Top Five All-Around Value Stocks: March 25

The metals and mining industry has recorded steady growth in commodity demand over the past few years, resulting in price increases. The price of gold has been boosted by increased investment demand, ongoing geopolitical tensions, a weak U.S. dollar and inflationary pressures. Increases in wealth in emerging economies like China and India could further increase global demand for gold. The long-term outlook for China also remains strong.

However, there is the risk of an inventory pileup and a price decrease should there be any unexpected slowdown in copper demand. Such a decrease, when coupled with higher costs of consumables and energy, could pressure Freeport-McMoRan's operating margin and impact its profitability.

Union Pacific UNP provides rail transportation through its principal operating company, Union Pacific Railroad Company, which is the largest railroad in North America. The railroad covers 23 states across the western two-thirds of the U.S. and ships products such as automobiles and automobile parts, agricultural products, coal, liquid and dry chemicals, plastics and liquid petroleum products.

Union Pacific has been rated a buy since February 2005. Despite economic softness and adverse weather conditions, the company recorded 5.9% year-over-year growth in its top line for the fourth quarter of 2007. For full-year 2007, revenue increased 4.5% to $16.28 billion year on year. Net income grew at a higher rate of 16% to $1.86 billion, bolstered by margin expansion and partially offset by higher interest expense and taxes. To combat rising fuel prices, the company deployed new technology, acquired environmentally friendly switch locomotives and implemented operational changes to improve fuel efficiency.

Union Pacific's efforts to improve customer satisfaction and maintain a diversified book of business place it in an advantageous position compared with competitors. Furthermore, the company hopes to gain from expected strong railroad pricing in the year ahead by adding many more unit trains in the Southeast and Southwest regions, which are expected to be growth areas this year due to the ethanol boom in these regions.

There is risk to the buy rating, however. Union Pacific's business is cyclical and susceptible to changes in economic conditions and could be adversely affected by severe weather conditions, currency volatility and higher-than-expected fuel prices.

Our quantitative rating is based on a variety of historical fundamental and pricing data and represents our opinion of a stock's risk-adjusted performance relative to other stocks.

However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could impact the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.

For those reasons, we believe a rating alone cannot tell the whole story, and should be part of an investor's overall research.

Know What You Own: UNP operates in the railroad sector, and some of the other stocks in its field include Norfolk SouthernNSC, Canadian National RailwayCNI and CSXCSX. These stocks were recently trading at ($54.62, +0.52%), ($49.32, +2.24%) and ($56.78, +1.28%), respectively. For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.