The Applied Finance Group (AFG) is an independent equity research provider that has partnered with CEO Magazine in recent years to give investors insight into which CEOs do the best job of creating value for its shareholders; after all, that is what they are hired for.

The AFG/CEO Wealth Creation Index, which relies upon AFG’s corporate performance metric Economic Margin (EM), provides a better understanding of wealth creation than traditional accounting measures such as EPS and ROC. The link below will take you to the complete list of rankings of CEOs from S&P 500 companies that have held their current position for at least 3 years, based on their wealth creation abilities. Topping the rankings in 2009 is MasterCard’s (MA) Robert W. Selander, up from third place last year. Both Selander and runner-up Federated Investors’ (FII) J. Christopher Donahue run very high EM companies (24.5 percent and 20.6 percent three-year averages, respectively). Interestingly, both have been able to improve in a bad economy.

Constellation Brands (STZ), which bills itself as the world’s largest wine company, headlines some positive results such as debt reduction of $155 million for the quarter and cost reduction benefits.

But revenues are down. It appears that consumers are not drinking away the recession. In fact, they are cutting back.

Sentiment

The major averages are deep in the red Thursday, as the historically volatile month of October kicked off with a bang. Two days of disappointing jobs data is partly to blame. A report released before the opening bell on Wall Street showed weekly jobless claims increased by 17,000 to 551,000 last week, which was significantly worse than the 1,000 increase economists had predicted. The news comes the day after ADP reported the economy lost a worse-than-expected 254,000 jobs in September and the day before the Labor Department releases key monthly jobs data Friday morning.

The day's other economic numbers were mixed. Data on personal incomes / spending, pending home sales, and construction spending all exceeded economist estimates. However, the ISM Index, a gauge of manufacturing activity nationwide, showed a decline to 52.6 in September; which was not much changed from the 52.9 in August, but also below economist estimates of 54.0.

Constellation Brands Inc (STZ), a leading global wine, spirits and other beverage producing company, reported strong fiscal 2010 second quarter results with earnings excluding non-recurring items of 54 cents per share – a 20% increase year over year. The earnings also exceeded the Zacks Consensus Estimate by 13 cents or 31.7%.

The strong quarterly results were primarily driven by global cost-cutting initiatives, de-levering of balance sheet, and continued stress on increasing sustainable free cash flow. During the quarter, pre-tax restructuring charges, acquisition-related integration costs, and other non-recurring expenses decreased to $29 million compared to $129 million in the year-earlier quarter.

In 2008, U.S. wine consumption and the adult per capita consumption of wine set a new record high at 2.5 gallons (breaching the previous high of 2.4 gallons in 1985), and marked the 15th strait year of consumption growth. Despite America’s growing taste for wine, it still lags far behind other traditional and new wine loving countries whose per capita consumption reaches as high as 15 gallons.

However, in coming years we believe the U.S wine industry will continue to prosper on the back of favorable demographics, strong domestic wine industries (the U.S. is now the fourth largest producer of wine among all countries), and a growing consumer base–particularly women and older generations–that is favoring wine over beer and spirits.

In recent weeks we have written several blogs (S&P 500 sector stock watch, Attractive stocks under $35, with potential investment opportunities, Solid S&P Value Companies, Cheapest Stocks In the S&P 500), discussing investment opportunities within the S&P 500. These stocks ideas all had favorable scores under The Applied Finance Group's (AFG’s) investment criteria, which includes economic performance, valuation, earnings quality and management’s ability to create shareholder wealth, among other criteria.

Another way that AFG identifies potentially attractive investments is through the use of its Value Expectations interface, which helps investors get a better understanding of the expectations embedded into stock prices. This interface allows us to understand the Sales Growth, EBITDA Margin, and Asset Turnover a company has to deliver in the future to justify its current trading price. In theory and in normal circumstances, if the imbedded future performance is very conservative relative to the company’s historical performance, the stock is regarded as undervalued. The table below displays the implied future Sales Growth (“Priced-in Sales Growth) of the companies we have recently recommended in our recent blogs, assuming their EBITDA Margins and Asset Turnovers stay at 5-year median levels.

Fidelity has a fund called the Low Priced Stock fund that only contains stocks with a price of below $35 a share which has been successful in the past. Following a similar strategy ValueExpectations.com has published 2 articles containing attractive stocks under $35 as a starting place for investor’s looking for potential investment opportunities.

The first low priced stock strategy blog outpaced the S&P 500 by over 58% since release in February the second article released in June has slightly underperformed the S&P 500 by -1.26%. Since this strategy has been well received by VE readers we decided to provide a new list of attractive stocks using the same strategy.

F1Q10 Earnings Call

July 1, 2009 10:30 pm ET

By: Jon "DRJ" Najarian

Reiterates 2010 Guidance

The alcoholic beverage company reiterated its fiscal 2010 outlook and expects GAAP diluted earnings per share in the range of $0.97 to $1.07 and non-GAAP diluted EPS of $1.60 to $1.70. That's positive guidance folks, so as I wrote Tuesday on InsideOptions, STZ looks ready to play catch-up with rival Diageo. STZ closed at $12.68 yesterday and is trading at $13.15 in the pre-market on our Heat Seeker system.

Bloomberg provides a score for companies within the S&P 500 based on an average of all analyst ratings from the street. Below is a table highlighting companies with the best analyst ratings, largest increase in rating, highest price targets, and worst analyst ratings and the valuation attractiveness of each of these companies based on The Applied Finance Group’s (AFG) valuation model.

Companies within each of these groups are ranked from most attractive from a valuation perspective to the least attractive. VE.com will actively track the performance of these recommendations and see how they stack up to the analyst recommendations in each group. AFGview.com, AFG’s professional investor website allows you to compare any company using their rating versus the consensus ratings of the sell side. If you are interested in an analysis on a specific company, contact afgsales@afgltd.com.

By using The Applied Finance Group’s (AFG's) Risk Analysis, we have identified the top and bottom two firms in each sector (excluding the Financial sector) according to an overall risk score based on 9 variables (see more detail below). In addition to the risk analysis variables we also added another layer of analysis by evaluating the companies’ Earnings Quality (based on the concept of Accruals) and Altman Z-Score (identifies firms that are at risk of going bankrupt in the next 2 years).

Applied Finance Group’s Risk Analysis is designed to systematically calculate a stock’s risk score based on fundamental relationships between the Quarterly Income Statements and Balance Sheets. The template measures 9 factors to determine Risk: Changes in A/R, Changes in Inventories, Cash Flow vs. Operating Cash Flow, Fixed Payments vs. Pre-Tax Cash Flow, Leverage, Intangibles, Write-offs, Management Quality, and Valuation. Companies with lower scores have less risk. Companies in the Financial Sector were excluded due to their differences in financial statement structure.

Here is a list of the variables that are taken into account within this risk analysis:

Below is a look at the YTD returns, valuation attractiveness and sales growth expectations of the two biggest and smallest companies in each sector within the S&P 500 (excluding financials). This link provides some insight into Applied Finance Group’s (AFG’s) valuation techniques. Also compare the expectations for sales growth to what the companies have delivered historically to see which stocks on this list are most likely to meet or exceed those expectations, and thus be more likely to out-perform.

click to enlarge

Best Buy (BBY), Corning (GLW), Taiwan Semiconductor (TSM), Xilinx (XLNX), Nokia (NOK), Jabil Circuit (JBL), Apple (AAPL), Google (GOOG), Research in Motion (RIMM), Hewlett-Packard (HPQ), Intel (INTC), Microsoft (MSFT), Qualcomm (QCOM), EMC (EMC), IBM (IBM), Marvell Technology (MRVL)

Since March 9, 2009, the S&P 500 experienced quite a recovery, going from 676 to 813, or just over a 17% rebound. To put that into perspective, the market historically delivered 8% average annual returns. In the table below we provide a list of the top and bottom 10 performers since the March 9th rebound began, to give you an idea of who the new Bulls and Bears are.

In the list you will find each company’s attractiveness from a valuation standpoint, as well as an analysis of sales growth expectations imbedded in these companies’ stock prices. Compare the expectations for sales growth to what they have delivered historically to see which stocks on this list are most likely to meet or exceed those expectations, and thus be more likely to out-perform. This list contains companies from the S&P 500 excluding all financial companies.

In a posting yesterday, we highlighted the S&P groups that have traded higher since Election Day. The purpose of this analysis was to look for groups that the market thinks might benefit under the Obama administration. Unfortunately, the search didn't turn up a lot of winners, as only two groups (Consumer Services and Power Producers) were positive over the period.

Today, we highlight the individual stocks that have actually made investors money from Election Day through yesterday's Inauguration. Unlike our search for groups, our screen for individual stocks turned up more results. However, with only 55 stocks rising (11%), it was still nothing to write home about. The chart below highlights the percentage of stocks in each sector that were up over the period. As shown, the sectors with the highest percentage of positive stocks are all defensive in nature (Utilities, Health Care, Consumer Staples, and Telecom Services), while the sectors with the least percentage of up stocks are all cyclical in nature. This highlights that investors are collectively putting more emphasis on the weak economy than they are on any specific policy proposals out of Washington.

F3Q09 Earnings Call

January 7, 2009 10:00 am ET

Continuing our trend on stocks and sectors which may be affected by Christmas, we are going to talk about Alcohol-related stocks.

Let's start with Diageo (DEO), which has a small percentage of shares outstanding on loan (%SOOL) at 0.92%. As you can see from this graph, the only time this figure has increased is for dividend arbitrage reasons. Utilisation is at 4.24%. Diageo’s share price has ebbed and flowed between 800p to 1,100p in the last six months, and is currently at 940p.

Money managers clean up portfolio holdings before the end of their tax year. Over 48% of US mutual funds close their books between late October and December. Managers sell stocks with large losses to avoid reporting them on their year-end report to shareholders. This causes downward pressure on stocks trading within their portfolio(s) that are at or near 52-week lows. Once the selling subsides, these stocks have historically experienced a price reversal. That said, investors should exercise due diligence before buying any of the companies listed below by analyzing any potential shift in a company's fundamentals and other factors such as sector weight and risk tolerance.

Here are the screen parameters used to select the following "sells" from funds: