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In recent weeks we have written several blogs (S&P 500 sector stock watch, Attractive stocks under $35, with potential investment opportunities, Solid S&P Value Companies, Cheapest Stocks In the S&P 500), discussing investment opportunities within the S&P 500. These stocks ideas all had favorable scores under The Applied Finance Group's (AFG’s) investment criteria, which includes economic performance, valuation, earnings quality and management’s ability to create shareholder wealth, among other criteria.

Another way that AFG identifies potentially attractive investments is through the use of its Value Expectations interface, which helps investors get a better understanding of the expectations embedded into stock prices. This interface allows us to understand the Sales Growth, EBITDA Margin, and Asset Turnover 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 below displays the implied future Sales Growth (“Priced-in Sales Growth) of the companies we have recently recommended in our recent blogs, assuming their EBITDA Margins and Asset Turnovers stay at 5-year median levels.

For those Valueexpectations.com readers who consider themselves value oriented investors, we have provided a good starting list of solid value companies that look attractive as potential investment opportunities for the long term. This list is a good place to start when looking for potential companies to add to your portfolio. The Applied Finance Group (AFG) considers companies with a Market Value/Invested Capital (MV/IC) in the bottom half of the universe as value companies.

To come to our list of attractive potential value plays, We ran those companies in the bottom half of MV/IC through AFG’s buy criteria that includes Economic Margin (How profitable they are), Valuation, Management Quality (how well management is running the business) as well as other quality checks to ensure that these companies are the most likely value companies to outperform. All 10 of these companies ranked above their sector peers in expected improvement of Economic Margins and in valuation attractiveness which has proven to be a good starting point when looking to identify companies likely to outperform their benchmark.

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).

Economic Margin - A corporate performance measurement that addresses the gaps in GAAP, eliminating distortions caused by accounting policies to measure what a company is truly earning above or below their cost of capital.

Management Quality – Assesses management’s ability to make wealth creating decisions.

The Consumer Confidence Index jumped higher in August than was expected and is at its highest point since the current recession began. The Consumer Confidence Index rose to 51.4 which beat expectations yet is still way below 90, the minimum level to indicate a healthy economy, but the confidence level is headed in the right direction. Being that consumers seem to be gaining confidence in an economic recovery, some consumer stocks may be returning to the forefront of some investor’s minds so we decided to put together a list of attractive consumer companies from the S&P 500.

All of the companies listed have an attractive valuation and are expected to improve their Economic Margins at a greater rate than their sector peers. All of these companies are also rated as attractive according to AFG’s default investment criteria which factors in valuation, economic performance and management quality.

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).

Economic Margin - A corporate performance measurement that addresses the gaps in GAAP, eliminating distortions caused by accounting policies to measure what a company is truly earning above or below their cost of capital.

Management Quality – Assesses management’s ability to make wealth creating decisions.

In yesterdays article we provided an update of the performance of our annual HOT STOCK LIST:

We also provided an update of the performance of the Toreador Large Cap Fund, TORLX which uses AFG’s Economic Margin Framework as part of its investment philosophy.

As you may note, both have done very well!

Today we decided to provide a Buy/Sell list to VE’s registered visitors applying some of these same investment principles: Economic Margin, Management Quality, and a company's Percent to Target (the deviation between a stock's current trading price and its current default target price according to AFG).

Below is a preview of the list which includes a Buy/Sell Recommendation on each Stock. The complete list, accessible to Value Expectations registered users, contains around 500 Stocks.

Source: The Applied FInance Group

To download the complete list click here.

As 2009 approached, USA Today’s market experts gave us their insights/predictions on what they thought would happen in the upcoming year. Even as the world has changed dramatically since this list was released in December 2008, these “guru’s” picks are worthy of some attention to see how their predictions did against the overall Russell 1000 index so far this year. We ran their list through Applied Finance Group’s (AFG’s) set of screens that identify potential investment opportunities to see which companies they recommended met AFG’s criteria. Below is each expert’s picks and performance along with the performance of the Russell 1000 to benchmark against. The 6 companies highlighted (TAP, CSCO, WMT, PG, ABT, JPM) were the companies that met AFG's Buy Criteria (described below) for a potential investment opportunity and the rest failed to make the grade.

USA Today's Investment Pros - Picks For 2009

USA Today's Investment Pros Picks Vs. Russell 1000 - December 12, 2008 to March 17, 2009

A brief description of The Applied Finance Group's Buy Criteria variables is below:

Economic Margin - A corporate performance measurement that addresses the gaps in GAAP, eliminating distortions caused by accounting policies to measure what a company is truly earning above or below their cost of capital.

Valuation Model – Using AFG’s modified discounted cash flow model to measure the intrinsic value of a firm compared to it's peers.

Management Quality – Assess management’s ability to make wealth creating decisions.

Related: Read our Economic Margin white paper which was published in the book: Value-Based Metrics: Foundations and Practice Edited by: Frank J. Fabozzi and James L. Grant Pages 157 – 178: Click Here