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.
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.
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.
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How To Read AFG's Intrinsic Value Chart
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Disclosure: No positions