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Today we will highlight the top performers in the S&P 500 year-to-date (ex. Financials) as well as provide a few company names that look the most attractive and unattractive according to The Applied Finance Group [AFG]. AFG’s valuation techniques have proven successful since 1996 at identifying mispriced securities and helping their clients take advantage of those market inefficiencies. Beyond valuation AFG helps clients understand the true economic profitability a company earns by using their Economic Margin methodology.

Economic Margin [EM] corrects distortions caused by traditional accounting policies to give a more accurate assessment of a company's true profitability. It is important to understand the direction a company's EMs are heading because companies expected to improve their Economic Margins have proven to be more likely to outperform than those with EMs expected to deteriorate. The EM Framework addresses profitability, competition, growth and cost of capital. When factoring in each of these variables, investors can fully assess a company's value.

We are providing a list of the top 25 performing stocks in the S&P 500 index to keep up to date on which companies have led the way thus far in 2010. Also by using AFG's research and valuation model we have provided further analysis on 8 of the top performing companies, 3 that we find attractive going forward and 5 that we find unattractive, based on valuation attractiveness, expected improvement in economic profitability and the overall investment attractiveness, which is based on various criteria AFG uses when identifying long / short opportunities.

Ticker Name Sector YTD Return
S&P 500 YTD Top Performers (ex. Financials)
(NYSE:SII) SMITH INTERNATIONAL INC Capital Goods 60.1%
(NYSE:MIL) MILLIPORE CORP Capital Goods 45.2%
(NYSE:TSN) TYSON FOODS INC Consumer Non Durable 43.9%
(NYSE:EK) EASTMAN KODAK CO Consumer Durable 41.0%
(NASDAQ:NOVL) NOVELL INC Technology 40.0%
(NASDAQ:JDSU) JDS UNIPHASE CORP Technology 37.5%
(NYSE:ARG) AIRGAS INC Basic Material 36.1%
(NYSE:LEN) LENNAR CORP CL A Capital Goods 35.0%
(NYSE:LXK) LEXMARK INTERNATIONAL Technology 33.1%
(NYSE:CMI) CUMMINS INC Capital Goods 31.3%
(NASDAQ:WFMI) WHOLE FOODS MARKET INC Consumer Services 30.7%
(NYSE:CLF) CLIFFS NATURAL RESOURCES Energy and Extraction 30.7%
(NYSE:F) FORD MOTOR CO Consumer Durable 29.3%
(NYSE:EL) ESTEE LAUDER CO INC THE Consumer Non Durable 28.9%
(NYSE:FDO) FAMILY DOLLAR STORES INC Consumer Services 27.8%
(NYSE:SVU) SUPERVALU Consumer Services 27.8%
(NASDAQ:TLAB) TELLABS INC Technology 26.8%
(NYSE:M) MACY'S INC Consumer Services 25.5%
(NYSE:ANF) ABERCROMBIE & FITCH CO Consumer Services 25.1%
(NYSE:BA) BOEING CO THE Capital Goods 25.0%
(NYSE:BHI) BAKER HUGHES INC Capital Goods 24.7%
(NYSE:BIG) BIG LOTS INC Consumer Services 24.2%
(NYSE:CCE) COCA-COLA ENTERPRISES Consumer Non Durable 23.4%
(NYSE:BJS) BJ SERVICES CO Capital Goods 22.8%
(NYSE:LTD) LIMITED BRANDS INC Consumer Services 22.8%

Here are a few companies from the list of top 2010 returns and how we view these companies going forward based on valuation, Economic Margin Improvement, and other criteria AFG uses to value securities.

AFG Rank within Sector
Ticker Name Sector Investment Opportunity Valuation Signal
Attractive Top Performers
(NYSE:BIG) BIG LOTS INC Consumer Services Attractive Attractive
(NYSE:FDO) FAMILY DOLLAR STORES INC Consumer Services Attractive Attractive
(NYSE:CLF) CLIFFS NATURAL RESOURCES Energy and Extraction Attractive Attractive
Unattractive Top Performers
(NYSE:EL) ESTEE LAUDER CO INC THE Consumer Non Durable Unattractive Unattractive
(NYSE:EK) EASTMAN KODAK CO Consumer Durable Unattractive Unattractive
(NYSE:CMI) CUMMINS INC Capital Goods Unattractive Unattractive
(NYSE:ANF) ABERCROMBIE & FITCH CO Consumer Services Unattractive Unattractive
(NYSE:CCE) COCA-COLA ENTERPRISES Consumer Non Durable Unattractive Unattractive

Below is a look at the valuation attractiveness of Abercrombie and Fitch Co. (NYSE:ANF) according to AFG's Intrinsic Value Chart. ANF is a company that AFG has done a good job tracking and currently looks overvalued. ANF not only has an unattractive valuation but it is also expected to experience a decline in Economic Margins which are 2 of the main ingredients of a company more likely to underperform.

(Click to enlarge)

How To Read AFG's Intrinsic Value Chart

(Click to enlarge)

Disclosure: No positions

Source: 25 Top Performing Stocks in 2010