Every day, TheStreet.com Ratings compiles a list of the top10 stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- and publishes these lists on the Ratings section of our Web site.
The rankings are based on our ratings, which assess risk-adjusted returns, as well as other criteria specific to the type of stock.
We update the lists at the end of the business day based on information available at the close of the previous trading session. Beginning this week, we are publishing a daily article that takesa closer look at the ratings of the stocks on one of the lists.
Today we start with all-around value stocks. These stocks are in the top 50% of all stocks rated by our proprietary quantitative model, which looks at more than 62 factors. Other selection criteria for this particular category include annual revenue of at least $500 million; lower-than-average valuation, such as a price-to-sales ratio of less than 2; and leverage that is less than 49% of total capital.
First on the list is
, which has been rated a buy since August 2004. One of the so-called super-major integrated oil companies, it has benefitted from strong global demand that keeps oil prices high, as well as from increases in its own exploration activity. The company's robust cash flow facilitates share buybacks and dividend hikes.
On the negative side, civil unrest in Nigeria and Venezuela could hurt Chevron's production and affect the company's growth.
Insurance and financial services company
has merited a buy rating since December 2004. With a strong market position and growing international operations, the company is poised for strong financial performance. MetLife has bolstered its market position in the core insurance and annuity business with its acquisition of TIC. It now has one of the broadest distribution networks in the sector.
Growth is expected through ongoing consolidation within the industry. The risks to the buy rating include the negative impact of any changes in interest rates, equity prices and any slowdown of the economy.
has been rated a buy since November 2004. This computer manufacturer's positives include robust top-line growth due to strong demand for its products, focused cost-cutting initiatives and improving profitability. Its strategy of acquiring businesses that complement its core operations is also commendable.
However, the optimism is tempered by the intense competition in the desktop, laptop and printer markets from
. This pressures H-P to cut costs.
has been rated a buy since October 2004. The company's strengths include steady growth in revenue, led by higher sales of defense electronics and business jets, and solid net income growth. Moreover, Raytheon, the fifth-largest Pentagon contractor, should benefit from higher proposed defense spending as President Bush's 2007 budget continues to favor spending on defense and homeland security.
Negative variables include a global economic slowdown, terrorist attacks and increased fuel costs.
has been rated a buy since November 2004. The company has diversified holdings, which include property casualty insurers
, cigarette maker
, an offshore oil and gas driller, hotels and the Bulova watch company. We believe this wide-ranging business portfolio helps generate stable revenue growth and spreads the company's risks. Loews' strong balance sheet is another positive. This liquidity helps it meet future insurance liabilities and fund capital expenditures.
However, the buy rating on the stock is subject to litigation risks in the company's cigarette business, the impact of any decline in energy prices on its drilling business, and the impact of any substantial catastrophic losses in its insurance operations.
, another "super-major" integrated oil company, has been rated a buy since August 2004. On the positive side, higher oil prices and increased oil and gas production have created robust revenue growth. Product enhancements are also a plus. The company has upgraded a line of lubricants designed to extend the life of engines by enhancing soot control, wear protection, oil consumption and deposit control. New exploration projects, such as the East Area Additional Oil Recovery project in Nigeria, should enhance production capacity.
As with Chevron, however, optimism is tempered by the possibility that production could be affected by the ongoing violence in Nigeria.
has had a buy rating since August 2004. It has well-diversified operations and a favorable industry outlook. Six distinct businesses provide more earnings stability than its industry peers. We are positive about the growth prospects for various protection and retirement products as baby boomers continue to age and life expectancies are longer. The investment environment for the conservative, liquid holdings of insurers also appears favorable.
Risks to the buy rating include any negative impact of changes in interest rates and equity prices on financial performance; any pressure on premium rates resulting from competition; or any unexpected, catastrophic events.
Integrated gas and electric holding company
has been rated a buy since November 2004, due to its strong margins and net income growth, as well as its above-average return on equity. Though Dominion has steady income growth, its decision to sell most of its oil and natural gas exploration and production segments could hurt future earnings. Also, any unpredictable weather conditions can hamper operations and increase maintenance expenses.
Telmex-Telefonos de Mexico
, which owns and operates the largest telecommunications system in Mexico, has been rated a buy since December 2004. Its strengths include solid stock price performance, revenue growth, attractive valuation levels and EPS growth.
These factors outweigh the fact that the company has subpar growth in net income.Telmex's stock price rose about 14% in 2006, and it has additional upside potential from there.
has been rated a buy since October 2004. The company's General Re unit is one of the largest reinsurers in the world -- it also own Geico, the fourth-largest U.S. auto insurer. Another unit, McLane, is a wholesale distribution and logistics business. Berkshire's strengths include robust revenue growth, a strong financial position with reasonable debt levels, solid stock price performance, compelling growth in net income and attractive valuation levels.
These strengths outweigh Berkshire's weak operating cash flow.