Evaluating S&P 500's Top Ten CEOs

The Applied Finance Group (AFG) is an independent equity research provider that has partnered with CEO Magazine in recent years to give investors insight into which CEOs do the best job of creating value for its shareholders; after all, that is what they are hired for.

The AFG/CEO Wealth Creation Index, which relies upon AFG’s corporate performance metric Economic Margin (EM), provides a better understanding of wealth creation than traditional accounting measures such as EPS and ROC. The link below will take you to the complete list of rankings of CEOs from S&P 500 companies that have held their current position for at least 3 years, based on their wealth creation abilities. Topping the rankings in 2009 is MasterCard’s (MA) Robert W. Selander, up from third place last year. Both Selander and runner-up Federated Investors’ (FII) J. Christopher Donahue run very high EM companies (24.5 percent and 20.6 percent three-year averages, respectively). Interestingly, both have been able to improve in a bad economy.

As a further layer of analysis, we have taken the companies of the top 10 CEOs and ranked them based on Valuation Attractiveness to give insights into which companies on the list look the most attractive as potential investment opportunities. Even good companies with strong leadership do not always make good investments, because it depends on what you pay for them. The companies on the list that look unattractive from a valuation standpoint are the companies we recommend reviewing in greater detail before you consider adding to any portfolio.

Since 1996, through back-tests and model portfolio results, AFG has proven to be successful at identifying winners and losers in the market by utilizing its Economic Margin methodology (understanding a company’s true economic profitability), and valuation techniques as seen in the Buy/Sell spread (provided below).

Rank within Sector Ticker Name Sector Valuation Signal Top 10 S&P 500 CEO's (NYSE:MA) MASTERCARD INC CL A Consumer Services Attractive (NASDAQ:GILD) GILEAD SCIENCES INC Health Attractive (NYSE:STZ) CONSTELLATION BRANDS INC Consumer Non Durable Attractive (NYSE:LO) LORILLARD INC Consumer Non Durable Attractive (NYSE:MON) MONSANTO CO Basic Material Fair (NASDAQ:CHRW) C.H. ROBINSON WORLDWIDE Transportation Fair (NASDAQ:MSFT) MICROSOFT CORP Technology Fair (NYSE:FII) FEDERATED INVESTORS B Financials Unattractive (NASDAQ:AMZN) AMAZON.COM INC Consumer Services Unattractive (NYSE:ECL) ECOLAB INC Consumer Non Durable Unattractive

AFG Recommendation Performance
9/1998 – 5/2009
Annualized Returns

Source: AFGView client databases from 9/1998 – 5/2009
Universe size: 4,000 to 5,500 firms

Comments

[granger:]

great article and info, thank you, keep it coming

Nov 12 03:31 PM