Stock Insights

A list of the 25 top performing stocks of 2010 (ex. Financials) from within the S&P 500 index. We have taken the top 25 companies from 2010 and provided our readers 3 attractive and 5 unattractive stocks from this list based on their valuation attractiveness relative to sector peers and overall investment opportunity using key criteria that The Applied Finance Group (AFG) uses in its stock selection process including corporate performance, management quality and earnings quality to see which of the top performers still look to have upside and which look like they have run out of room to run.

This past Saturday, Warren Buffett released Berkshire Hathaway’s 2009 annual report and his annual letter to Berkshire shareholders.* The last Friday in February has become like Christmas Eve for value investors the world over. A night of tossing and turning is followed by a mad rush to the computer to download the latest version at 8am on Saturday morning. And then, maybe 30 minutes later, melancholy as we all realize that Mr. Buffett won’t write to us again for 365 days. As admirers of Mr. Buffett, frequent shareholders, and practitioners of the “value” approach to investing, you could count us among the sleep deprived on February 27th.

The 25 most actively traded stocks in the S&P 500 based on trading volume, ranked by valuation and investment opportunity attractiveness. These companies seem to garner the most attention from within the investment community, so we decided to add our insights into which of these firms look attractive and worthy of the hype and which you may want to avoid.

The example we have provided is Texas Instruments Inc. (NYSE:TXN) a company that currently looks undervalued according to AFG’s default valuation model. An important fact to note is that AFG has shown it tracks Texas Instruments Inc. (NYSE:TXN) well (high accuracy score of 100). Also, Texas Instruments has a current AFG Value Score of 82, meaning the company ranks in the top 82nd percentile of companies in the AFG universe in valuation attractiveness. Companies AFG identifies as undervalued have proven through back-tests to be more likely to outperform than those companies with an unattractive default AFG valuation rank.

The Applied Finance Group (AFG), an independent equity research firm, would like to invite professional investors/money managers to participate in AFG’s Market Forecast Project (MFP). The MFP is a professional investor sentiment survey designed to help money managers make more informed investment decisions, enhance client communication and provide an edge in the portfolio construction process. The main focus of the MFP is to provide participants investment ideas, macro-economic sentiment and stock market predictions of a large and diverse group of investment professionals to see how other professional money managers in the industry view the market.

Coca-Cola Co (KO) announced its acquisition of the North America operations of its top bottler, Coca-Cola Enterprises Inc (CCE) at a value totaling approximately $12.2 billion, by assuming $8.8 billion of CCE debt and relinquishing its 34% equity ownership in CCE, valued at $3.4 billion. This acquisition, which is expected to close in the 4th quarter of 2010, is largely viewed as a strategic reversal to close a competitive gap after a similar deal by Pepsi Co, which just completed the purchases of its largest bottlers, Pepsi Bottling Group Inc (PBG) and PepsiAmericas Inc (PAS). In a concurrent agreement, CCE also agrees to buy Coke’s bottling operations in Norway and Sweden for $822 million. CCE will also have the right to acquire Coke’s 83% equity stake in its German bottling operations 18 to 36 months after closing for fair value.

A focus list of buys and sells for our readers to use as a starting point when looking to make changes to portfolio. This list contains attractive and unattractive stocks from every major sector excluding financials. AFG's buy and sell lists have proven through time to provide a significant spread between the buys and sells helping you to identify winners and avoid potential torpedoes.

James Glassman of MSN Money provided a list of the 25 best performing stocks of the past decade and says the list is a good starting point when looking for the best stocks of the next decade because of their solid past performance. Although ValueExpectations does not share the same sentiment regarding past performance, we set out to analyze the top performing stocks of the last 10 year to determine which companies are most likely to continue their impressive run.

An analysis of the expectations for sales growth embedded in the stock prices of every S&P 500 company needed to justify the current price. Sector averages of embedded expectations relative to 5 year median historical sales growth gives valuable insight into which sectors look the most undervalued and have the most realistic expectations compared to what they have been able to deliver in the past. The more realistic the expectations, the more likely it will be to meet or exceed those expectations.

When managing clients' money, it is just as important for professional investors to be able to avoid potential torpedoes in the market, as it is to discover the next attractive investment opportunity poised to hit a return home run. The Applied Finance Group (AFG) has proven through its Buy-Sell list returns that it does a good job of both identifying winners in the market as well as avoiding potential torpedoes. Since 1996, AFG Buy-Sell lists have provided clients a consistent spread between its buy and sell recommendations, with the buys outperforming benchmarks by roughly 10% on an annualized basis and the sells underperforming by roughly 10%. Since ValueExpectations.com spends a sufficient amount of time providing its readers with attractive investment opportunities, which have outperformed over 57% of the time, it is now time to help our readers identify a few small and large cap stocks that rank poorly according to key AFG criteria, including Management Quality (MQ), Earnings Quality (EQ) and Valuation Rank.

From November 26, 2008 to November 9, 2009 ValueExpectations.com released 63 blogs containing lists of stocks that we identified as attractive investment opportunities. The chart below is a list of those 63 blogs with an update of their performance relative to benchmarks. The stock lists that we have provided to our readers have experienced an average of 15.58% outperformance relative to the performance of the benchmark associated with each particular list along with an overall batting average of 57.8% from all of our recommendations combined.

Today we will focus on the Capital Goods sector and provide readers with a few names we like as well as a couple that we don’t in terms of investment attractiveness from within this sector. We will also take a look AFG’s Management Quality Chart to help us better understand each of these companies from a corporate performance and strategic standpoint. Lastly, using snapshots from www.afgview.com (AFG’s web-based research platform), we will take an in-depth look at Fluor Corp.

A list of the favorite long and short equity ideas from professional money managers who participate in AFG's Market Forecast Project (MFP) survey. The MFP survey is designed to keep investors updated on events that will affect the markets and economy, provide insight into how peers currently view the market, and enhance communication with clients by becoming more well rounded and knowledgeable about different aspects of the market. The list below contains MFP participants favorite investment ideas. The companies highlighted in grey are companies that were recommended as both a long and a short idea and the far right column denotes a company that was recommended more than once.

Twice in 2009, ValueExpectations.com highlighted “Fidelity’s Low Priced Stock Fund”, an investment strategy that has been employed since 1989 by fund manager Joel Tillinghast. The theory behind this “low-price” strategy is that stocks within the small cap space tend to experience the most frequent mis-pricings and have the least amount of analyst coverage. Mr. Tillinghast created this strategy to take advantage of the numerous inefficiencies in small caps. They started out as a strategy to invest in stocks trading below $10; that limit has since been raised to $35 to widen the pool of investable stocks. Since the prior 2 stock lists that we previously provided have outperformed, we will once again provide our readers a list of 30 attractive stocks under $35.

It’s that time of the year again … a time when most people indulge in expressions of love and affection for others. While some are in, or looking to be in, long-term relationships, others are looking for short-term romance. Similarly, some investors look for long-term investment opportunities, while others look for short-term gains. This blog will look at the medical device industry to find companies that have exposure to heart-related products and are making good strategic decisions. We wrote previously about how important it is to understand Management Quality with two important variables: Economic Management and Asset Growth. The Management Quality Quadrant below looks at a few companies that market their medical devices to treat irregular heartbeats, repair heart valves, and otherwise help patients with serious heart conditions.