Seeking Alpha

MarketGrader's  Instablog

MarketGrader
Send Message
MarketGrader is a technology-driven research company that covers 5,700 North American listed stocks. We focus on providing investors a combination of thorough and rigorous analysis with a user friendly and intuitive presentation. Our research is based on a Top Down Analysis, which covers each... More
My company:
MarketGrader.com
My blog:
Stocks and ETF research
View MarketGrader's Instablogs on:
  • Coal Stocks: Hots and Nots
     Yesterday Goldman Sachs upgraded the coal sector from neutral to attractive, alleging that a rise in the price of oil will support higher coal prices and improve investor sentiment in substitute industries (such as Coal and Consumable Fuels).

    In this vein, we have employed our MarketGrader analysis to determine which companies seem to be best positioned to capitalize on the improving outlook of this industry, should Goldman’s theory materialize into improved business for coal producers. For those of you not yet familiar with MarketGrader’s analysis here’s a recap: we evaluate companies on the basis of 24 fundamental indicators that are grouped into 4 categories, growth, value, profitability, and cash flow. The individual grades for these indicators are then compiled into an overall numerical grade from zero to 100 and a Buy, Hold or Sell rating. Our system also performs technical and momentum analysis to arrive at our Sentiment rating (positive, negative or neutral), designed to gauge current investors’ mood for any particular stock.

    Below are the five highest graded Coal and Consumable Fuel companies (all rated buys) in MarketGrader.com, along with their overall grade, sentiment rating, and two of their best indicators:

    1. Alliance Resource Partners LP (NASDAQ:ARLP)

    Grade 83.68

    Sentiment: Positive

    Best indicators: Return on equity- A+ (A+ on overall profitability), P/E analysis- A+


    2. Sino Clean Energy Inc (OTC:SCEI)

    Grade 81.48

    Sentiment: Negative

    Best indicators: Long Term Market Growth- A+, Return on Equity- A+


    3. L&L Energy Inc (NASDAQ:LLEN)

    Grade 81.05

    Sentiment: Negative

    Best indicators: Long Term Market Growth- A+, Relative Profit Margins- A+


    4. Alliance Holdings GP LP (NASDAQ:AHGP)

    Grade 79.05

    Sentiment: Positive

    Best indicators: Debt/Cash Flow Ratio- A+, Capital Utilization- A+


    5. Uranium Focused Energy Fund (UF.U.CA)

    Grade 76.51

    Sentiment: Negative

    Best indicators: Growth Potential- A+, Cash Flow Growth- A+

    Now for the Nots- below are the bottom five companies in the Coal and Consumable Fuels Industry. This list contains their overall grades (all corresponding to a sell rating), sentiment, and two of their worst indicators. Note that this list includes Patriot Coal Corp (PCX), which Goldman Sachs upgraded yesterday from a neutral to a conviction buy. However, MarketGrader’s analysis shows PCX’s profitability and cash flow indicators are extremely poor, raising concerns about the company’s future outlook.

    1. Evergreen Energy Inc (EEE)

    Grade 8.47

    Sentiment: Negative

    Worst indicators: Market Growth Long Term- F, Operating Margins- F


    2. Homeland Energy Group Ltd. (HEG.CA)

    Grade 17.28

    Sentiment: Negative

    Worst indicators: Growth Potential- F, Market Value- F


    3. Oxford Resource Partners LP (NYSE:OXF)

    Grade 19.30

    Sentiment: Neutral

    Worst indicators: Return on Equity- F, Capital Structure- F


    4. JNR Resources Inc (JNN.CA)

    Grade 19.42

    Sentiment: Negative

    Worst indicators: Asset Utilization- F, Operating Margins- F


    5. Patriot Coal Corp (PCX)

    Grade 24.38

    Sentiment: Positve

    Worst indicators: Debt/Cash Flow Ratio- F, Return on Equity- F

    Jun 21 2:28 PM | Link | Comment!
  • 5 Highest Rated Sector ETF’s by MarketGrader: Technology Dominates

    When looking to evaluate ETF’s, MarketGrader’s new ETFGrader application adopts a bottom-up approach based on our fundamental analysis. Utilizing StockGrader , we analyze each component’s fundamentals and issue an overall rating for each company in the ETF. We then calculate a weighted average of all components in the ETF, based on the underlying index’s calculation methodology, to arrive at its average overall grade, which is therefore derived from the fundamental strength of its components.

    The fundamental rating that we assign each component takes into account four main indicators and 24 sub-indicators. The four main indicators are: Growth, Value, Profitability, and Cash Flow. Each indicator is divided into six sub-indicators such as Growth Potential, Capital Structure, Return on Equity, and Debt/Cash Flow Ratio. The grades for all indicators are then compiled into our overall company rating, or overall grade. Once we have our component ratings, we then calculate our ETF ratings based on a weighted average that takes into account both the components of the ETF and the weight in the portfolio.

    Currently the 5 highest rated sector ETF’s in MarketGrader all belong to the Technology sector, and, more specifically, 3 of the 5 track the Semiconductors industry. The following is the list of our top 5 ETF’s complete with their average ETF grade and rating, their average sentiment, the two highest rated components, and the two lowest rated components. Note that grades that are 60 or higher denote a “Buy,” grades between 50 and 60 denote a “Hold,” and grades below 50 denote a “Sell.”

    1. HOLDRS Semiconductor (SMH)

    HOLDRS Semiconductor received an ETF average grade of 77.8 (out of 100). The market sentiment for SMH is currently positive. The two highest rated components in SMH are Intel Corp (NASDAQ:INTC), which has an overall grade of 91.8 and Altera Corp (NASDAQ:ALTR), with an overall grade of 86.0. The two lowest rated components are LSI Corp (NASDAQ:LSI), with a 46.8, and National Semiconductor Co (NYSE:NSM), with a 59.4.

    2. IShares PHLX SOX Semiconductor Sector Index Fund (SOXX)

    IShares PHLX SOX Semiconductor Sector Index Fund received an ETF average grade of 72.0. The market sentiment for SOXX is currently neutral. The two highest rated components in SMH are Intel Corp (INTC), with an overall grade of 91.8 and Cirrus Logic Inc (NASDAQ:CRUS), with an 89.0. The two lowest rated components are NXP Semiconductors NV (NASDAQ:NXPI), with an overall grade of 27.7, and NetLogic Microsystems Inc (NASDAQ:NETL), with a 30.3.

    3. IShares Dow Jones U.S. Technology Index Fund (IYW)

    IShares Dow Jones U.S. Technology Index Fund received an ETF average grade of 71.8. The market sentiment for IYW is currently neutral. IYW’s two highest rated components are Intel Corp (INTC), with an overall grade of 91.8 and Apple (NASDAQ:AAPL), with an 88.0. The two lowest rated components are Ciena Corp (Cien), 18.7, and Diebold Inc (NYSE:DBD), 19.1.

    4. HOLDRS Internet Architecture (IAH)

    HOLDRS Internet Architecture received an ETF average grade of 71.8. The market sentiment for IAH is currently positive. IAH’s two highest rated components are Apple (AAPL), 88.0, and Hewlett Packard (NYSE:HPQ), with an overall grade of 72.2. The two lowest rated components are Sycamore Networks Inc (OTCPK:SCMR), 14.6, and Ciena Corp (NYSE:CIEN), 18.7.

    5. Powershares Dynamic Semiconductors (PSI)

    Powershares Dynamic Semiconductors received an ETF average grade of 71.8. The market sentiment for PSI is currently positive. PSI’s two highest rated components are Kulicke and Soffa Industries Inc (NASDAQ:KLIC), which has an overall grade of 93.5, and Veeco Instruments (NASDAQ:VECO), with an 87.2. The two lowest rated components are NVidia Corp (NASDAQ:NVDA), with a 44.2, and Electro Scientific Industries (NASDAQ:ESIO), with a 54.2.

    For the complete rankings of al sector or industry based ETFs in MarketGrader, please click here.



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jun 16 11:15 AM | Link | Comment!
  • The Best Bank in MarketGrader.com

    Today MarketGrader is highlighting this small Kentucky-based bank, which has excellent financials  and a pristine record, on Barrons.com. Republic Bancorp (NASDAQ:RBCAA) is not only the highest graded bank in all of MarketGrader but the highest graded company in the entire Financial sector and the eighth-ranked stock among our entire coverage universe.

    The company has 43 banking centers in Kentucky, Indiana, Florida and Ohio and over $3.6 billion in assets. Its market capitalization is only $385 million. Its trailing 12 month revenue, at the end of the first quarter, was $314 million with $91.5 million in net income. Its first quarter results were remarkable, with revenue increasing 22% year-over-year to $180 million and net income jumping by 60%. The bank has beaten the consensus estimate of the two analysts that follow it by an average of 21% in the last six quarters.

    The stock trades at 4.7 times trailing 12 month earnings per share, virtually the same ratio when compared to its full fiscal year estimates (forward P/E). And following today's across-the-board market drop, at its closing price of $20.17, the stock can be bought for less than the $20.50 in tangible equity per share. Buyers at this price will essentially get the bank's dividend and its future earnings stream for free.

    Republic Bancorp's grades are very strong not only across our Growth and Value indicators but also according to our Profitability and Cash Flow measures, which explains its overall remarkable grade of 90. The stock's Sentiment, by the way, is also positive, with a score of 7.7 out of 10. From a profitability standpoint, the bank's net interest margin is the equivalent of 8.9% of its interest earning assets, compared to 3.6% on average for all public banks followed by MarketGrader and based on trailing 12 month results the bank's return on equity was 21% while it returned 2.8% on assets that averaged $3.3 billion in the last four quarters. The average ROA of all banks in our system was 0.3% during the same period.

    Republic Bancorp's capital position couldn't be stronger. It reported Tier 1 (core) Capital of 23.9% last quarter compared to the bank average of 12.7%. Its non-performing assets fell in the last year to 9% of tangible equity from 12.4% a year ago. Again, for comparison purposes, non-performing assets for all banks followed by MarketGrader average 73% of tangible equity plus loss reserves, underscoring the difficulties banks are having working through the bad assets they piled onto their balance sheets during the recent free credit mania. RBCAA today has $0.70 in loss reserves for every dollar in non-performing assets, as solid as a bank gets. Underlying all of this, the bank's stockholder's equity is very clean, with intangible assets representing only 2.3% of common equity.

    To top it all off, the bank increased its dividend, as it usually does, at the end of 2010, and it now pays $0.15 per share, yielding almost 3% at today's stock price. Two things are remarkable and worth mentioning about its dividend: first, dividends paid in the last 12 months accounted only for 7.5% of cash flow and 12.7% of after-tax earnings, giving it plenty of room to increase it, although given management's apparently conservative style, large special dividends are unlikely. And second, the bank never had to cut its dividend during the financial crisis like so many others did. Banks looking for acquisition targets with a decent presence in the south could do worse than look at RBCAA.

    For a complimentary report on Republic Bancorp please click here. For our complete breakdown of the entire banking industry and the financial sector we invite you to take a free trial of our service. Click here to see what you get with a subscription to MarketGrader.com.

    May 11 6:31 PM | Link | Comment!
Full index of posts »
Latest Followers
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.