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As the first 100 days of the new administration have come and gone, portfolio managers and analysts are searching through the market to see which stocks, industries, and sectors will gain from new policy and which ones are potential torpedoes in their portfolio. In AFG’s Monthly Market Review we have highlighted some of the focus of the new administration and how it can affect decisions as an investor, and we continue to search through the market in the hope of identifying which companies warrant their performance and which ones look to be unattractive from a valuation standpoint. The companies within the Financial sector have moved for reasons other than valuation, and will not be evaluated from a valuation perspective but it is interesting to see which companies have done the best and worst given the recent market shift.

Below is a comparison of the performance of the market with the last four presidents - we understand that each president walked into a different economic environment, but it is interesting to see how each one faired their first 100 days. The key will be how the market does over the long haul, especially given the significant policy changes and challenges the markets face over the course of the next year.

S&P 500 Reactions to Obama's First 100 Days

Event Key Of Obama's First 100 Days

How Obama's First 100 Days Compare to Last 3 U.S. President's (S&P 500)

S&P 500 Companies With Best/Worst Returns During Obama's First 100 Days

Valuation Attractiveness of Top/Bottom 10 Companies in Obama's First 100 Days (Ex. Financials)

Valuation Model – Using AFG’s modified discounted cash flow model to measure the intrinsic value of a firm compared to its peers. AFG's Value Score - A score which represents the ranked percent to target (deviation between stock’s current trading price and AFG’s current default target price) or attractiveness (upside) relative to the universe. A Value Score of 100 is the most undervalued and 0 is the most overvalued company in the universe.

Economic Margin is a measure of economic profitability that identifies how much a company earns above or below its cost of capital. We analyzed all companies in the S&P500 Index based on their historical, current and forecasted Economic Margins to see which firms have the best average of past, present and future profitability. We identified the two most profitable and the two least profitable companies from each sector and have presented them in the table below. As a base of reference, the average firm in corporate America earns a 0 (zero) Economic Margin, or is a “break-even business”. Our research has shown that companies with consistently positive EMs that are also expected to increase their EMs in the future tend to outperfom firms with negative or declining EMs.
<!--[if gte mso 10]> Economic Margin is a corporate performance measure, which helps us identify well managed, wealth creating companies. Although not included in this post, we want to remind you that it is also important to understand the attractiveness of corporations' valuations to make sure we invest in great companies at great prices. (Here is an article by ValueExpectations.com explaining Applied Finance Group’s basic valuation concepts).

Note: Only companies in the S&P 500 were included.

S&P 500 Companies With The Best/Worst Average Profitability (Economic Margin)

Economic Margin (EM) Defined: A measure of corporate performance that captures off balance sheet items, by looking at how much a company is earning above or below their cost of capital. EM is expressed in a % or margin. The Economic Margin Framework™ is more than just a performance metric as it encompasses a valuation system that explicitly addresses the four main drivers of enterprise value: profitability, competition, growth and cost of capital. more EM details (PDF)

One would think that $3 million is too much to pay for a 30 second commercial for the Super Bowl, but maybe not when considering the correlation between the likeability of a company’s super bowl ads and its stock price. Companies that run well-liked commercials have performed relatively well in recent years as investors respond by driving up their share prices not just for the day after the Super Bowl, but for weeks thereafter.

Kenneth Kim, an Assoc. Professor of Finance from the University of Buffalo, studied 102 publicly traded companies that ran 529 commercials in the last 17 Super Bowls, and although the majority of those firms saw a boost after gameday, the companies that saw the biggest boost were the ones with the most liked ads according to USA Today's Ad Meter.

These commercials bring companies into the conscious of consumers as well as investors, and the most liked commercials appear to have had the best effect on the advertising company’s stock performance. From 1996-2007 Super Bowl advertising companies outperformed the S&P 500 by 1.3% and 10 out of the last 12 years.

Let’s take a look at the companies that ran commercials during the 2009 Super Bowl and the implied sales growth expectations priced-in to their stocks. The more realistic the expectations for the implied sales growth are, compared to what the company has delivered historically in sales growth, will give you an idea of which firms are most likely to meet or exceed those expectations. The more realistic the expectations the more likely the company is to out-perform.We will keep an eye out for these stocks short-term to see if any boost in stock performance was realized within the post Super Bowl week.

Company's That Advertised During the Super Bowl with Each Companies Sales Expectations

 ** denotes Sales information gathered from AFG Global Database.

And the best Super Bowl commercial according to USA Today Ad Meter is....

Click Here to view the best Super Bowl Ad of 2009

For the past 26 years Steven Halpern, editor of thestockadvisors.com has gone to well known and respected advisors once a year to find out which stocks they like for the coming year. Take a look at the list of stocks advisors liked in 2008 and their performance. Also listed are the picks of 75 prominent advisors for 2009 along with sales growth expectations for the companies to justify their current price (VE Sales Growth) which can be compared to what they have delivered in revenue growth over the past 5 years(5 Year Median Sales Growth). These companies are worth a look because they are in favor of well-respected advisors, but the companies that also have low expectations for sales growth priced-in to their stock are especially worthy of a close review.

2008 Blogger Picks Conservative and 2008 Performance

2008 Blogger Picks Speculative and 2008 Performance

Blogger Picks for 2009 and Sales Expectations

* denotes # of years historical sales numbers available

VE Sales Growth calculated for these firms on 1-6-09