To identify potentially attractive investment ideas, The Applied Finance Group (AFG) uses a combination of proprietary variables including valuation, economic performance, management quality, and Earnings Quality. In December of 2008, ValueExpectations.com released a list of companies sorted only by AFG’s Value Score (defined below). Our valuation techniques have proven successful at identifying mispriced securities, which has helped our clients select stocks that outperform their chosen benchmark.

The ValueExpectations.com blog posted in December 2008 (High Value Score Stocks - S&P 500), contained these high Value Score companies (DDS, S, NOV, MTW, SII, WFR, CHK), and outperformed the S&P 500 by 40% as of our 3-26-09 performance update. We recently checked the average performance of those picks through 8-27-2009 to find that they have returned an astounding 52% above the S&P 500, with 6 of the 7 companies outperforming. High Value Score Stocks Part 2, released on 5-7-09 has also outperformed the S&P 500 by nearly 3% since its release, with a batting average of just over 60%.

Due to the success of the first two “High Value Score” blogs, we again used valuation as a basis for selecting a new set of investment ideas. Listed below are the top 10 companies in the S&P 500 (excluding Financials) based on AFG Value Score alone. These companies look the most attractive from a valuation perspective relative to the rest of the index.

AFG's Valuation Metric – Measures the percent to target (deviation between a stock’s current trading price and its AFG current default target price). To derive the intrinsic value of a firm, AFG uses its proprietary Valuation Model (modified discounted cash flow model).