With the stock market up 20% since October (MarketGrader Sentiment Index Flashes ‘BUY,’) we thought this would be an appropriate time to highlight some of our best values stocks, available this week to MarketGrader.com guests in our featured Value Honor Roll.

One company in particular that caught our attention this week is Power-One, Inc. (NASD: PWER), a California-based manufacturer of power supplies and equipment used in the communications, semiconductor, health care and industrial sectors. In our view the company’s business segments put it in a strong position to benefit from two ongoing growth trends: the development of alternative sources of energy and the ongoing ‘cloud’ build out. The company manufactures solar and wind inverters, equipment that transforms energy from those two alternative sources into usable electricity. Exposure to this market segment, while promising, brings with it volatility given the nascent state of this industry, its dependence on venture capital and government incentives and the resurgence of the oil and gas industries in the U.S. On the other hand, its lineup of power supplies puts the company in the very real and very profitable position of providing critical equipment to the build up of data centers and the ‘cloud’ as companies from Amazon to Google race furiously to expand their networks.

The stock, currently at $5.15 a share, trades 43% below its 52-week high, mostly as a result of lowered guidance by management in the last quarter of 2011. However, since then, the company had a strong earnings report on February 2nd, beating analyst estimates by 50%. Its fiscal year 2012 consensus estimate is up now to $0.90 per share from $0.76 three months ago, an increase of 18%. And while the company’s revenue fell 27% last quarter from the year earlier period, its overall financial position is very strong. Trailing 12-month revenue is up 89% in three years, when the company was posting full year losses. In the last 12 months it earned $127 million. It is clear that the company is not only growing, but doing so profitably while systematically fortifying its finances. It has been trimming its debt load, which peaked at $110 million in 2008 and is down now to a mere $36 million, accounting for only 8% of total capital. All of it has long term maturities. Power-One generated $178 million of free cash flow in the last 12 months and now has $204 million in cash on hand. Also on a trailing 12-month basis its return on equity was 31% and its return on capital was 40%. The company generates almost $300,000 in revenue and $37,000 in net income per employee, both above the industry average.

The stock trades at a meager 5.5 times trailing earnings and 7.6 times next year’s estimates. It also trades at 0.5 times trailing 12-month sales, a fraction of the 3.5 price-to-sales ratio industry average for its peers in the Electrical Products industry. A few investors seem to be catching on; the stock’s Sentiment score has been climbing rapidly in recent weeks from a December low of 3.8 to its current 6.6 (out of 10.) But long term investors need not hurry as this is still, by our account, a value play. While Power-One has an overall MarketGrader grade of 77.8, when graded from the value perspective (where our system emphasizes value indicators over growth indicators) the overall grade jumps to an impressive 91.8. It is worth mentioning also that 12% of the company’s float is sold short, which, in combination with a small market cap of $630 million could represent unwanted volatility for the more conservative types. Long term, however, the stock looks solid from our vantage point. Please click here for our complete analysis.

Being a successful contrarian investor takes skill and preparation; yet many talented and hard working contrarians are often proven wrong for too long before eventually being proved right in the long run, their portfolios paying a steep price in the process and often jeopardizing hard-earned gains–John Paulson comes to mind here. In a market as treacherous and volatile as today’s stock market, dominated by high frequency traders and double and triple inverse or leveraged ETFs, playing contrarian to investor sentiment can be disastrous. Good examples of this are Netflix and MF Global Holdings, two companies that could hardly be any more different from each other. One, a (once) high-flying Internet darling and the other a self-styled up-and-coming investment bank with more ambition than capital to support it. Yet they have at least one thing in common: they are both members of MarketGrader’s Declining Sentiment list, currently featured on our web site as the free stock idea list of the week. This list highlights the 100 stocks with the biggest four-week drops in Sentiment score.

While Netflix’s story reached a climax this week with the company’s disappointing earnings announcement, in which the it revealed a jaw-dropping loss of 800,000 subscribers in one quarter, the tug of war between NFLX bulls and bears has been playing out for months. And while today’s rock bottom Sentiment score of 1.1 (out of 10) might seem like yesterday’s news, NFLX has been a member of this not-so-select group for more than a month. Actually, signs of deteriorating Sentiment first surfaced based on MarketGrader.com’s analysis as early as June, when the stock’s Sentiment rating was first downgraded from Positive to Neutral. While the score stayed in a Neutral Sentiment range for most of the following two months a second major decline occurred in mid September when the Sentiment rating was downgraded from Neutral to Negative. This should have given cautious investors warning a month ahead of the company’s earnings announcement. While many would argue today that the company still has a solid business, generally strong fundamentals (we won’t argue with that) and a clear plan to steer its business away from DVD deliveries and towards streaming digital content (can’t argue here either,) such deterioration in Sentiment should have given investors pause in waiting for a better entry point given the stock’s lofty valuation (here our Rating Style Change feature comes in quite handy.) And for long term owners of the stock it should have served as a sign to take some money off the table and wait for the storm to pass. A history of Netflix’s Sentiment rating in the last two years is illustrated below.

MF Global’s story played quite differently in the last few months yet it had a similar (and scarier) ending this week. While MarketGrader.com has rated MF a ‘Sell’ since 2008, unlike NFLX which we rate a ‘Buy’ based on its fundamentals, a similar decline in the stock’s Sentiment score took place two weeks before yesterday’s earnings announcement. On October 11^th MarketGrader.com downgraded MF’s Sentiment rating from Neutral to Negative and added the company to the Declining Sentiment list. The chart below illustrates the decline in Sentiment earlier this month. The stock fell 47% yesterday following the company’s earnings report and is down again today more than 32% at the time of this article’s publication.

Investors without a MarketGrader.com subscription wondering who else might be on our Declining Sentiment list may view it for free for a limited time by clicking here. They may then view our complete analysis, both top-down (Sector, Industry and Sentiment) and bottowm-up (Fundamentals) for every company on the list. Subscribers may, of course, always access this and all other daily-updated lists in the Stock Ideas section under the StockGrader tab in MarketGrader.com.

Our popular ‘Stock Ideas’ section, one of our web site’s most popular features with our subscribers, is, we suspect, about to become even more popular. After hearing back from many of our subscribers who have requested an expansion of this section to include more pre-filtered lists of stocks based on myriad search criteria, we have embarked on a complete revamp of our Stock Ideas section, the first part of which was released on Friday along with our new ‘Company Profile’ page. The two new Stock Ideas sub-sections rolled out last week are only the first step in our roll-out of an entirely new set of lists devoted to helping you find the best stocks in MarketGrader.com based on your own preferences or investment style. Since last Friday subscribers clicking on the ‘Stock Ideas’ link in the StockGrader section of our site will notice two new sections: ‘New Income Ideas’ and ‘New Sentiment Ideas.’ In addition to providing you with brand new lists of stocks with these two sections we’re also introducing our new user interface design, which will be used going forward in this section of our web site.

New Stock Ideas Interface

This week we’re introducing a new way for our subscribers to scroll through any of our ‘Stock Ideas’ called ‘Mosaic View,’ which will be available for all lists in this section of our web site in addition to our traditional ‘List View.’ Starting with the two new sections we launched on Friday, subscribers that go to any of our new stock ideas sections will now land on a snapshot page highlighting the first stock in the list, which appears underneath a new horizontal scroll bar that will display all stocks in the list from left to right. Our goal with this new ‘mosaic view’ is to allow you to see, without leaving the stock ideas section of the site, the actual criteria and data points used in selecting every company to any particular list. The navigation bar above the company’s snapshot allows you to scroll across the list without leaving the page or hiding the stock currently selected. By simply clicking on any of the ‘mosaic tiles’ on the scroll bar you may change the snapshot below it. On the page’s left hand side you may see all the idea lists in each sub-category (such as Sentiment Ideas or Income Ideas) with a brief description of each one. Clicking on any of the lists on the left margin will populate the rest of the page. And when you want to see the entire list of stocks from top to bottom all you have to do is click on the ‘List View’ tab in the upper right hand corner of the page for a traditional view of the entire list.

New Sentiment Ideas

The first new group of lists we would like to introduce to our subscribers in our expanded ‘Stock Ideas’ section is based on our Sentiment indicator. The purpose of these three new lists is to help you identify stocks with improving or declining investor sentiment in anticipation of possible short-term price movements.

1. Improving Sentiment

This is a list of the 100 stocks in MarketGrader.com with the biggest jump in positive momentum based on changes to our Sentiment indicator in the last four weeks. Our Sentiment indicator, designed to complement our traditional Fundamental Analysis, measures overall investor and market sentiment for a company’s shares irrespective of the company’s financial performance. It is comprised of four individual indicators: Price Trend, based on a MACD analysis; Price Momentum, based on a relative price strength analysis; Earnings Guidance, which tracks the rate at which companies and the analysts that follow them change their annual EPS forecast over time; and Short Interest, which tracks the monthly changes in the number of shares sold short relative to the company’s public float. The combination of these four indicators, which result in our 0-10 Sentiment score, helps MarketGrader.com subscribers identify opportunities among stocks that seem to be in favor with investors and that may be climbing as a result of a quantitative story (acquisition, product launch, etc.) not tracked or quantifiable by our traditional fundamental analysis. However, all companies in this list must have an overall ‘Buy’ or ‘Hold’ rating. The list is ranked, from top to bottom, based on the magnitude of the increase in each stock’s Sentiment score in the last four weeks.

2. Declining Sentiment

This list with the 100 stocks in MarketGrader.com with the biggest drop in Sentiment is, essentially, the opposite of our ‘Improving Sentiment’ list. It measures drops in our 0-10 Sentiment score in the last four weeks irrespective of company fundamentals. These are usually stocks that investors want to be careful with as they are either out of favor at the moment or in the process of falling out of favor with investors. The list is particularly helpful in helping investors avoid companies with high fundamental grades whose stocks are in decline, particularly if they’re concerned about their short-term performance.

3. Speculative Plays

Like our ‘Improving Sentiment’ list, this one is based on stocks with significant increases in investor sentiment over the last four weeks; however, unlike the aforementioned list, stocks in this selection are all rated ‘Sell’ based on MarketGrader.com’s fundamental analysis. This leads us to believe that the reasons why these stocks’ Sentiment is improving have little to do with the companies’ financial performance and more to do with investor expectations of upward movement in their shares as a result of a qualitative story that might not have played our entirely in the market. This would help explain why, for example, the current list contains plenty of homebuilders, banks, financials, publishers and generally companies in industries with poor overall fundamentals. This is an interesting list for investors willing to do some qualitative research looking to uncover the story behind some of these jumps in Sentiment and get ahead of a potentially lucrative rise in the stock. However, caution is required as these are, after all, speculative plays.

While company valuations seem to have taken a back seat to global macroeconomic concerns in Septmeber, investors would be well served by identifying buying opportunities among stocks that in addition to having strong fundamentals are also showing resilience to the market’s recent turmoil as measured by investor sentiment toward their stocks. In this vein we have put together a list of ten value stocks that have high overall fundamental grades and a strong and rising sentiment indicator, as measured both by MarketGrader.com.

Our selection criteria is simple: we looked for companies with an overall grade above 70 (out of 100 total possible points) with a Value grade at least as high to their Growth grade. For context, MarketGrader.com’s 24-indicator analysis is broken down into Growth, Value, Profitability and Cash Flow indicators (six each) which are then aggregated into our final overall grade. Additionally, and perhaps more importantly in the context of today’s volatile environment, we looked for companies with a high Sentiment score in our zero to ten point scale. MarketGrader.com’s Sentiment Analysis is broken down into four indicators: Price Trend, based on a MACD analysis, Price Momentum, based on a relative price strength analysis, Earnings Guidance, which tracks the rate at which companies and the analysts that follow them change their next fiscal year EPS forecasts and Short Interest, based on monthly changes to short interest as a percentage of float. The top ten stocks to pass our filter are listed below.

1. Simulations Plus Inc. (NASD: SLP)

This micro-cap, worth only $48.6 million, designs and builds software used in the development of new drugs by biotechnology and pharmaceutical companies. The stock’s overall Sentiment score is 8.8 (out of 10.) Its Price Trend is Positive and based on its Price Momentum its relative strength is at the 90^th percentile, or better than 90% of the stocks in MarketGrader.com’s coverage universe. Today the analyst consensus estimate for the company’s fiscal year 2012 EPS is $0.31 per share compared to $0.25 three months ago.

Fundamentally the company’s overall grade is 79.8 (out of 100) which ranks it as the third highest stock out of 90 in the Packaged Software industry followed by MarketGrader.com. The company’s trailing 12-month net income is almost twice as high as what it was three years ago on trailing 12-month revenue of $11.81 million. During this same period Simulation Plus generated $3.1 million in free cash flow and produced a 20.8% return on equity and a 32% operating margin. The company has no debt and the stock trades at 17 times trailing and 13 times forward earnings per share.

2. Nike Inc. (NYSE: NKE)

Nike’s Sentiment score of 8.9 is based partly on a positive Price Trend indicator and Price Momentum at the 89^th percentile of all stocks followed by MarketGrader.com. Today’s earnings consensus estimate for fiscal year 2012 is $4.96 per share vs. $4.81 three months ago. Only 1% of the company’s share float is sold short.

Nike’s overall grade of 76.1 makes it the fifth highest ranked company among the 45 that we follow in the Apparel/Footwear industry. Last quarter it reported revenue and net income that were up 13.6% and 13.8% respectively from a year earlier. Its trailing 12-month revenue and net income through the period ended last quarter were $20.85 billion and $2.13 billion, with $858 million of free cash flow. Nike is virtually debt free despite total debt of $663 million considering its cash on hand last quarter was $4.54 billion. Based on its operating results from the last 12 months its operating margin was 12.9%, its return on equity was 21.7% and its return on invested capital was 26.6%. When its cost of equity and debt are subtracted, on an after tax basis, from this number, the result is an economic value added of 18.8%. This reflects the return to investors after accounting not only for the company’s operating costs but also to the opportunity cost of investing in its shares. The stock’s dividend yield is currently 1.4%; it trades at 19 times trailing and 17 times forward earnings per share (the richest valuation on our list.)

3. Microsoft Corp. (NASD: MSFT)

Microsoft’s shares trade currently in a positive Price Trend and have better Price Momentum than 70% of all stocks in our coverage universe. Analysts following the company expect, on average, fiscal year 2012 earnings per share of $2.86, up from the consensus estimate of $2.76 three months ago. 1% of the company’s float is sold short.

Based on an overall grade of 86.0 Microsoft is ranked eighth out of 873 Technology companies followed by MarketGrader.com. Despite its size the company continues to record outstanding net income growth, up 30% last quarter from a year earlier and up 31% in three years based on trailing 12-month net income of $5.87 billion. During this period Microsoft generated a remarkable $19.46 billion in free cash flow. With its recent 25% dividend increase the stock now yields 3%, about in line with 30-year U.S. government bonds. In addition to its payout the company has bought back 15% of its outstanding shares in the last five years even after accounting for newly issues shares used as compensation. The stock’s trailing and forward P/E are 9.5 and 8.2 respectively.

4. Metropolitan Health Networks Inc. (AMEX: MDF)

Metropolitan Health Networks is a provider of health care services to the elderly and to patients with certain disabilities. Its stock currently has a Sentiment score of 8.7 with a stock price trend that, while still positive, seems to be flattening out, despite price momentum that is better than 76% of the stocks in our coverage universe. Its fiscal year 2011 consensus estimate of $0.65 per share is lower than the $0.67 consensus from three months ago. Its short interest is 4% of float.

The company’s overall fundamental grade of 78.9 makes it the highest ranked stock in the Medical/Nursing Services industry, in which we cover 36 companies. It also makes MDF the 12^th best stock out of 625 in our entire Health Care sector coverage list. The company’s market cap is $192 million. Its trailing 12-month revenue of $374.56 million is 26% higher than it was three years ago while its net income of $26.7 million is three and a half times higher over the same time period. The company has no debt, a return on invested capital of almost 52% and operating margins of 11.46%, above the 10.76% industry average. The stock trades at only 7.3 times trailing and 6.5 times forward earnings per share.

5. Eli Lilly & Co. (NYSE: LLY)

LLY’s Sentiment score of 8.0 is based on a Price Trend indicator that is positive, even though the chart has flattened out recently, and a Price Momentum indicator that ranks the stock’s relative strength at the 78^th percentile of all stocks under coverage. The EPS consensus estimate for the 2011 fiscal year is for $4.33 per share compared to $4.28 three months ago. Short interest stands at 3% of float.

Eli Lilly’s overall fundamental grade of 70.6 ranks it third among the 18 Major Pharmaceutical companies followed by MarketGrader.com. While the company’s revenue increased by 8.8% last quarter its net income fell 11.2%, both relative to the year earlier period. However, its trailing 12-month net income of $4.73 billion is 24% higher than it was three years ago. It generated $1.35 billion in free cash flow last quarter alone and $4.36 billion in the last 12 months. Total debt of $6.73 billion is only slightly higher than its $6.33 billion in cash on hand, which helps explain the company’s generous payout. The stock, which trades at 8.8 and 10 times trailing and forward EPS respectively is currently yielding an incredible 5.3% based on a $0.49 per share dividend.

6. Intel Corp. (NASD: INTC)

INTC’s current Price Trend is positive, apparently reversing a recent negative trend. The stock’s Price Momentum ranks at the 90^th percentile and its short interest is 3% of its public float. Analysts following the company expect a fiscal year 2012 report of $2.37 per share compared to $2.27 just three months ago. All of this results in a Sentiment score of 7.1, a recent upgrade from ‘Neutral’ to ‘Positive.’

The company’s current fundamental grade of 89.1 makes Intel the highest ranked stock in the Semiconductor industry, where we follow 94 stocks and the second highest ranked company in the entire Technology sector, where we follow 872 companies. Its revenue increased 21% last quarter alone while net income increased only 2.3% given that capital expenditures jumped 137% as the company continues to invest in the development of processors geared towards mobile devices, diversifying it away from its PC-focused business and putting it in a favorable position for future market share gains. Despite its ongoing investments Intel still generated $526 million in free cash flow last quarter and $4.96 billion in the last months. Its total debt of $2.16 billion is dwarfed by its $11.55 billion in cash on hand. It continues to operate very profitably with a remarkable 34% operating margin on trailing 12-month sales of $48.4 billion. The stock trades at 10 and 9 times trailing and forward earnings per share and, at current its price, yields 3.24%.

7. Hi-Tech Pharmacal Co. Inc. (NASD: HITK)

The stock’s Price Trend is positive and its Price Momentum ranks at the 95^th percentile of all stocks in our database. The consensus estimate for fiscal year 2012 of $3.05 per share is 35% higher today than the expected $2.26 three months ago. Short interest is 13% and the stock’s Sentiment score is 8.9.

Hi-Tech Pharmacal’s overall grade of 92.1 currently makes it the highest graded company in all of MarketGrader.com, across all sectors. Its revenue and net income increased by 39% and 59% respectively last quarter, when it also generated $16.75 million in free cash flow on sales of $56.2 million. Free cash flow in the last 12 months was $35.37 million. The company has no debt and operating margins of 31.42% compared to the pharmaceutical industry average of 16.67%. The stock trades at 9.2 times trailing earnings and 12 times forward estimates.

8. j2 Global Communications Inc. (NASD: JCOM)

JCOM, which offers clod-based communications services such as e-faxes, voicemail, conference calling and data storage is the second highest ranked stock in the Internet Software & Services industry behind Google. It also ranks ninth overall among all Technology stocks. It has a market capitalization of $1.35 billion.

The stock’s Sentiment score is 8.3, based on a positive Price Trend and Price Momentum ranked above 83% of all stocks in our coverage list. Consensus fiscal year 2011 estimates of $2.52 exceed the $2.37 estimate from three months ago. Short interest is 11%.

The company had strong report last quarter with a 40% jump in sales and 52% increase in net income. Trailing 12-month revenue of $292.86 million is up 26.3% in the last three years and net income is higher by 55% at $106.15 million. The company has no debt, $151 million in cash on hand and it generated $40.5 million in free cash flow last quarter and $126.2 million in the last year. Its return on equity in the last 12 months was 21% on 39% operating margins. The stock’s trailing and forward P/E are 12.8 and 11.1 respectively.

9. DSW Inc. Cl A (NYSE: DSW)

DSW is the number one stock in the Apparel & Footwear industry according to MarketGrader.com based on an overall grade of 80.0. The stock’s Sentiment score of 8.7 is based on an EPS consensus estimate of $2.87 for the fiscal year ended January 2012, up from $2.79 three months ago, a positive Price Trend, Price Momentum ranked higher than 93% of all stocks in our system and short interest of 5%.

The company’s trailing 12-month revenue and net income are up 36% and 419% in the last three years to $1.94 billion and $232 million, with TTM free cash flow of $124.5 million. Total debt is $133.4 million and cash on hand is $350.7 million. The company’s operating margin of 10.25% exceeds the industry 9.06% average and its return on equity was 37.04% in the last year. The stock trades at 7.8 and 14.5 times trailing and forward earnings per share.

10. CF Industries Holdings Inc. (NYSE: CF)

Despite all the negativity that has surrounded basic material stocks during September, CF Industries has a Sentiment score of 8.9 based on a positive Price Trend and Price Momentum ranked at the 89^th percentile; additionally the consensus estimate for the company’s fiscal year 2011 has increased from $16.69 in earnings per share three months ago to $21.22 today, a 27% jump. Short interest is 4%.

The company’s overall grade of 82.2 ranks it number one among 16 companies in the Agricultural Chemicals industry followed by MarketGrader.com and the 14^th best stock, based on its fundamentals, in the entire Materials sector. CF Industries has cut its debt by 38% in the last year, down to $1.62 billion, or 25% of total capital. It has $1.36 billion in cash on hand and it generated $1.78 billion in free cash flow in the last 12 months. Both revenue and net income grew strongly last quarter while on a trailing 12-month basis they grew a remarkable 57% and 52% to $5.13 billion and $1.02 billion respectively. Its operating margin of 36.7% exceeds the industry average of 21.8%. Return on equity in the last year was 20.9% and the stock trades at 11 times trailing and 7.9 times forward earnings per share. The company’s market cap is $10.4 billion.