Every June, The Applied Finance Group (AFG) hosts its annual conference in Las Vegas to help its clients improve their understanding of AFG’s methodology and valuation framework. Putting these concepts into practice, AFG also provides several actionable Buy ideas that clients can add to their portfolio, upon returning to their office. One of the most popular sessions during the conference is called “Hot Stocks”- a time when AFG analysts give detailed analysis of several stocks that are currently of great interest to the investment community.
Since its release on June 12, 2009, the “Hot Stocks” portfolio has outperformed the Russell 1000 by 5.85%. Below is a look at the four Buy recommendations within the “Hot Stocks” portfolio, and their performances as of August 13th 2009. Also provided below is the performance of the Russell 1000 index during the same time period.
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Additionally Toreador's Large Cap Fund (TORLX) which uses AFG's Economic Margin Framework as part of its investment philosophy has recently crossed it's 3 year track record threshold, Click here to view TORLX performance.
A brief description of AFG's buy criteria variables:
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.
AFG's Value Universe - Companies in the AFG universe, which have MV/IC at the bottom 50% of the universe and have EPS estimates.