Investment Approach

New Constructs Post Earnings Short Model Sparse:
New Constructs is an expert in identifying transitory earnings distortions. These are one-off line items in a company’s earnings report that present a temporary state in time but could distort the true business outlook.
The short only model exploits conditions where the street gets a company's earnings outlook wrong. While temporary in nature, these one-off line items in a company’s earnings report could ultimately distort the true business outlook.This model seeks to specifically exploit earnings distortions by screening daily for all new 10Ks and 10Qs in the Russell 1000. It further identifies optimal conditions for entry (based on how wide the displacement is between the street and the model's outlook).
The portfolio’s goal is to outperform the benchmark SH in risk adjusted return as measure by its Sharpe ratio

The model carries forward the following backtest execution guidelines:

Every earnings date we project core earnings outlook against analysts outlook for the next quarterly earnings.
Model is trained on a perpetual basis every quarter with an expanding window.
To enable a fair comparison between different business sizes the earnings distortion are normalized by market cap.
The model filters for relevant constituents daily.
The constituents which hold positive distortions are identified.
All hold securities are equally weighted upon entry.
Mini/Max allocations guideline are: 0.2%/1.7%
Trailing Stop Loss of 3.5% is also enacted.
Please note: This backtest simulates stop losses pessimistically and we expect real-time performance to be less punitive on stop loss exits.
Positions are held conditionally as long as the short signal remains active or until an exit criteria(Stop loss) is activated.
The backtest considers slippage per transaction and commissions. See report below for additional details.

Performance Attribution

Risk/Return versus benchmark

Monthly Return Comparison Trailing 12 Months

	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Jan	Total
Strategy	6.4%	27.9%	0.0%	-3.0%	2.0%	-5.0%	-0.6%	0.5%	0.7%	-3.5%	-0.3%	-6.8%	16.6%
Benchmark	8.6%	6.0%	-12.5%	-5.0%	-2.7%	-5.6%	-6.8%	3.3%	2.1%	-10.0%	-3.7%	-2.9%	-26.9%
Rel. Return	-2.2%	21.8%	12.5%	2.0%	4.7%	0.6%	6.2%	-2.7%	-1.4%	6.5%	3.4%	-3.9%	43.5%

Perspective on Performance

Model outperforms the benchmark in terms of returns, sharpe ratio and drawdown during out of sample period from 12/30/16 to 1/25/21

Performance Chart

Correlation

Beta

Top Participation Short
DVN	3.15
RRC	2.82
X	2.68
M	2.50
CHKAQ	2.45

Top Participation Long/Short
DVN	3.15
RRC	2.82
X	2.68
M	2.50
CHKAQ	2.45

Top Short Winners
X	1.5%
ENDP	0.9%
MIC	0.9%
WYNN	0.9%
QEP	0.8%

Top Long/Short Winners
X	1.5%
ENDP	0.9%
MIC	0.9%
WYNN	0.9%
QEP	0.8%

Top Short Losers
WLL	-3,549.7%
VER	-26.3%
SPR	-1.1%
ADS	-1.0%
CPRI	-1.0%

Top Long/Short Losers
WLL	-3,549.7%
VER	-26.3%
SPR	-1.1%
ADS	-1.0%
CPRI	-1.0%

Module:	N/A
Date of report:	1/28/21 11:30 AM
Date Range:	12/30/16-1/25/21
Generated by:	NewConstructs Research
Benchmark:	SH

Transaction Cost Modeling:
Leverage
Short Borrowing	0.0%
Slippage Mode	Specify a bps value
Slippage	0 bps

Rebalancing:
Frequency	Every 1 Days
Preferred Day	N/A

EqualAllocator Settings:
Description	Equally Allocates across input universe.
Input Universe	Weight->Univ((1e-08Univ((1e-08
Direction	Long

IgnoreDriftAlloc Settings:
Description	Stops Drift

Transaction Cost:

Commissions ($0.004 per share, $2.95 min per trade)	$39,780
Slippage	$42,111
Borrowing Costs	$0
Total Transaction Costs	$81,891

Transaction Analysis:

Number of Transactions	8,315
Average Trade Hold Days (Weighted)	2.00 (2.49)
% Successful Transactions (Weighted)	47.9% (39.7%)
% Hit Stop Loss	0.8%
% Hit Stop Gain	0.0%
Profit Ratio	1.53

Monthly Performance Metrics:

Days of Outperformance	57.1%
Months of Outperformance	69.4%
Most Consecutive Months of Outperformance	8
Most Consecutive Months of Underperformance	3

Benchmark Relative Metrics:

Beta	0.39
Information Ratio	1.35
Annualized Tracking Error	17.2%

Performance Metrics:

Portfolio	Return	Sharpe	Sortino	Alpha	Ann. Volatilty	Max DrawDown
Fund	31.4%	0.54	0.48	0.51	14.2%	-18.7%
Benchmark	-50.9%	-0.75	-1.04	0.00	20.5%	-50.9%

Portfolio	Initial	Adjusted Final	Adjusted Return	Compound Annual Return
Fund	$1,000K	$1,314K	$314,233	7.0%
Benchmark	$1,000K	$491,301	($508,699)	-16.1%

Performance Metrics By Year

		2017	2018	2019	2020	2021
Return	Strategy	1.5%	15.6%	-2.7%	23.6%	-6.8%
Return	Benchmark	-17.4%	4.9%	-22.1%	-25.1%	-2.9%
Winning Days	Strategy	48.3%	53.7%	42.6%	44.6%	0.0%
Winning Days	Benchmark	43.0%	47.6%	40.9%	42.5%	33.3%
Sharpe	Strategy	0.29	1.16	-0.22	1.07	-6.70
Sharpe	Benchmark	-2.85	0.36	-1.93	-0.67	-3.75
Sortino	Strategy	0.22	0.97	-0.18	1.17	-5.83
Sortino	Benchmark	-4.04	0.61	-3.13	-0.95	-6.33
Max DD	Strategy	-5.1%	-7.4%	-11.2%	-12.8%	-6.8%
Max DD	Benchmark	-17.8%	-12.2%	-24.3%	-44.7%	-4.2%
Alpha	Strategy	0.07	0.13	0.06	0.33	-0.05
Alpha	Benchmark	0.00	0.00	0.00	0.00	0.00
Ann. Volatilty	Strategy	5.7%	13.3%	10.3%	21.9%	16.3%
Ann. Volatilty	Benchmark	6.6%	17.6%	12.5%	34.3%	12.1%
Tracking Error	Strategy	0.5%	0.9%	0.8%	1.7%	1.0%
Tracking Error	Benchmark	0.0%	0.0%	0.0%	0.0%	0.0%

Monthly Return to Benchmark By Year

		Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Total
2017	Strategy	-1.0%	1.3%	-0.8%	2.2%	-2.8%	-1.9%	-0.1%	1.1%	-0.3%	0.3%	1.7%	2.0%	1.5%
	Benchmark	-1.8%	-3.7%	-0.2%	-0.9%	-1.4%	-0.6%	-1.9%	-0.2%	-1.9%	-2.3%	-2.8%	-1.2%	-17.4%
	Relative Return	0.8%	5.0%	-0.7%	3.1%	-1.5%	-1.3%	1.8%	1.3%	1.6%	2.6%	4.5%	3.2%	18.8%

2018	Strategy	-1.1%	7.7%	-1.6%	1.0%	-0.3%	-0.5%	0.4%	1.1%	1.6%	7.0%	-2.0%	1.7%	15.6%
	Benchmark	-5.2%	3.5%	2.5%	-0.3%	-2.2%	-0.4%	-3.4%	-2.9%	-0.3%	7.1%	-1.8%	9.3%	4.9%
	Relative Return	4.1%	4.2%	-4.1%	1.3%	1.9%	-0.0%	3.8%	4.1%	1.8%	-0.1%	-0.2%	-7.6%	10.7%

2019	Strategy	0.0%	0.0%	0.5%	0.0%	2.5%	-4.4%	0.5%	5.8%	-1.4%	0.1%	0.0%	-6.0%	-2.7%
	Benchmark	-7.2%	-2.9%	-1.7%	-3.5%	7.0%	-6.3%	-1.2%	1.6%	-1.7%	-2.0%	-3.4%	-2.6%	-22.1%
	Relative Return	7.2%	2.9%	2.2%	3.5%	-4.4%	1.9%	1.7%	4.3%	0.3%	2.0%	3.4%	-3.3%	19.4%

2020	Strategy	-0.2%	6.4%	27.9%	0.0%	-3.0%	2.0%	-5.0%	-0.6%	0.5%	0.7%	-3.5%	-0.3%	23.6%
	Benchmark	0.2%	8.6%	6.0%	-12.5%	-5.0%	-2.7%	-5.6%	-6.8%	3.3%	2.1%	-10.0%	-3.7%	-25.1%
	Relative Return	-0.4%	-2.2%	21.8%	12.5%	2.0%	4.7%	0.6%	6.2%	-2.7%	-1.4%	6.5%	3.4%	48.7%

2021	Strategy	-6.8%	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	-6.8%
	Benchmark	-2.9%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	-2.9%
	Relative Return	-3.9%	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	-3.9%

Monthly Turnover For Strategy By Year

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Total
2017	133.2%	81.6%	160.7%	158.0%	85.4%	213.8%	128.7%	187.4%	89.2%	188.6%	96.1%	91.8%	1,614.6%
2018	233.6%	69.0%	181.7%	101.2%	39.6%	224.0%	67.6%	147.7%	105.9%	232.0%	335.0%	261.3%	1,998.6%
2019	0.0%	0.0%	186.9%	0.0%	392.7%	100.1%	145.3%	370.3%	142.4%	242.5%	0.0%	252.2%	1,832.4%
2020	153.6%	149.3%	78.3%	0.0%	83.9%	259.7%	84.8%	81.3%	257.3%	215.2%	46.2%	172.0%	1,581.6%
2021	95.1%	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	95.1%

FOR QUALIFIED INSTITUTIONAL INVESTOR USE ONLY. NOT INTENDED FOR INDIVIDUAL RETAIL INVESTORS.

Investment advisory services provided by Neuravest Research Inc., a registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. Nothing presented herein has been approved or verified by the United States Securities and Exchange Commission or by any self regulatory organization (SRO), or state securities authority.

Information presented herein is hypothetical and solely for informational purposes only, and should not be construed as an offer to buy or a solicitation of an offer to sell any security or other investment product. Though we have endeavored to present the information contained herein from sources believed to be reliable, we cannot guarantee the accuracy of such information and make no warranties or representations as such.

All investments involve risks that an investor should fully understand and be willing to bear. Past performance is no guarantee of future returns, and investing can result in partial or complete loss of invested capital. Such risks can be magnified to the extent leverage is deployed in the pursuit of potentially higher returns.

To the extent investment returns are presented, such investment returns are either hypothetically backtested or reflect a perpetual paper trading simulation and are labeled as such. Returns are presented as net returns of transaction costs, slippage and short borrowing costs (when applicable). Investment returns are also net of Neuravest standard annualized management fees of 40 basis points (on Assets Under Management) and 10% performance fee on excess return above an 8% hurdle. Investment returns presented reflect the reinvestment of dividends and other earnings, however they do not account for taxes that an investor may owe as a result of any investment gains. Investors may incur taxes as a result of investing, and may pay different transaction costs to the ones presented to the broker-dealer executing the transactions for their account(s).

Hypothetical backtested returns are simulated, retroactive, and created using the benefit of hindsight to a select period of time, and are thus inherently not as reflective of actual historical returns. Any hypothetical backtested returns are based on the following assumptions and criteria:

Actual price was available for execution
Capacity and daily float was supportive of volume traded.
Transaction cost and slippage are reflective of real-world brokerage fees.

Hypothetical backtested returns do not reflect actual trading and do not reflect the impact that material economic and market factors may have had on Neuravest’s algorithmic decision-making at the time.

To the extent investment performance is compared to one or more indexes, investors should be aware that one cannot invest directly into an index (a simulated basket of securities that do not reflect fees, costs, or taxes that an investor may actually incur).

Neuravest Research and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your personal tax, legal and accounting advisors before engaging in any transaction.

Asset allocation/diversification or hedging does not guarantee a profit or protect against a loss.

Hypothetical backtest results, past performance is not indicative of future returns. Results are net of transactions' cost as well as of subscription fees of 40bps on AUM plus performance fee of 10% on excess return above an 8% hurdle.
Results are effective as of the last day of the backtest.

Performance fees may vary depending upon executed leverage.

NEURAVEST RESEARCH INC (CRD# 312803/SEC#: 801-120607)

	1 Yr	2 Yr	3 Yr	5 Yr	10 Yr
Ann. Return	16.6%	5.9%	9.9%	N/A	N/A
Ann. Volatility	22.4%	17.4%	16.1%	N/A	N/A

Backtest: NC Short Post Earnings Sparse

Backtest: NC Short Post Earnings Sparse

FOR QUALIFIED INSTITUTIONAL INVESTOR USE ONLY. NOT INTENDED FOR INDIVIDUAL RETAIL INVESTORS.

	Strategy Overall	Bench Overall	Strategy TTM	Bench TTM
Abs. Return	31.4%	-50.9%	16.6%	-26.9%
Rel. Return	82.3%	N/A	43.5%	N/A
Beta	0.39	N/A	0.39	N/A
Ann. Volatility	14.2%	20.5%	22.4%	34.4%
Sharpe	0.54	-0.75	0.79	-0.74
Drawdown	-18.7%	-50.9%	-18.7%	-46.3%
IR	1.35	N/A	1.56	N/A
Tracking Error	17.2%	N/A	27.8%	N/A