right. Better to be vaguely right than precisely wrong, so to speak. But the key is, again, economic earnings, much more difficult to have good economic earnings than to have good accounting earnings.

You never want WACC to be the reason you're buying something, the reason you think something's undervalued, right? You never want to have to drop your WACC to 3% to make To make the valuation work, quote unquote.

Yeah. And, and, and that's a big driver in the way we, we deal with WACC, John. I think you and I talked about that a lot early on. Like, you know, we normalize. We, we also make sure that, that, for example, beta, whatever the beta is today, it's the same beta over time so that you don't see changes in economic earnings as a result of a change in beta. You don't want that. You're never going to get that from new constructs. When economic earnings changes, it's because the value drivers that John mentioned changed. NOPAT and invested capital change. It's not going to really be a change in WACC. So everybody wants the truth. Of course they do, right? Oh, before we get going here, how does revenue enter the calculation of economic earnings? It's captured in NOPAT. So your NOPAT will grow if your NOPAT margin stays the same. It grows if your revenue grows. Is debt the best proxy for WACC? No, the, the weighted average cost of all fund sources is how you calculate WACC. So weighted average implies you've got a combination of debt and equity, and we can share a link to, to you, Mark Herbert, for your question. Kyle, if you don't mind, you want to throw that link in there as an answer to Mark to show how we calculate the weighted average cost of capital, and maybe even put it into the chat in case more people have a question. So the truth, everybody wants the truth, but it's expensive, right? And to that, to that end, Johnny, you out? Thank you so much.

This was so much fun. I have to go record a podcast. Thank y'all so much.

Yeah, thank you.

Bye, y'all.

Thanks. Let's go ahead and jump into a, to a deep dive here, Kyle, on how we can show people where to find where economic earnings are greater than accounting earnings. As a New Constructs client. You want to go ahead and share your screen?

Yep, I'll do that, and we'll jump right into the ratings page where you can get all the info we just talked about. This is our standard ratings page. Um, you can see right on our ratings table we've got economic versus reported EPS. You can get the value there on economic earnings and GAAP earnings under the GAAP reconciliation tab. We can get those drivers we just talked about. We've got our GAAP net income reconciled down to NOPAT. We've got the total assets reconciled down, calculate invested capital, average invested capital. And then on the rating breakdown tab, we show you economic earnings versus accounting earnings in nice charts. You can see where they are relative to one another. Down on the ROIC chart, we've also got the WACC charted. So you've got all those drivers that we just talked about all within the ratings page of our site. Awesome. All right. We are—

we're pushing it on time here, Kyle. We need to keep— we need to get moving. Okay. So great demo there. So basically, you type in a ticker, you get an answer. We will show you whether or not economic earnings are greater than accounting earnings. We'll show you how it's gone over the last 5 years. You get that detailed breakdown also in terms of how Net income is different from NOPAT, and you also get to see how unadjusted assets are different from invested capital. So the question is, you know, who has time to do this work, right? To, to go through 200-plus page 10-Ks and 10-Qs and analyze all the disclosures? Who has time to do that proper diligence? The cost of doing this is millions of dollars per quarter. Every quarter you got a whole new set of financial data you got to go through. And why do we know? That it costs a million bucks because we've done the math. We've done the math to look at how many people would take and the amount of hours it takes to read a filing. It's about 8 hours for an expert to go through a filing manually and build a model. And so you're not going to see that. Kyle, why don't you jump in again real fast and show us whether or not Google or ChatGPT can give us an answer on what economic earnings mean or, or whether or not economic earnings are greater than accounting earnings?

Definitely. I actually wanted to pull real quick if we asked it for a company's economic earnings, what it would say there, because I thought the answer was quite telling that it doesn't know, doesn't have specific information on economic earnings. And I think similarly, when we ask it how to calculate economic earnings, it has a very drawn-out answer. It looks very official, and it's missing a whole lot of stuff. When we get into some of the adjustments, this might take a second.

That's better than what it showed yesterday.

It is true. Maybe it's learning.

Like they've listened to this webinar.

Yesterday they were trying to tell us about adjustments that shouldn't be made and should not be made and everything.

Yeah, it didn't even mention NOPAT. It mentioned net income. That's interesting. Well, that's a very shorthand measure of NOPAT and invested capital. Of course, there's no definition of it.

Yeah.

And the weighted average cost of capital is missing a lot. But that's, that's interesting. The answer yesterday had nothing even close. This is, this is more in the ballpark. By the way, the definition doesn't really help you that much if you can't get an example.

Yeah. And same thing on Google. We can search those same kind of questions and the economic earnings number. It's pulling a bunch of revenue figures and get right to their filings. The search results aren't going to be great there. And then same question, how do we calculate economic earnings? I like this mainly because you'll see our site right there if you want to find out how.

Google got that part right.

Yeah, I'll turn it back over to you to keep moving on. Thank you. Thank you.

So we asked ChatGPT and we asked Google. You're not going to get the answer there. That's the takeaway. If the average investor or financial advisor does not have the means to uncover the true value of a stock or the profitability, and they can't uncover whether economic earnings are greater than accounting earnings? What are you going to do? You need access to technology. We're calling it WRAP, or our Robo-Analyst Process. That's New Constructs AI to uncover the true economic earnings of a company. It's our patented system and proprietary technology that enables us to build a research platform that for the first time gives investors Reliable fundamental research. Never been done before. And again, if you don't believe me, ask the Journal of Financial Economics, Harvard Business School, or MIT Sloan. When I think about new constructs, it's like a paradigm shift, right? Typically analytically rigorous work, very difficult. And, and, and you can do it, right? High analytical rigor here, low analytical rigor here. Number of companies covered, low, high. So a few people did the work manually, the greats. On a few companies. If you want research on a lot of companies, it's typically really low quality. New Constructs is the first to sort of break the mold there and give you high quality at scale and give you the ability to, to scout out where economic earnings are greater than accounting earnings on a visual, on a visceral level. As Kyle was showing, these are the charts. You can see exactly the trends in terms of economic versus reported earnings and the data behind it.

Right?

We're always looking to give you that transparency, and it's important that if you want to find hidden gems in the stock market like what we showed with Domino's and Accenture and AutoZone, you got to do the work— rigorous analysis of the footnotes and the management discussion analysis to get to the economic earnings, to understand profitability and valuation. There's really no shortcut. As we mentioned at the top, Of the show, top-tier institutions prove that the robo-analyst process has superiority at every level. And you go to our site, you can download these papers and see them very easily. Superior data, superior modeling, superior ratings. I don't believe in the history of the world that's ever been done. And these are some major, major firms proving that. We've been ranked number one by SumZero for stock picking every month for nearly three years. Better data matters. Now we're going to reveal our top 7 most dangerous— special bonus time from Kyle— top 7 most dangerous stocks. And Kyle, we're gonna have to go pretty fast because we're running a little bit short on time.

So these are the top 7 best-performing stocks from our most dangerous model portfolio from since February's model portfolio. And then I'll read through the performance real quick and I'll show them in the portfolio on our site so you can actually see what you would look at if you were logged in and everything. We had Express down huge, 49%. The S&P's up 3.5%. Golden Entertainment, ticker GDN, down 18 and change. Akamai Technologies down 11%. Verix Imaging Corp down 10%. Industrial Logistics Properties down 8%. OpenText down 8% as well. And then Joint Corporation down almost 6%. These are again from our most dangerous stocks that range from small cap up to large cap. I've got them in a list here, and like I said, I'm going to jump out to the website where you can actually see these in a portfolio, which I've got loaded up here. So I put each of these tickers in the portfolio. You can see the current rating. Like I said, these were from our February most dangerous portfolio. So the ones that have performed well could have fallen to neutral if they got cheaper or the economics improved. We are in filing season right now. We're getting a bunch of different 10-Ks. for, you know, 2,000 companies or so. So models are changing and you can see the ratings. You can look at Express like I talked about earlier. You know, it's on the most dangerous stock model portfolio in March. You can see there's that misleading economic earnings trend where we've been talking about on the positive side. On the negative side, if economic earnings are much lower than GAAP earnings, you've got possible red flags there as well. So we've got these 7. Most of them still look unattractive or very unattractive. with Express, even though it fell 49%, still being on the most dangerous model portfolio for March. I'll turn it back over to you, David.

Yeah, so economic earnings versus accounting earnings is good for looking for bad stocks and good stocks. It's an awesome metric. Thanks so much for everybody for being with us today. We look forward to seeing you in the future.

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