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Buffett often touts that investors should focus on top management as one of the cornerstone's of finding a good investment but that's easier said than done. While there is no straight forward science when attempting to quantify qualitative characteristics it isn't impossible. Often, investors will look for companies with strong Return on Assets as an indicator of management's ability in running the company. That is exactly why we decided to focus on companies that have a high ROA, have out performed the S&P 500 over the last three months, and are now near their 52 week highs. In our view these companies deserve a closer review in order to see which one's may hold top management teams & have the ability to take the stock price even higher.

Return on Assets (ROA) illustrates how much a company
is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.

We first looked for stocks that operate with strong profitability (ROA (TTM)>20%) and are trading near their 52-week high. From this narrowed list of candidates we then looked for companies that have also outperformed the S&P 500 over the last three months. We did not screen out any sectors or market caps.

The list is ranked from highest to lowest by the 3-month return:

1. Synageva BioPharma Corp. (GEVA)

Sector

Healthcare

Industry

Biotechnology

Market Cap

$336M

Beta

0.53

The company The investment seeks to provide total return that closely corresponds, before fees and expenses, to the total return of the BofA Merrill Lynch US Corporate Index. GEVA has a ROA (TTM) of 34.83%. The company is 0.00% below its 52-week high & has gained 588.07% over the last three months. The short interest was 4.70% as of 10/14/2011.

2. Xyratex, Ltd. (XRTX)

Sector

Technology

Industry

Data Storage

Market Cap

$417M

Beta

1.83

The company Xyratex Ltd provides modular enterprise-class data storage solutions and storage process technology. XRTX has a ROA (TTM) of 24.00%. The company is 14.15% below its 52-week high & has gained 70.39% over the last three months. The short interest was 11.10% as of 10/14/2011.

3. Vera Bradley, Inc. (VRA)

Sector

Consumer Cyclical

Industry

Footwear & Accessories

Market Cap

$1,781M

Beta

N/A

The company Vera Bradley, Inc., through its subsidiary, Vera Bradley Designs, Inc., engages in the design, production, marketing, and retail of functional accessories for women under the Vera Bradley' brand. Its products include a range of handbags, accessories, and travel and leisure items. VRA has a ROA (TTM) of 22.42%. The company is 16.00% below its 52-week high & has gained 39.35% over the last three months. The short interest was 74.40% as of 10/14/2011.

4. Medicines. (MDCO)

Sector

Healthcare

Industry

Drug Manufacturers - Specialty & Generic

Market Cap

$1,021M

Beta

0.68

The company The Medicines Company, a global pharmaceutical company, provides various medicines to hospitals for advancing the treatment of critical care patients primarily in the United States and Europe. MDCO has a ROA (TTM) of 22.07%. The company is 2.83% below its 52-week high & has gained 38.03% over the last three months. The short interest was N/A as of 10/14/2011.

5. Mercadolibre, Inc. (MELI)

Sector

Industrials

Industry

Business Services

Market Cap

$3,801M

Beta

1.33

The company MercadoLibre, Inc., together with its subsidiaries, hosts online commerce and payments platforms in Latin America. MELI has a ROA (TTM) of 20.78%. The company is 7.14% below its 52-week high & has gained 34.55% over the last three months. The short interest was 8.80% as of 10/14/2011.

6. Choice Hotels International, I. (CHH)

Sector

Consumer Cyclical

Industry

Lodging

Market Cap

$2,108M

Beta

0.98

The company Choice Hotels International, Inc., together with its subsidiaries, operates as a hotel franchisor worldwide. CHH has a ROA (TTM) of 26.10%. The company is 14.97% below its 52-week high & has gained 25.91% over the last three months. The short interest was 9.00% as of 10/14/2011.

7. CBOE Holdings, Inc. (CBOE)

Sector

Financial Services

Industry

Financial Exchanges

Market Cap

$2,459M

Beta

N/A

The company CBOE Holdings, Inc., through its subsidiaries, operates markets for the execution of transactions in exchange-traded options. CBOE has a ROA (TTM) of 30.73%. The company is 8.73% below its 52-week high & has gained 25.30% over the last three months. The short interest was 3.10% as of 10/14/2011.

8. Linear Technology. (LLTC)

Sector

Technology

Industry

Semiconductors

Market Cap

$7,535M

Beta

0.89

The company Linear Technology Corporation, together with its subsidiaries, designs, manufactures, and markets various analog integrated circuits worldwide. LLTC has a ROA (TTM) of 35.61%. The company is 8.47% below its 52-week high & has gained 22.01% over the last three months. The short interest was 7.30% as of 10/14/2011.

9. FactSet Research Systems, Inc. (FDS)

Sector

Industrials

Industry

Business Services

Market Cap

$4,470M

Beta

1.08

The company FactSet Research Systems Inc. provides financial and economic information to investment community worldwide. FDS has a ROA (TTM) of 26.02%. The company is 11.95% below its 52-week high & has gained 14.81% over the last three months. The short interest was 3.60% as of 10/14/2011.

10. Texas Instruments, Inc. (TXN)

Sector

Technology

Industry

Semiconductors

Market Cap

$36,728M

Beta

1.16

The company Texas Instruments Incorporated engages in the design and sale of semiconductors to electronics designers and manufacturers worldwide. TXN has a ROA (TTM) of 24.09%. The company is 13.40% below its 52-week high & has gained 14.47% over the last three months. The short interest was 3.00% as of 10/14/2011.

We hope this list helps as investors do their own due diligence and research on identifying companies that have top management.

*Company profiles were sourced from Finviz.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 10 Rallying Stocks That Meet Warren Buffett's Management Criteria