July 2010 Home Run Index Constituents And Performance Update

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ValueExpectations.com - Home Run Index (July, 2010)

Value Expectations blog presents the 4th issue of the Home Run Index (HRI) – a buy list that will be updated monthly to contain some of the best ideas from our quantitative research.

For the month of June, the Home Run Index returned to form as the Russell 1000 HRI list was mostly even with its Russell benchmark, slightly underperforming by -0.1%, and the Russell 2000 HRI again outperformed its Russell benchmark by 1.5%.

The chart below displays the performance of the HRI from last month. Also listed below you will find the factors taken into account that make up a Home Run Index company as well as a breakdown of the historical performance of the HRI. To view the list of constituents for July, 2010 please follow the instructions below.

To access the new list of Home Run Index constituents in a PDF file:

1. You must be registered for www.ValueExpectations.com. If you are not registered Click Here to join for Free!

2. Send an email to mghioldi@afgltd.com with Home Run in the subject line.

Once you are registered and send an email, I will email you the PDF file containing the new list of Home Run Index companies.

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What is a Home Run Index Stock?

AFG’s research has identified five factors that consistently identify stocks likely to deliver significant short term over and under performance. Our Home Run Index recommendations rate highly across each of these factors.

Valuation: Identifies companies trading at significant discount to AFG’s intrinsic value estimate.

Momentum: Identifies companies with positive Economic Margin Momentum over a three-month window.

Earnings Quality: Identifies companies with strong relationships between their cash flows and net income, based on changes in Net Operating Assets, and avoids companies with high accruals.

Management Quality: Identifies whether corporate management teams are pursuing strategies that create or destroy value.

Price Characteristics: In most markets, we look for stock candidates that exhibit certain traits related to their share price and moving average relationship, but in periods of high market turbulence, we will ignore these metrics until markets recover.

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Historical Performance:

The Home Run Index has outperformed the Russell 3000 by 15.0% annually since 9/98, with a monthly outperformance batting average of 66.7%. On average, roughly 103 companies are included in the portfolio each month, with 39 from the Russell 1000 and 64 from the Russell 2000.

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