Cheapest S&P 500 Stocks

To identify potentially attractive investment ideas, The Applied Finance Group (AFG) uses a combination of proprietary variables including valuation, economic performance, management quality, and Earnings Quality. In December of 2008, ValueExpectations.com released a list of companies sorted only by AFG’s Value Score (defined below). Our valuation techniques have proven successful at identifying mispriced securities, which has helped our clients select stocks that outperform their chosen benchmark.

The ValueExpectations.com blog posted in December 2008 (High Value Score Stocks - S&P 500), contained these high Value Score companies (Dillard's (DDS), Sprint (S), National Oilwell Varco (NOV), Manitowoc (MTW), Smith International (SII), MEMC Electronic Materials (WFR), Chesapeake Energy (CHK)), and outperformed the S&P 500 by 40% as of our 3-26-09 performance update. We recently checked the average performance of those picks through 8-27-2009 to find that they have returned an astounding 52% above the S&P 500, with 6 of the 7 companies outperforming. High Value Score Stocks Part 2, released on 5-7-09 has also outperformed the S&P 500 by nearly 3% since its release, with a batting average of just over 60%.

Due to the success of the first two “High Value Score” blogs, we again used valuation as a basis for selecting a new set of investment ideas. Listed below are the top 10 companies in the S&P 500 (excluding Financials) based on AFG Value Score alone. These companies look the most attractive from a valuation perspective relative to the rest of the index.

Exchange/Ticker Name Sector Valuation Attractiveness (NASDAQ:CEPH) CEPHALON INC Health Very Attractive (NYSE:PM) PHILIP MORRIS INTL INC Consumer Non Durable Very Attractive (NYSE:DNB) DUN & BRADSTREET CORP Consumer Services Very Attractive (NYSE:S) SPRINT NEXTEL CORP Technology Very Attractive (NYSE:FIS) FIDELITY NATIONAL INFO Consumer Services Very Attractive (NASDAQ:APOL) APOLLO GROUP INC CL A Miscellaneous Very Attractive (NYSE:AES) AES CORP THE Utilities Very Attractive (NYSE:AZO) AUTOZONE INC Consumer Services Very Attractive (NYSE:TSO) TESORO CORPORATION Energy and Extraction Very Attractive (NYSE:TMO) THERMO FISHER SCIENTIFIC Health Very Attractive

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).

Comments

[dancing diva:]

Interesting names. Thanks.

Aug 30 08:57 AM

[herbert hoover:]

TSO?????????? Good luck with that one. Who wants to own a petroleum refiner with demand tanking and price volatility rising. I'd buy T-bills before I bought that dog (and no, I would never buy T-bills).

Aug 30 09:15 AM

[Old Trader:]

herbert hoover,

Actually, refiners can (note that I said "can") be an attractive investment when oil prices drop, since their margins can expand (the crack spread), if oil (input cost) drops faster than distillate prices (out price).


On Aug 30 09:15 AM herbert hoover wrote:

> TSO?????????? Good luck with that one. Who wants to own a petroleum
> refiner with demand tanking and price volatility rising. I'd buy
> T-bills before I bought that dog (and no, I would never buy T-bills).

Aug 31 11:16 AM

[oldman:]

would be interesting to know if any pay dividends. I'd be interested in the top 10 cheapest stocks with highest dividends

Aug 31 11:29 AM

[Old Trader:]

oldman,

Be careful chasing yield....as someone once said, "more money has been lost chasing yield than has been lost at the point of a gun".


On Aug 31 11:29 AM oldman wrote:

> would be interesting to know if any pay dividends. I'd be interested
> in the top 10 cheapest stocks with highest dividends

Aug 31 12:04 PM

[bobbobwhite:]

Although in the short term valuations of specific stocks may be lower or higher than logic would indicate, and we should always seek to take advantage of that disparity to buy or sell, but in the long run a down stock is usually down for a good reason and most often is not a prudent buy.

Sep 01 01:46 PM

[Chickenpookie:]

Old Trader,
I find your logic quite respectable, thank you for your comments.

Sep 04 11:32 PM