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WHAT WE ARE LOOKING FOR

This week we have been running a series of screens using a stock selection system employed by James O'Shaughnessy, a quantitative equity strategist and best-selling author of What Works on Wall Street.

His company, O'Shaughnessy Asset Management LLC, which manages the RBC O'Shaughnessy family of mutual funds, has back-tested the system to 1960. Today's is the last in the series and it looks at the U.S. common share market. The cornerstone of the process is to look for stocks with low price-to-sales ratios (PSR). Using that as a base, we build in recent stock market performance as a factor.

MORE ABOUT TODAY'S SCREEN

Beginning with the PSR calculation, the selected stocks chosen today must have a PSR of less than 1.5. In addition, their profit must have grown over the past year and the change in their share price over three and six months must have been above average for all U.S. stocks in the database.

The stocks that fit all of those criteria are then ranked according to their price change over the past 12 months.

Momentum is obviously important, Mr. Latimer said. "First of all, we are looking for very inexpensive stocks - cheap stocks on the mend," he said. "We pick the best based on their 12-month performance."

The database consists of all U.S. securities covered by Compustat North America. For purposes of today's table, the companies must trade at a share price of more than $1 (U.S.) and they are excluded if the market capitalization is less than $200-million. Also excluded are all investment trusts, mutual funds and limited partnerships.

WHAT WE FOUND

A couple of familiar names pop up in the list - Wal-Mart Stores Inc. and Fairfax Financial Holdings Ltd. - but what really stands out is the wide range of industries represented by the companies making the grade.

Cornerstone Growth - U.S. % % % US$-mil US$-mil US$-mil
Relative Relative Absolute US$ US$ US$ % Revenue Revenue Revenue
EPS strength strength strength Price 52-wk 52-wk Div (most rec (most rec. (most rec. 1-mo % YTD % 1-yr %
Symbol Company name P/S gwth 3-mo 6-mo 12-mo Oct. 22 high low yld fisc YE) 12-mo) quarter) price chg price chg price chg
CRD.B-N Crawford & Co. 0.7 0.19 90.6 251.3 122.7 14.63 22.50 3.07 0.0 1,051 1,096 289 -17.0 252.5 122.7
UFI-N Unifi Inc. 0.4 1.77 141.0 158.5 86.9 5.01 5.43 1.80 0.0 713 713 190 6.1 107.0 86.9
FSYS-Q Fuel Sys. Solu. 1.4 0.77 6.0 150.6 63.2 30.35 61.24 9.80 0.0 265 338 98 -41.1 112.4 63.2
AITP-OTC Am. Italian Pasta 0.5 0.51 71.5 176.4 57.7 14.00 17.95 4.26 0.0 398 517 156 0.7 100.0 57.7
LG-N Laclede Group 0.5 0.64 67.6 83.6 49.1 47.37 52.14 31.48 3.2 2,022 2,080 505 -1.4 42.4 49.1
DMND-Q Diamond Foods 0.9 0.39 56.9 102.8 42.0 29.10 32.14 15.83 0.6 531 531 113 10.1 36.9 42.0
IPHS-Q Innophos Hold. 0.6 4.72 6.4 65.5 36.7 20.00 41.51 10.44 3.4 579 717 264 -25.2 39.7 36.7
HGR-N Hanger Orthopdc 0.5 0.23 37.2 110.2 34.3 15.31 21.00 9.06 0.0 637 672 181 -21.9 39.1 34.3
OFG-N Oriental Fin. Grp 1.0 2.20 25.6 7.0 29.2 14.57 25.65 10.74 3.8 332 359 92 -14.9 11.2 29.2
PNY-N Piedmont Nat. Gas 1.1 0.13 63.0 60.0 26.7 30.32 35.29 21.72 3.4 1,711 2,055 355 -3.0 19.1 26.7
MANT-Q ManTech Int'l 1.0 0.64 21.1 42.6 26.6 47.00 62.06 34.87 0.0 1,448 1,695 465 -19.3 7.3 26.6
WAB-N Wabtec 1.4 0.43 7.0 54.6 26.6 44.75 60.75 28.72 0.1 1,360 1,535 396 -15.9 30.0 26.6
CEL-N Cellcom Israel 1.4 1.15 16.8 20.0 26.4 27.55 37.05 24.31 10.8 1,569 1,841 504 -3.7 -3.8 26.4
FLO-N Flowers Foods. 1.1 0.21 24.4 47.6 25.0 26.41 32.68 20.13 2.3 2,037 2,166 541 -5.8 14.7 25.0
APSG-Q Applied Signal 1.2 0.22 63.8 121.8 23.6 17.52 18.86 10.73 2.9 170 184 50 -2.8 32.7 23.6
SXE-N Stanley Inc. 1.2 0.69 45.5 87.5 23.5 34.01 38.99 22.68 0.0 604 643 173 -7.9 6.2 23.5
GTIV-Q Gentiva Health 0.5 0.34 35.7 46.0 21.8 22.21 29.25 17.03 0.0 1,229 1,292 346 -18.6 16.6 21.8
ZEP-N Zep Inc. 0.7 0.12 51.5 70.9 20.1 18.31 21.36 12.18 0.9 566 575 153 -7.2 33.4 20.1
SCL-N Stepan Co. 0.2 3.06 4.4 24.3 20.1 36.85 60.82 27.75 2.4 1,330 1,577 433 -36.6 15.0 20.1
WMT-N Wal-Mart 0.5 0.36 23.6 29.4 17.6 52.27 63.85 42.50 1.8 375,376 397,213 102,667 -11.2 11.4 17.6
FFH-N Fairfax Fin. 0.6 77.29 47.0 20.9 17.0 265.53 355.62 208.15 1.9 7,476 7,915 1,245 -18.6 -5.5 17.0
HE-N Hawaiian Electric 0.7 0.31 41.1 43.3 16.6 24.82 29.75 20.92 5.0 2,536 2,885 774 -10.9 13.2 16.6
SPTN-Q Spartan Stores 0.2 0.53 55.7 82.4 15.1 25.94 27.74 16.73 0.8 2,477 2,572 627 10.2 14.3 15.1
SF-N Stifel Financial 1.2 0.89 47.0 101.0 14.4 43.10 60.61 24.67 0.0 789 837 214 -12.4 23.0 14.4
NPK-N Nat'l Presto Ind. 0.9 1.18 12.8 50.9 13.3 55.77 80.60 41.40 1.8 421 432 111 -29.3 15.0 13.3

SOURCE: O'SHAUGHNESSY ASSET MANAGEMENT

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