Applied Materials is a former highflier of the 1990s which has come down to earth. AMAT’s price to earnings, sales, and book value ratios all compare favorably with the S&P 500, and the P/E ratio of 16 matches the expected earnings growth rate. The dividend yield is rather low at 1.05%, and the beta is high at 1.42, so this is not an investment for the faint-hearted. But an average annual total return of at least 15% appears reasonable based on current fundamentals.

The company looks financially strong and it has little debt. Applied Materials’ annual net earnings have been quite volatile, but they have made money every year since 1997, except for 2003; and their net earnings have been strong since then. They started paying a dividend of .09 a share in 2005 and doubled it to .18 in 2006. The payout ratio is only 15%. There have been many 2-for-1 splits over the years. The most recent was in 2002.

I am inclined to think that stock market cycles which used to exist may have been discounted by the market at this point, but I had not seen the 17 and 43 week EMA combination before, and I was impressed by how promptly the moving average crossovers identified major trend changes during this eight year period, and without giving false signals.

The popular stock indexes rallied on this news. The Dow closed at an all-time high of 12,741.86. The S&P 500 rose to a six-year high of 1,455.30.

In his last column, Dorfman sums up what he has learned from nine years of intensive research of many investment strategies. I have extracted the first four points to preserve for posterity. They are deceptively simple, but I think they are extremely important:

But as this chart from MarketGauge by DataView LLC indicates, there have been two incidences of this phenomenon since 1998. The closed-end funds traded at a premium for a good part of 2001, halfway through the bear market; and closed-end funds also traded at a premium for most of 2004.

This stock has enjoyed phenomenal growth, but it has been in a downtrend for the last year. I have been watching for signs that WFMI is bottoming out, but recent developments lead me to believe that the company is headed for more trouble in the months ahead.

WFMI is currently operating 191 stores and it has plans to open 80 more this year. Whole Foods’ stores in large cities have certainly done well, but as the company grows they are of course forced to open their new stores in smaller cities, such as Birmingham, AL, pop 231K; Boise, ID, pop. 193K; Sugarland, TX, pop 76K; and Portland, ME, pop. 64K.

To recap briefly, PUW is based on the WilderHill Progressive Energy Index. This Index is comprised of U.S. listed companies that are significantly involved in “transitional energy bridge technologies”, with an emphasis on improving the use of fossil fuels. Simply put, the ETF invests in companies which are likely to profit from more efficient use of existing energy resources.

I am going to pass because of CFR’s high correlation to the energy sector, where my portfolio is overweight, but for anyone without that problem CFR might reward further research. This Texas bank has enjoyed excellent profit and dividend growth but it is relatively inexpensive compared to some its peers.

CFR has strongly outperformed the S&P, but it has a higher dividend yield and less volatility. In addition to offering the customary banking services through 100 offices all over Texas, the company does international banking business with customers residing in Mexico or doing business with customers in Mexico, sells a variety of insurance products, and acts as a correspondent for other banks in the area.

ADM is a strong company with a solid leadership position in the highly profitable business of processing soybeans, corn, wheat, and cocoa. It is hard to find commercially prepared food or beverages which do not contain ingredients manufactured by ADM.

Although the stock’s current dividend yield is only 1.14%, this company has paid dividends for 75 years, they have increased the dividend every year for more than 25 years, and the payout ratio is only 17%. The stock is quite cheap for a blue chip with excellent prospects. It has a price-earnings ratio of 15, a price to cash flow ratio of 10, and a price to book value ratio of 2. The company’s net income has tripled over the last five years.

ZION operates over 500 banking offices through seven subidiairies in ten Western states: Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Utah, Texas, and Washington, and also engages in money management, insurance sales and other financial businesses through ten other subsidiaries. The firm has a market capitalization of 9.1B.

Zions has outperformed the S&P, but with less volatility. But the current dividend yield is only 1.82%. However, the dividend does show an excellent 5-year growth rate and the payout ratio is only 27%. A glance at the balance sheet shows a current ratio of 1.11, within the range of many banks.

Although the current dividend yield of 1.89% is a bit light, dividend growth has been quite satisfactory - Chubb has raised the dividend annually for at least 25 years - and the payout ratio is modest. CB’s annual total return potential appears close to 12%. This stock looks quite cheap by conventional valuation standards. The P/E ratio and P/CF ratio are both below 9. The company is financially sound and has relatively little long-term debt.

MMM and its brand name are synonymous with high-quality American consumer goods. The company has achieved success by applying leading-edge technology to the development of innovative new products, such as Scotch tape and Post-it notes, which have become international blockbusters. Over time, the reach of MMM’s products has extended into more arcane areas such as electronics, health care, and security.

But in recent years the flow of new blockbusters has dried up, generic substitutes for MMM products have proliferated, and the stock has been a disappointing performer. It has been stuck in a trading range between 66 and 82 for three years now. There is a perception on Wall St. that MMM’s growth is slowing. The shares’ P/E ratio has contracted from 29 in 2002 to the present reading of 16.2.

This security has been trading with a relatively high correlation to the financial, consumer staples and consumer discretionary sectors, and a relatively low correlation to the energy, technology, and health care sectors. I have some reservations about jumping in because of the lack of long-term financial data, and I anticipate widespread weakness in the stock market, but I would consider buying CLMT after a pullback.

Description of business from the company’s website: “When Calumet was founded in 1916, it was our goal to make the highest quality naphthenic specialty oils available. Since that time, we’ve devoted ourselves to making this goal a reality. The refining of petroleum has come a long way since 1916. There have been many advances—better processing methods, improved equipment and chemical discoveries. Throughout, we’ve stayed at the forefront of technology. Our equipment is modernized and our operations are diverse and efficient.

Although it is true that their cash flow is good, and the interest coverage ratio is a solid 3.69, the current ratio and the debt to equity ratio are unsatisfactory, especially for a company with a history of cutting dividend payments. The current dividend yield of 2.15% is inadequate to compensate investors for the risk of owning a security with this kind of history.

I learned about this indicator in an article by Mark Arbeter in the January 31 issue of the S&P Outlook entitled “Overheated Bulls? A correction could be looming for the S&P 500″. I can not reproduce the article here because of copyright issues, but be sure to read it if you have access to the S&P Outlook.

AVA has taken on considerable debt to finance its activities. While cash flow appears adequate to keep everything going, there is not much margin for error. The stock has increased in volatility in recent years and it has underperformed the S&P. The dividend yield appears inadequate to compensate investors for the level of risk. In my opinion AVA is trading at a significant premium to its intrinsic value. The stock price appears to have fully discounted possible positive developments in the future. AVA does not look like an attractive investment at this time.

Blodget points out that the market has become much more efficient in the internet era. He contends that stock pickers have the deck stacked against them, and that they would do much better if they bought low-cost index funds and let it go at that.

Description of business from the company’s website: “: "Central Vermont Public Service customers who want to support renewable energy and Vermont dairy farms have a new energy choice - CVPS Cow Power.

The Vermont Public Service Board has approved CVPS (CV) Cow Power, which is intended to help promote development and reliance on renewable energy in Vermont by creating a market for energy generated by burning methane from cow manure. The Home Service Store, an affiliate, operates a national home maintenance and repair service. Subsidiary SmartEnergy is a water-heater rental business... Central Vermont Public Service [is] an independent, investor-owned company providing energy and energy-related services to customers throughout Vermont. CVPS, the largest of the state’s 21 utilities, serves 155,000 customers across the state."

Additional information from Yahoo Finance: “South Jersey Industries, Inc., through its wholly owned subsidiaries, engages in the purchase, transmission, and sale of natural gas for residential, commercial, and industrial use. It also sells natural gas and pipeline transportation capacity to various customers on the interstate pipeline system, and transports natural gas purchased directly from producers or suppliers.

The company also acquires and markets natural gas and electricity to retail end users and provides energy management services to commercial and industrial customers. It also markets an air quality monitoring system through an environmental consulting firm. The company markets wholesale natural gas storage, commodity, and transportation in the mid-Atlantic and southern states. The company develops and operates energy related projects, which provide cooling, heating, and hot water services.

Value Screen:

1) Does the stock’s dividend yield exceed the yield of the S&P 500? Yes - 2.97%.