Our Take on the S&P 500's 20 Most Actively Traded Stocks

by: Value Expectations

Investors who employ technical analysis tend to monitor a stock's trading volumes in comparison to its movements in price in order to predict upcoming reversals in trends in an attempt to identify attractive entry points and essentially “time the market”. Beyond the technical analysis aspect, trading volume basically represents the interest level and excitement (or lack thereof) that the stock generates in the market by illustrating how many buyers and sellers there are for a stock during a particular time period. Volume can also be an indicator the amount of liquidity of a stock, liquidity meaning how easy it is to find a trader to buy from or sell to in order get in or out of a stock.

Companies that generate the highest trading volume tend to be the most buzz-worthy and exciting companies that garner the most attention in the news and amongst the investment community which can attract many investors into transactions. Today we will provide our readers a list of the top 20 highest trading volume companies from the S&P 500 to see which companies have been generating the most activity in the market over the last 12 months.

The list below identifies the most actively traded companies ranked from highest volume to lowest in average daily dollars traded over the past year.

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After looking at the top 20 highest volume companies we will also provide some insight into a few from the list that we believe look like attractive investment opportunities. The 4 stocks that stand out the most from this list are Google (NASDAQ:GOOG), Pfizer (NYSE:PFE), Freeport McMoran (NYSE:FCX) and Intel (NASDAQ:INTC), as they all look very attractive from a valuation standpoint and are expected to improve their economic profitability (Economic Margin) over the next year, which are 2 very important characteristics used in AFG’s stock selection process.

Next let’s take a closer look at the Intrinsic Value charts for Google and Freeport McMoran which can better illustrate that our model has done a good job tracking the company (solid model accuracy) and that both companies are currently trading at a premium (trading range represented by blue bars) to their default intrinsic value (indicated by red line).

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Both Google and Freeport McMoran also look to be following what we consider to be a “wealth-creating” strategy of growing a profitable business. We first focus on understanding how profitable a company is from an economic standpoint by knowing more accurately what a company truly earns above or below its cost of capital (Economic Margin). AFG has proven through numerous backtests that when a company earns above its true cost of capital (positive EM) and grows its asset base at the same time to maximize that profitability, it is a recipe for success to reward a company’s shareholders with generous returns. Both Google and Freeport have consistently generated positive EMs, constant growth and are both expected to improve EMs in the next year, all good signals pointing to attractive investment opportunities.

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Disclosure: None