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With 2009 winding down and a full year in the books for the current administration, we have provided a breakdown of the best performing stocks since President Obama was sworn in as President on November 4, 2008.

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With 3 Quarters of 2009 now in the books, we thought it would be timely to provide a list of the top 20 performers in the S&P 500 so far this year to give investors an idea of which stocks have been doing well. Along with the list of top 20 performing companies, we have also provided a breakdown of the average return by sector as defined by AFG vs. the entire S&P 500 index to show which sectors have been leading the way. Also by using The Applied Finance Group’s (AFG's) research and valuation model we have provided further analysis on 4 of the top performing companies, 2 that we find attractive going forward and 2 that we find unattractive, based on valuation attractiveness, expected improvement in economic profitability and the overall investment attractiveness, which is based on various criteria AFG uses when identifying long/short opportunities.

Top 20 Performers In S&P 500 YTD (Total Return)

2009 YTD Sector performance (average return %) in S&P 500

 Here are a few companies from the list of top 2009 returns and we view these companies going forward based on valuation, Economic Margin Improvement, and other criteria AFG uses to value securities.

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Now that we are more than halfway through 2009, It is an excellent time to highlight the top performers in the S&P 500 year-to-date and see which companies look the most attractive according to The Applied Finance Group (AFG). AFG’s valuation techniques have proven successful since 1996 at identifying mispriced securities and helping their clients take advantage of those market inefficiencies. Beyond valuation AFG helps clients understand the true economic profitability a company earns by using their Economic Margin methodology.

Economic Margin (EM) corrects distortions caused by traditional accounting policies to give a more accurate assessment of a company's true profitability. It is important to understand the direction a company's EM's are heading because companies expected to improve their Economic Margins have proven to be more likely to outperform than those with EM’s expected to deteriorate. The EM Framework addresses profitability, competition, growth and cost of capital. When factoring in each of these variables, investors can fully assess a company's value.
 

AFG's Buy/Sell criteria factors in Economic Margin, Management Quality, and AFG's Valuation Metric. In order to determine Management Quality, AFG scores management on their growth decisions in accordance with the company’s ability to either create or destroy wealth. AFG's Valuation Metric measures a company's Percent to Target (the deviation between a stock's current trading price and its AFG current default target price). To derive the intrinsic value of a firm, AFG uses its proprietary Valuation Model.

AFG's Valuation Metric – Measures the percent to target (deviation between a stock’s current trading price and its AFG current default target price). To derive the intrinsic value of a firm, AFG uses its proprietary Valuation Model (modified discounted cash flow model).
 

Below is a look at the YTD returns, valuation attractiveness and sales growth expectations of the two biggest and smallest companies in each sector within the S&P 500 (excluding financials). This link provides some insight into Applied Finance Group’s (AFG’s) valuation techniques. Also compare the expectations for sales growth to what the companies have delivered historically to see which stocks on this list are most likely to meet or exceed those expectations, and thus be more likely to out-perform.

 Biggest/Smallest Companies (Mkt Cap) By Sector S&P 500 (excluding financials)

*AFG’s Value Expectation allows us to understand the imbedded Sales Growth, EBITDA Margins, and Asset Turnovers a company has to deliver in the future to justify its current trading price. In theory and in normal circumstances, if the imbedded future performance is very conservative relative to the company’s historical performance, the stock is regarded as undervalued. The table displays the implied future sales growth of companies assuming their EBITDA margins and Asset turnovers stay at the 5 year median levels.