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Most Reliable Russell 1000 Stocks – Including Hewlett-Packard Co. (NYSE:HPQ) and Medco Health Solutions (NYSE:MHS)
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High Value Score Stocks – Including Pfizer Inc. (NYSE:PFE) and Gamestop Corp. (NYSE:GME)
When narrowing the market to a focus group of stocks to choose from, The Applied Finance Group (AFG) has a core set of principles we concentrate on to develop a group of stocks that are more likely to outperform the market.
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Attractive Technology Stocks - Including Microsoft Corp. (NASDAQ:MSFT) and Hewlett-Packard Co. (NYSE:HPQ)
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Best Stocks Since Obama’s Election – Including Freeport-McMoran C & G (NYSE:FCX) Cognizant Tech (NASDAQ:CTSH)
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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Sales Growth Expectations of S&P 500’s Top Performers – Including Cognizant Tech Sol. (NASDAQ:CTSH)
Using The Applied Finance Group's (AFG's) Value Expectations interface we have provided an analysis of the expectations embedded in the stock prices of some of the top performers in the S&P 500 year to date (excluding financials) to see which companies have the lowest expectations for sales growth (VE Sales Growth) relative to what the company has been able to deliver historically (5 Year Median Sales Growth).
AFG’s Value Expectations interface provides clients a platform to better understand economic profitability, and at the same time understand the performance a company must deliver to justify its current stock price. By understanding the embedded expectations a company must deliver to justify their current trading price, clients can develop a “hurdle rate” to quickly determine if the company’s expectations are rich or low. Take, for example, the typical company during the tech bubble: the expectations that were priced into the average tech stock far exceeded what it could realistically deliver. For this reason, AFG identified the technology sector as overvalued, as well as potential torpedoes such as Cisco, whose expectations were unrealistically high.
By gaining a better understanding of the embedded expectations built in to security prices, relative to what a company has delivered historically, can provide insight into the Sales Growth, EBITDA Margin, and Asset Turnover a company must deliver in the future to justify its current trading price. In many circumstances, if the imbedded future performance is very conservative relative to the company’s historical performance, the stock is regarded as undervalued.
The top performers of the S&P 500 listed below are ranked based on valuation attractiveness using The Applied Finance Group’s valuation model. You would like to look for companies with attractive valuations and modest expectations for revenue growth relative to what the company has been able to achieve over the past five years when looking for potential investment opportunities as these types of companies have proven through time to outperform firms with the opposite characteristics.
If you would like to view some of the favorite long and short investment ideas provided by professional investors click here to view the results for AFG's Market Forecast Project.
Sales Growth Expectations of S&P 500 Top Performers of 2009
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Source: EconomicMargin.com
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.
To stay updated on how other professional investor's currently view the market join our Market Forecast Project survey and be among the first to receive the results.
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Top S&P 500 YTD Returns – Which Companies/Sectors Have Performed Best So Far - Including Nordstrom Inc. (NYSE:JWN)
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)
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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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To stay updated on how other professional investor's currently view the market join our Market Forecast Project survey and be among the first to receive the results.
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S&P 500 - YTD Returns by Sector
Below is a chart and table outlining the 2009 year to date performance of the sectors within the S&P 500. The Technology sector has lead the way thus-far while Utilities and Financials have been dragging down the overall average of the index. As previously reported in our Market Forecast Project, Technology was also voted most attractive sector according to our survery of professional investors. These sectors are based on the sector classification created by The Applied Finance Group.
Source(The Applied Finance Group)
Source(The Applied Finance Group)
| Ticker | Name | Sector | Attractiveness | Valuation | EM Change |
| Attractive Technology Companies - S&P 500 | |||||
| HRS | HARRIS CORP | Technology | Attractive | Attractive | Positive |
| IBM | INTERNAT BUSINESS MACHNS | Technology | Attractive | Attractive | Positive |
| ORCL | ORACLE CORP | Technology | Attractive | Attractive | Positive |
| WDC | WESTERN DIGITAL CORP | Technology | Attractive | Attractive | Negative |
| HPQ | HEWLETT-PACKARD CO | Technology | Attractive | Attractive | Negative |
| Unattractive Technology Companies - S&P 500 | |||||
| AMAT | APPLIED MATERIALS INC | Technology | Unattractive | Unattractive | Negative |
| JDSU | JDS UNIPHASE CORP | Technology | Unattractive | Unattractive | Negative |
| KLAC | KLA-TENCOR CORP | Technology | Unattractive | Unattractive | Negative |
| MU | MICRON TECHNOLOGY INC | Technology | Unattractive | Unattractive | Negative |
| CIEN | CIENA CORP | Technology | Unattractive | Unattractive | Negative |
Source(The Applied Finance Group)
*Valuation & EM Change are Ranks within their sector
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.
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Professional Investors Vote For Technology
What is the most attractive sector? That's one of the questions we asked a group of professional investors in our Market Forecast Project. The answer varied from person to person, but there was a general consensus. The majority was in favor of Technology, which pulled away by far with 41 of a possible 98 first place votes. Survey participants were asked to rank a list of sectors from 1-11 in order of how attractive they found that sector to be over the next 12 months. Technology ranked highest with an average ranking of 2.7, well ahead of the rest; Basic Material placed second with an average rank of 4.8. We've put together a list below of both attractive and unattractive companies within the Technology sector. It may be worthwhile to take a closer look at the companies listed. If the insight provided by the survey’s investment professionals holds true, you could be among those who outperform the market.
Market Forecast Sector Ranking Results
15. Rank Order, which sector seems most attractive to you over the next 12 months?
(1 = Most attractive)
Results Have Been Ranked by Most Attractive
1 Technology
2 Basic material
3 Energy & extraction
4 Health
5 Capital goods
6 Consumer non-durable
7 Financials
8 Consumer services
9 Consumer durable
10 Transportation
11 Utilities
10 Attractive Technology Stocks
10 Unattractive Technology Stocks
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).
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S&P 500 Top 10 Returns 2009 YTD
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).
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