A Trio of Perfect 10s

03/11/2005 12:00 am EST


Beth Gaston Moon

, Schaeffer's Investment Research, Inc.

"Our Equity Scorecard evaluates 2,000 stocks in terms of 10 sentiment, technical, and fundamental indicators," says Beth Gaston of Schaeffer's Investment Research. Currently, only three stocks in the S&P 500 have scored a perfect 10. Here's her review of these 10s.

"Sometimes the quest for a perfect ‘10’ stock can seem as ridiculous or hopeless as Dudley Moore pining over Bo Derek. But through our Equity Scorecard, I've discovered a trio of equities that appear to have everything going their way from our perspective. What's more, these are the only three equities that have earned the highest possible rating.

"Ameren (AEE NYSE) is a utilities company operating primarily in Missouri and Illinois serving 2.3 million electricity customers and 900,000 natural-gas customers. AEE has maintained a solid upward trajectory for the past eight months and recently notched a new all-time high. The shares are currently overlooked by several segments of the investing public, suggesting that there is still future growth potential for the security. First, the options crowd has failed to throw its weight behind the stock. Analysts are also shying away as there are just two ‘buy’ ratings on the stock and 10 ‘holds’ and some of these ambivalent analysts could soon sway to the bullish camp. Meanwhile, short interest surged 73% last month to 5.9 million shares. If short sellers were to begin covering their positions, it would take more than two weeks to eradicate all of the shorted positions, which could really infuse the shares with additional strength.

"Moody’s (MCO NYSE) is the holding company for Moody's Investors Service, which offers credit ratings and financial information on about 200,000 companies in 100 countries around the globe. Earlier this year, MCO short interest reached its highest point since October 2003. The number of shorted MCO positions dipped slightly lower last month, indicating a potential hint of short-covering activity. If the bears begin unloading their bets in earnest, it could take nearly six days worth of trading activity, as indicated by the equity's short-interest ratio. Checking in on other sentiment indicators, put positions have the upper hand on MCO, outweighing total call contracts by a margin of nearly three-to-two. This leaves plenty of skeptics toward the stock who could ultimately metamorphose into added buying power. Speaking of skeptics, there are three outright ‘sell’ ratings on the MCO, as well as three ‘hold’ ratings and a solitary ‘buy’ vote of confidence.

"Norfolk Southern (NSC NYSE) operates a freight railroad throughout 22 states and Canada. The entire sector has been rallying higher, and has helped push NSC to a new 52-week high. This new peak effectively broke the stock free of a sideways consolidation range that had been in effect since late December. The stock was fully sated and digesting its recent gains, as it appreciated nearly 70% between its April low and its December peak. During its recent consolidation phase, the stock rebounded higher off its 20-week trend line. The analyst community appears to support NSC, as the stock boasts seven ‘buy’ ratings and four ‘holds’. However, options players have boarded the pessimistic train. What's more, short interest rallied by 14% during the last reporting period, indicating continued pessimism on the shares, which is typically a bullish contrarian sign."

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