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.

Adventurous investors looking for outsized returns spend a good deal of their time looking for stocks in the small cap space. While smart stock selection can indeed result in significant gains, the risks are also considerable and investors buying small caps, particularly in a market as nervous as the current one, should keep a close eye on their stocks. Understanding, or at least following, the qualitative story is very important, particularly as many of the most promising small caps belong in sectors such as technology and health care where product innovation, regulatory changes and litigation, only to name a few, carry consequences to which smaller companies are more sensitive than bigger ones. While reporting companies’ qualitative story isn’t MarketGrader’s strength, we do believe that beginning your research process with a solid group of well run, profitable candidates can get you off to a good start. Below we list the top five Small Caps in MarketGrader based on a combination of solid fundamentals and strong sentiment. These companies are part of our Small Cap Honor Roll, which you may view here.

DepoMed Inc. (DEPO)

With an overall grade of 93.6 (out of 100), DEPO is the highest graded pharmaceutical company in MarketGarder.com. The company has a market capitalization of $422 million and, it should be said, faces significant headwinds on a number of fronts. Its diabetes drug Glumetza is facing a patent challenge from Sun Pharmaceuticals while its partner, Abbott Labs, has declined to market its new drug Gralise, despite FDA approval. Despite a three month decline of 15% in the price of the stock, most investors seem to be sticking around, as evidenced by our strong Sentiment score of 8.3 (out of 10). MarketGrader’s Sentiment analysis is based on four indicators designed to measure, well, investor sentiment for the stock, irrespective of the company’s fundamentals (RIMM’s Sentiment score, for example, fell from 8.1 in early April to 1.7 in the days before last week’s earnings announcement, which sent the stock tumbling more than 20% in a day).

As indicated by our fundamental grade, DepoMed’s financials are solid, in large part because it posted very strong results for the quarter ended March 31^st. It generated $86.7 million in free cash flow during the last 12 months, on revenues of $149.8 million. The company has been paring its debt load aggressively, with total debt outstanding of just $1.16 million, down 86% from where it stood two years ago. The stock is currently trading at 3.9 times trailing 12-month earnings per share and 4.8 times forward full year earnings. The company’s return on equity in the last 12 months was 85%.

Kulicke and Soffa Industries Inc. (KLIC)

Singapore-based KLIC, which manufactures equipment for the Semiconductor industry, is one of a few highly graded companies by MarketGrader in the sector. It has an overall grade of 93.5, a Sentiment score of 8.6 and a market capitalization of $785 million. The company has cut its debt by 59% in the last two years to $101.75 million, which now accounts for just 21% of total capital. Kulicke and Soffa generated $138.45 million of free cash flow during the last 12 months on revenues of $836.12 million, with a return on equity of 41.3%. Revenues are now 40% higher than they were three years ago. During the last year the company’s margins expanded smartly, with operating margins of 21.17% compared to 8.7% for the 12 months ended a year ago. The stock is currently trading at 4.6 times trailing 12-month earnings per share and 5.7 times fiscal year 2011 estimates.

Republic Bancorp Inc. (RBCAA)

This Kentucky-based bank has a market capitalization of $367 million and the highest overall grade, at 90.3, of all banks in MarketGrader.com. Its Sentiment score is 7.6. RBCAA, which has branches in Kentucky, Indiana, Ohio and Florida, has consistently increased its dividend yearly in the last five years and never had to cut it during the 2008 financial crisis. The bank, which has excellent financials, was highlighted on our Blog last month. During the last 12 months, ended last quarter, Republic Bancorp’s income resulted in a 2.78% return on over $3.6 billion on average quarterly assets, much higher than the average return on assets of 0.05% for all banks followed by MarketGrader. The bank’s capital position is very strong, with core capital accounting for 23.9% of risk-weighted assets, above the 12.7% bank average. Additionally, at the end of last quarter Republic Bancorp had $0.70 in loan loss reserves for every dollar of nonperforming assets. The stock is currently trading at 4.5 times trailing 12-month earnings and 5.4 times full year estimates.

Nova Measuring Instruments Ltd. (NVMI)

Another highly graded company in the semiconductor space, Israel-based NVMI has a MarketGrader overall grade of 90.2 and a Sentiment score of 8.9. It has a market capitalization of $267 million. The company’s revenues and net income have been growing at a healthy clip in recent quarters and it has no debt. It generated $27.38 million in free cash flow on a trailing 12-month basis, on revenues of $98.8 million, which were 72% higher than the 12 months ended three years ago. More importantly, Nova Measuring Instruments has been growing profitably, having grown its gross margin to 57.5% in the last 12 months from 50.6% a year earlier, while achieving a return on equity of 35%. The company’s shares currently trade at 9.3 times trailing earnings and 9 times full year estimates.

Momenta Pharmaceuticals Inc. (MNTA)

Momenta Pharmaceuticals, with a market capitalization of $978 million the highest graded biotechnology stock in MarketGrader.com, is another company investors should monitor closely. We give it an overall grade of 89.5 and a Sentiment score of 8.4. The company was losing money up until three quarters ago, when its growth exploded. Contrast its results for the 12 months ended last quarter to the equivalent period ended a year ago: revenues grew in this one-year period to $191.25 million from $19.95 million; a $62.19 million loss turned into $110.38 million of net income while free cash flow went from a negative $50.1 million to $39.93 million in the most recent period. The company has increased its common share base by 15% also during the last year. It has apparently used its capital and improved operating results to aggressively pay down debt, which went from $11.58 million in 2007 to $1.58 million at the end of the first quarter. It is also sitting on $182 million in cash and other short-term investments. Among things for investors to monitor will be its ongoing profit sharing agreement with Sandoz, part of Novartis, and its pending litigation with TEVA Pharmaceuticals, which Momenta sued for patent infringement last December.

Cephalon Inc. (CEPH) announced today that it has agreed to be acquired by Teva Pharmaceutical Industries for $81.50 a share in cash, a 5.8% premium to the stock’s Friday close of $77.02. The company had previously disclosed on March 18th that it was rejecting an offer from Valeant Pharmaceuticals, based in Canada, for $73 per share.

While MarketGrader’s rating on Cephalon has been ‘Buy’ since January 2010, when we upgraded the stock from ‘Hold,’ it is our Sentiment rating the one that more closely tracks all of this recent acquisition activity. MarketGrader had Cephalon’s Sentiment rating as ‘Negative’ as recently as February 9th of this year. We then raised it to ‘Neutral’ as activity surrounding the stock started picking up, something that is tracked by our Price Trend and Price Momentum indicators, two of the four that make up our Sentiment score. The overall Sentiment score jumped from 4.2 to 6.1 (out of 10 possible points) on March 30th and continued climbing throughout April to the current 7.6, which indicates a ‘Positive’ rating.

MarketGrader also highlighted CEPH as the Stock of the Week on Barrons.com on September 15th, 2010 based on a closing price of $61.60 the previous day. While this highlight was based on the strength of the company’s fundamentals and not necessarily its Sentiment rating, an investor who had bought the stock following our mention of it would have gained 31.2% based Teva’s offer.

For more stocks with improving sentiment scores please take a free trial and refer to our Today page, where we highlight five such stocks every day. For our Seeking Alpha readers, please refer to our Premium App (MarketGrader Research), where you may see the top 40 stocks with improving sentiment and the top 40 companies with improving fundamentals every day. You may read more about the app here.

A good indicator of the market’s current bullishness can be found in our Sector Analysis, the first ‘level’ of our Top Down Analysis. Six of the ten sectors followed by MarketGrader currently have a Neutral rating based on the underlying price strength and momentum of the stocks in them: Consumer Discretionary, Energy, Financials, Industrials, Information Technology and Materials. The other four sectors are rated Positive: Consumer Staples, Health Care, Telecom Services and Utilities. None, of course, are rated Negative. That the four sectors with a Positive rating are traditionally considered to be defensive havens is not a coincidence given investors’ recent uncertainty about the aging bull market’s ability to continue its upward trend; particularly in anticipation of the Fed’s unwinding of QE2. So, as investors ponder what the stock market will look like in the second half of 2011 we would like to highlight one of our currently favorite sectors, Health Care, and particularly our Health Care index.

MarketGrader follows 631 Health Care stocks, with 125, or 19.8%, currently rated ‘Buy.’ 212 stocks in the sector, or 33.6% have a Positive rating. 76 companies receive both a ‘Buy’ rating based on our fundamental analysis and a Positive sentiment rating. 36 stocks in the sector are trading at their 52-week high and only 6 at their 52-week low. And 346 stocks, or 54.8%, are trading above their 50 and 200 day moving average lines with only 109 trading below both lines. The following are MarketGrader’s ten highest graded Health Care stocks that also have a Positive sentiment and trade above $10 per share:

-       Jazz Pharmaceuticals Inc. (JAZZ), Grade: 84.6, Sentiment: 9.1

-       ViroPharma Inc. (VPHM), Grade: 81.4, Sentiment: 8.8

-       Medicines Company (MDCO), Grade: 78.8, Sentiment: 8.1

-       AMERIGROUP Corp. (AGP), Grade: 77.4, Sentiment: 8.7

-       Cyberonics Inc. (CYBX), Grade: 77.1, Sentiment: 7.2

-       Momenta Pharmaceuticals Inc. (MNTA), Grade: 77.0, Sentiment: 8.1

-       Medidata Solutions Inc. (MDSO), Grade: 75.9, Sentiment: 8.8

-       Align Technology Inc. (ALGN), Grade: 75.8, Sentiment: 8.7

-       WuXi Pharma Tech Inc. (WX), Grade: 74.8, Sentiment: 7.9

-       HealthSpring Inc. (HS), Grade: 74.7, Sentiment: 8.2

Investors could do worse in following the sector than tracking the MarketGrader Health Care Index, one of our eight sector indexes. This equally weighted basket of 40 stocks is rebalanced quarterly during the third week of February, May, August and November. Subscribers to MarketGrader.com can follow its components and track its performance on a daily basis. It is currently the year’s top performer among our sector indexes with a year-to-date return of 14.4% compared to 8.7% for the S&P 500 Health Care index and 9.6% for the S&P 1500 Health Care index. In 2010 it beat both of these benchmarks by 1,469 basis points and 1,221 basis points respectively. In the last three years, through last night’s close, the MarketGrader Health Care index is up 32.7% (cumulative) compared to 7.3% and 10.8% for the S&P 500 and S&P 1500 Health Care indexes respectively. Here are a few of the index’s components:

Five biggest companies:

-       Unitedhealth Group Inc. (UNH), Grade: 71.9, Sentiment: 9.5

-       Amgen Inc. (AMGN), Grade: 68.3, Sentiment: 6.4

-       Eli Lilly and Co. (LLY), Grade: 71.3, Sentiment: 7.9

-       Gilead Sciences Inc. (GILD), Grade: 66.9, Sentiment: 6.8

-       Celgene Corp. (CELG), Grade: 59.3, Sentiment: 6.8

Top five performers since its last rebalance:

-       Biogen Idec Inc. (BIIB), Grade: 73.2, Sentiment: 9.5

-       Hi Tech Pharmaceutical Co. Inc. (HITK), Grade: 88.2, Sentiment: 5.4

-       Questcor Pharmaceuticals (QCOR), Grade: 49.8, Sentiment: 5.4

-       Perrigo Co. (PRGO), Grade: 66.2, Sentiment: 9.3

-       Resmed Inc. (RMD), Grade: 67.9, Sentiment: 6.6

Guest readers may access all 40 components of the MarketGrader Health Care index for free for a limited time by clicking here. For a complete breakdown of the entire sector and for the components of the other seven MarketGrader sector indexes we encourage you to take a free trial of our service.