Portable Alpha Daily

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Sunday, February 25, 2007

Alpha and the Week Ahead

Most of the major indexes closed out the week slightly lower due in part to a higher than expected CPI report and the resurgence in oil prices. A bright light however was the NASDAQ, which ended the week with a rally surpassing levels of the preceding six years.

U.S. markets will most likely continue into the end of the month on a weak note with higher energy prices weighing heavily on investor sentiment along with uncertainty over the health and direction of the U.S. Market. Investors will continue to struggle digesting the barrage of economic reports, including critical housing and crude inventory reports that will hopefully provide guidance as to the near-term direction of the economy. Data to be released next week includes:

  • Feb 27 Durable Orders
  • Feb 27 Consumer Confidence Report
  • Feb 27 Existing Home Sales
  • Feb 28 GDP Preliminary
  • Feb 28 Chain Deflator Preliminary
  • Feb 28 Chicago PMI
  • Feb 28 New Home Sales
  • Feb 28 Crude Inventories

We see continued opportunities for adding alpha to existing portfolios in both the Mid Cap and Small Cap market segments principally focused within the following sectors: Basic Materials, Telecommunications, Real Estate, Transports and Utilities.

This week we are taking a slightly different approach in highlighting these opportunities. We have broken out of our universe those equity members from the Small and Mid Cap Styles, as well as from the five highlighted sectors.

The top five names in each table are ranked by AAS Rating Score along with the calculated alpha factor over relatively reasonable time periods. The alpha factor represents the return of the security minus the return of the S&P 500.

Mid Cap Stocks

Small Cap Stocks

Basic Materials



Real Estate


A word of caution to those interested in investing in Real Estate: note that while those members of today’s report bear significant AAS Rating Scores and attractive alpha generation, only Central Parking Corp. (CPC) carries a Buy status. All other equities are currently listed as “Neutral,” reflecting many issues concerning both the Commercial and Residential Real Estate markets of late.

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bearish since December 8th.

Asset Allocation – AAS Model Portfolios are between 75% long and 25% cash currently.

Beta Exposure and Portable Alpha Generation
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top Rated Major Market Derivative – No buy recommended major market investments

Top Rated Style-Box Derivative – No buy recommended style-box investments

Top Rated Sector Derivative – iShares Dow Jones Transports (IYT 2/20/07)

Today’s Top “Buy” Recommended Stocks

Martin Marietta Materials, Inc. (MLM 11/6/06)

Vulcan Materials Co. (VMC 10/31/06)

Precision Castparts Corp. (PCP 9/20/06)

NBTY, Inc. (NTY 12/5/06)

Rock-Tenn Co. (RKT 4/27/06)

Texas Industries Inc. (TXI 10/11/06)

OM Group Inc. (OMG 2/7/07)

Avnet Inc. (AVT 10/5/06)

MEMC Electronic Materials Inc. (WFR 1/8/07)

Carpenter Technology Corp. (CRS 1/31/07)

Today’s Top “Sell” Recommended Stocks

New Century Financial Corp. (NEW 6/13/06)

Chicago Mercantile Exchange (CME 2/22/07)

Plexus Corp. (PLXS 12/29/06)

Advanced Micro Devices Inc. (AMD 9/27/06)

SanDisk Corp. (SNDK 10/20/06)



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