Hoisting a Red Flag

I remember reading Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports, Third Edition back in college for a class on Security Analysis.   The world of forensic accounting fascinated me – and one project was to see how many red flags we could find in the 10Ks and Qs for Lucent.  Needless to say, there were a lot!

A number of research boutiques have popped up focusing on this field (and a new forensic accounting ETF just launched), and we highlight some research from New Constructs in this week’s issue.

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Kevin Rich
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Email address: positiveskew@yahoo.com


Incorporated in July 2002, New Constructs® is an independent publisher of investment research firm that provides clients with consulting, advisory and research services. The firm specializes in quality-of-earnings, forensic accounting and discounted cash flow valuation analyses for all U.S. public companies. To support its proprietary database of financial data, the company leverages expertise in analyzing the Notes to the Financial Statements and extracting data directly from SEC filings. New Constructs® translates accounting data from 10Ks and Annual Reports into economic financial statements, i.e. NOPAT, Invested Capital, and WACC, to create economic earnings models, which are necessary to understand the true profitability and valuation of companies. All data, calculations and adjustments are available for review and modification by clients. In addition to its unique economic analysis of financial data, New Constructs® performs all traditional accounting analyses.

New Constructs® is a long-time member of the Investorside® Research Association, a non-profit trade association of investment research providers that do not engage in investment banking, company consulting or research-for-hire.

New Constructs, LLC has been a Better Business Bureau Accredited business since December 2009.

Our Value Proposition

New Constructs® helps clients make more intelligent capital allocation decisions. We perform this service by more accurately identifying companies that are the most undervalued relative to their profit potential and the most overvalued relative to their profit potential. The merits of this investment strategy and our ability to execute it speak for themselves in Proof Is In Performance.

Our Focus

New Constructs® focuses on publishing the true profitability and valuation of as many companies as possible. When we are not reading and parsing SEC filings, we are developing the expertise and technology to read and parse SEC filings better and faster. We also work to inform as many people as possible of the valuable research we offer.