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New Sabrient Small Cap  Growth UIT Launched

April 14, 2017:  A new Small Cap Growth UIT (FJHCLX), 14th in the series, was launched on  April 12 by First Trust Portfolios.  This UIT invests in top-ranked (at the time of their selection) small-cap stocks that represent a cross-section of industries that Sabrient believes are positioned to perform well in the coming year. The stocks are GARP stocks—stocks that represent "growth at a reasonable price”—and they are meant to be held for the full term of the trust. For a prospectus or fact sheet, please visit First Trust Portfolios.

New Defensive Equity UIT Launched

March 9, 2017:  A new Sabrient Defensive Equity UIT (FSEORX), 11th in the series, was launched by First Trust Portfolios on March 8, 2017. This UIT seeks to find companies that are positioned to perform well in environments of falling stock prices but also those companies that have the potential to provide solid performance in rising markets. The stocks in the portfolio are selected through an investment strategy process developed by Sabrient. For more information, a prospectus, or a fact sheet please visit FirstTrustPortfolios.com.

Brent MillerBy Brent Miller, CFA
President & COO, Gradient Analytics (a Sabrient Systems company)

“Change is the law of life. And those who look only to the past or present are certain to miss the future.” – JFK

When evaluating the earnings quality of a given company, a forensic accounting firm like Gradient Analytics focuses on key indicators that may indicate that a company has taken liberties to cosmetically enhance its financial performance via aggressive revenue recognition and/or the understatement of expenses. Signals that a firm may be engaging in financial gamesmanship include:

  1. Divergence between reported earnings and free cash flow (i.e., an increase in accruals)
  2. Overstatement of assets
  3. Understatement of liabilities
  4. Negative or decelerating organic revenue growth
  5. Persistently widening gap between GAAP and non-GAAP EPS

In this article, I discuss a new amendment to the accounting standards that seeks to reduce inconsistencies and improve standardization of revenue recognition practices.  Read more... Read more about New Accounting Standard Changing Software & Telecom Industries

By Scott Martindale
President, Sabrient Systems LLC

On Tuesday, March 21, the S&P 500 had its first 1%+ down-day of the year, and its first truly significant downward move in five months, falling -1.3% for the day, while the Russell 2000 small caps fell by an ominous -2.7%. For the S&P, it was the culmination of a -2.2% move over a 4-day period before stabilizing for a few days. But for the Dow, Monday of this week was its eighth straight losing day for the first time – its longest losing streak since 2011. The consensus bogeyman of course is the elusive passage of a new healthcare reconciliation bill and the fear that this exposes chinks in President’s Trump’s armor that may foreshadow delays in all his other fiscal stimulus proposals that have been so widely anticipated, and largely priced in. But I suggest focusing on the fundamental economic trends that are still solidly in place and not jump to conclusions about the future of external stimuli, some of which should enjoy broader bipartisan support. Maybe this is why the VIX has held defiantly below the important 15.0 level.

In this periodic update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review Sabrient’s weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable ETF trading ideas. Overall, our sector rankings still look bullish, and the sector rotation model continues to suggest a bullish stance. Read on.... Read more about Sector Detector: Investors remain cautious as Trump meets unexpected obstacles

Scott MartindaleBy Scott Martindale
President, Sabrient Systems LLC

Last week, in the wake of the President’s address to Congress, stocks rallied hard but ran into a brick wall at Dow 21,000, NASDAQ 5,900, and S&P 500 2,400. For the moment, optimism is high due to solid economic and corporate earnings reports along with the expectation that economic skids will soon be greased by business-friendly fiscal policies. But the proof is in the pudding, as the saying goes, and the constant distractions from a laser focus on the Trump agenda are becoming worrisome – not to mention the many uncertainties in Europe, North Korea’s missile launches, and China’s lowered growth projection as it tries to address its high debt build-up. Nevertheless, capital continues to flow into risk assets.

In this periodic update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review Sabrient’s weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable ETF trading ideas. Overall, our sector rankings still look bullish, and the sector rotation model continues to suggest a bullish stance. Read on.... Read more about Sector Detector: Frothy market awaits consolidation and new catalysts

Rachel BradleyBy Rachel Bradley
Analyst, Gradient Analytics LLC

“Trust but verify.” – Ronald Reagan

Before launching an initial public offering ("IPO"), a company must submit extensive disclosures to the Securities & Exchange Commission (SEC) on Form S-1; however, the data listed therein does not include a complete history of financial results while the firm was private. In fact, as a result of the JOBS Act emerging growth companies may now elect to include fewer years of financial history than was previously required.

In an attempt to provide a more comprehensive view of recent IPOs, our analysts perform a deep-dive review of the firm’s prospectus and accounting practices, and compare the firm’s financial data to its close peers to gain a better grasp of the quality and sustainability of its reported earnings.    Read more Read more about IPOs & Forensic Accounting: An Unlikely Match

brent / Tag: IPO, TWLO, NTNX / 0 Comments

By Scott Martindale
President, Sabrient Systems LLC

The year has begun with a continuation of the bullish optimism in equities. The new mood rewarding economically-sensitive market segments began with the big post-election rally – which was partly due to simply removing the election uncertainty and partly due to the “Trump Bump” and an expectation of a more business-friendly environment. Investors are playing a bit of wait-and-see regarding President Trump’s initial executive orders. Last week ended with a strong employment report and an executive order seeking to take the shackles off the banking industry (including dismantling of the Dodd-Frank Act and delay/review of the DOL Fiduciary Rule), which sent the Financial sector surging and led the Dow to close back above 20,000 and the NASDAQ Composite to new record highs, while the S&P500 struggles to breakout above the 2,300 level.

No doubt, the new Administration is shaking things up, as promised…and the left is pushing back hard, as promised. Nevertheless, I believe economic fundamentals are positive with a favorable environment for equities globally – especially fundamentals-based portfolios like Sabrient’s. I also like the prospects for small caps, European, and Japan.

In this periodic update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review Sabrient’s weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable ETF trading ideas. Overall, our sector rankings still look bullish, and the sector rotation model continues to suggest a bullish stance. Read on.... Read more about Sector Detector: Stocks eye new highs as Trump gets busy fulfilling campaign promises

By Byron MacLeod, CFA
Associate Director of Research, Gradient Analytics, LLC

“Whatever you are, be a good one.” – Abraham Lincoln

We at Gradient Analytics are accounting experts. We evaluate companies for earnings sustainability, financial engineering, and accounting mismanagement. Unfortunately, many investors and portfolio managers may be unaware of the variety of levers enabling managers to aggressively recognize revenue, temporarily boost earnings, overstate assets, hide liabilities, or grow through acquisitions. Unaware investors can suddenly find that their supposedly “safe” investments have turned sour on them.

By monitoring the true quality of earnings, it becomes easier to judge a company’s true financial health.

The “Trump Bump” & Rising Correlations

Though the market appears to be recently dominated by Trump’s potential impact on the American economy, earnings quality trends continue to be relevant to stock prices.    Read more Read more about The Trump Bump: An Earnings Quality Analysis

byron / Tag: Donald Trump, IYZ, IYF, IEO, ITA, STI, CMA, QCOM, NRP, FMC, DGI, SPX / 0 Comments

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