With the U.S. stock market at or near 52-week highs, depending on which benchmark you look at, and an uneasy complacency among investors seemingly setting in, we thought an update on our MarketGrader Sentiment Index might serve as a reality check. For those not familiar with the index, or MGSI as we call it, we suggest a quick read of our October 5th, 2011 introductory post, available here. To summarize: MGSI tracks the ratio of stocks in the MarketGrader.com coverage universe with a positive sentiment to those with a negative sentiment. Such ratings are based on our four sentiment indicators that track price momentum, price trend, earnings guidance and short interest. Any reading of the MGSI ratio above 2.5 suggests excessive investor optimism, while a reading below 1.5 suggests excessive pessimism. Extreme readings above 3.0 or below 1.0 suggest extreme scenarios. Which brings us to our current state of affairs.

Before discussing what MGSI is saying today it is worth noting how we got to our current state of collective enthusiasm for stocks. Since our October 5th warning of an extreme reading of 0.14 (with seven stocks in negative sentiment territory for each one with positive sentiment) the market has rallied strongly as the risk premium in risk assets has fallen significantly. Since our article, the S&P 500 Index has gained 20.8% with the Dow up 19.4%, the NASDAQ Composite up 23.1% and the Russell 2000 up 28.0%. We’ll take this opportunity, of course, to highlight the performance of the MarketGrader-powered Barron’s 400 Index, up 29.2% since Oct. 4th 2011. In rising periods such as this one the B400 clearly continues to outperform. Perhaps more telling than the rise in these benchmarks has been the fall in the VIX, the now ubiquitous measure of implied volatility in S&P 500 options, which closed Thursday 53% below its Oct. 4th level.

This forceful rise in equities in the last four and a half months has expectedly pushed the MGSI to and all-time high of 4.96, solidly in what we call “Extreme Optimism” territory. Today there are 1,175 stocks in MarketGrader.com with positive sentiment and only 358 with negative sentiment. To put this into perspective, since MGSI’s inception in November 2008, the index has spent only 20 days above 3.0 and three days above 3.5. And this rise has been powered by stocks across the board, as seen from our individual sector MGSI sub-indexes. These essentially track the same ratio of positive-to-negative sentiment stocks MGSI tracks but on a sector by sector basis across nine sectors. Of all nine MGSI sectors tracked by MarketGrader, seven are currently scoring above 2.5, inside our “Excessive Optimism” territory. Six of the seven currently score above 3.o, inside of our “Extreme Optimism” area. These are all at 52-week highs. The seventh, Energy, is not at a yearly high but is only a stone’s throw away from getting there. The sector with the most extreme reading is Financials with an off-the charts MGSI level of 9.61. Of the 15 stocks in the sector with a sentiment score above nine (out of 10) only three have a ‘Buy’ rating based on underlying company fundamentals. The only two sectors not in the overly optimistic camp are Telecommunications, which only counts a very narrow 109 companies and Materials, a somewhat broader group. Telecommunications, at 0.88, is actually in “Extreme Pessimism” territory and Materials, at 2.11, is in neutral, or ‘Goldilocks’ territory, not too hot,not too cold.

The MarketGrader Sentiment Index readings should be seen as tactical, rather than strategic market calls, considering they are based on a very narrow view of the market, namely through investor sentiment. Investors should place the MGSI readings in the context of macroeconomic trends and overall earnings-driven trends for U.S. companies. From the perspective of company fundamentals we feel generally bullish about the case for equities in the years ahead, particularly given the lack of earnings multiple expansion despite the aforementioned increases in stock prices. With three quarters of the S&P 500 and 83% of the Barron’s 400 companies having already reported results this earnings season, both indexes are still trading at below historical P/E ratios of 13 and 14 times 12-month forward earnings respectively. And while corporate earnings gains have slowed down from the early 2011 pace, U.S. companies continue to show productivity gains and are sitting on piles of cash and mostly sound business models. This will, however, be the subject of a separate story. For now cautious investors might want to keep an eye on MGSI, available for free here at MarketGrader.com.

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.

Amid an uncertain economic climate investors should be looking not only for companies that are able to survive an economic downturn but also for those that might actually benefit from taking market share from weaker rivals that may be too busy defending their turf or simply focused on surviving a weak economy. A good place to find these companies is MarketGrader’s Cash Kings idea list, one of 22 unique lists published daily for our subscribers.  In order to qualify as a ‘Cash King,’ a company must have an overall ‘Buy’ rating from MarketGrader, a Cash Flow overall grade of at least A- and a minimum of $1 billion in cash on hand. Our current list, available for free to all visitors as the Idea List of the Week, includes a total of 113 companies. 22 of them have at least $10 billion in cash on hand and 36 have a market cap of at least $50 billion; this is clearly a list of mostly large cap companies, with the smallest one, BBVA Banco Frances SA Buenos Aires (BFR), having a capitalization of $1.8 billion. And very telling perhaps of investor preference for safer, solid companies amid the recent market downturn, only five of the companies on the list have a Negative Sentiment rating, while 30 have a Neutral Sentiment rating and 78 have a Positive Sentiment rating.

The following are a few of the highlights of the top ten Cash Kings on MarketGrader.com:

1. Intel Corp (NASD: INTC)

Intel, which was recently the highest overall graded company in all of MarketGrader, has only $2.14 billion in total debt, compared to $11.90 billion in cash on hand. The company received an A+ grade in 4 of the 6 indicators that make up our Cash Flow category: EBITDA Margin, Debt/Cash Flow Ratio, Interest Coverage Capacity and Economic Value. Intel has an overall grade of 91.8 (out of 100).

2. Cliff’s Natural Resources Inc. (NYSE: CLF)

Cliff’s Natural Resources, with an overall grade of 89.0, saw its cash flow grow considerably in its latest quarter to $106.90 million, a 60.27% increase from $66.70 million reported in the year earlier period. The company’s liquidity is not only remarkable but the current amount of debt it carries relative to the cash flow it generates from its operations is even lower now than it was a year ago. It received an A+ grade in 3 of our 6 Cash Flow indicators: Cash Flow Growth, Debt/Cash Flow Ratio and Retention Rate.

3. Apple Inc. (NASD: AAPL)

Apple is truly a cash machine, generating almost $6 billion in free cash flow per quarter and more than $23 billion over the last 12 months.  Its cash flow grew considerably in its latest quarter to $6.22 billion, a 166.91% increase from $2.33 billion reported in the year earlier period. When compared to the 96.25% increase in cash flow in the last twelve months it seems like the rate of growth is accelerating, which could have a very positive impact on earnings growth in coming quarters. The company clearly has very strong liquidity having no debt to finance and $29.23 billion in cash on hand. This affords it significant flexibility to take on debt if it wanted to pursue new growth opportunities such as an acquisition. Apple received an A+ in 5 of 6 Cash Flow indicators: Cash Flow Growth, Debt/cash flow Ratio, Interest Covering Capacity, Economic Value, and Retention Rate. It has an overall grade of 88.0.

The following companies round out our top ten Cash Kings:

4. Research In Motion LTD. (NASD: RIMM)- Overall Grade: 87.6

5. Vale SA (NYSE: VALE)- Overall Grade: 87.2

6. Microsoft (NASD: MSFT)- Overall Grade: 87.1

7. Freeport-Mcmoran Copper and Gold (NYSE: FCX)- Overall Grade: 86.0

8. Altera Corp (NASD: ALTR)- Overall Grade: 86.0

9. Lam Research Corp (NASD: LRCX)- Overall Grade: 84.9

10.  Annaly Capital Management (NYSE: NLY)- Overall Grade: 84.4

For the complete list of all 113 “Cash Kings” and their fundamental analysis, please click here.

Since the release of our redesigned web site about a year ago one of the most popular new features with our subscribers has been our Top Down Analysis. In it, MarketGrader complements its traditional Fundamental or Bottom Up Analysis with three top down indicators: our Sector Rating, Sub-Industry Rating and Sentiment Rating. These three combine to provide context and timeliness to our Buy, Hold or Sell rating by focusing on factors such as supply and demand as well as market momentum that affect stock prices in the near term irrespective of company fundamentals. And among these three new indicators none has become more popular or more widely followed among MarketGrader subscribers than the Sentiment indicator. We have received numerous inquiries from our clients about how it works, asking for more information on the underlying indicators that make up our Sentiment score and rating. We have listened to these requests and are pleased to announce the release of our newest feature, a dedicated Sentiment Analysis page for every company that we cover.

Beginning today, when you log into your MarketGrader.com account and enter any ticker symbol or name and land on our Classic page, you will notice a new link between ‘Fundamental Analysis’ and ‘Top Down’ called ‘Sentiment.’ When you click on it you’ll land on our new page, which breaks down our Sentiment Analysis based on its four underlying indicators. Above the four indicators you’ll see the stock’s overall Sentiment score (from 0-10) and our Positive, Neutral or Negative Sentiment signal.

Our first indicator, called Price Trend, relies for the most part on a MACD (Moving Average Convergence Divergence) analysis. MACD is essentially a technical study (meaning it is based on stock prices) used to determine price trend for any given security. It is calculated based on the rolling moving average of stock prices for given periods of time; these periods vary depending on the inputs used. For example, some investors prefer using shorter-term MACD analyses while others use longer term. Also, the frequency of the observations, or points used to calculate the averages, be it daily, weekly or monthly prices, will determine the smoothness of the lines on the chart and hence the indicators that are used to determine price trend. In our analysis we use a five-year study with weekly observations. There are two primary things to focus on regarding the MACD analysis. The first one is the positioning of the lines relative to the zero line and the second one is the interaction between the MACD line and the MACD Average line. If the current point of the lines lies above the zero line the price momentum is positive. And if the MACD lies above the MACD Average, the price trend is positive (it means recent prices are running higher than the average of prices over a longer stretch of time). The opposite happens, of course, if the lines lie below the zero line and the MACD stands below the MACD Average. In other cases both can combine into different permutations, which means you can have a stock with positive momentum but a negative trend or negative momentum and a positive trend, for example. Our Sentiment page shows you the actual chart used in calculating our indicator. When you hover with your cursor over the lines on the chart you will see a tool tip pop up giving you the underlying values for that point in time. On the left side of the page MarketGrader tells you if the MACD is above or below the MACD Average, if the Oscillator (separation between the lines) is positive or negative and whether the overall price trend is positive, neutral or negative. We also display here, of course, our indicator grade. Like with all other Sentiment indicators, the beauty of using MarketGrader to follow sentiment is that you don’t need to be watching a chart constantly to know when two lines crossed each other or spend a long time trying to divine technical charts. MarketGrader follows these for you and translates them into easy to understand, contextual and actionable indicators.

The next section of the new Sentiment page displays our Price Momentum indicator. Like the Price Trend indicator above it, this indicator is also based on technical data. More specifically the indicator combines the stock’s price trend calculated using MACD as described above with a relative strength rank of the stock against all other stocks in MarketGrader’s coverage universe. This indicator is useful in identifying strength behind specific trends. For example, a positive price trend within the context of a negative market is more useful than a positive trend within a bullish market. After all, if all stocks are rising, finding any given stock that is also rising isn’t that challenging whereas identifying stocks that buck the trend relative to the rest of the market is much more valuable. This section of the page displays the stock’s percentile rank, the indicator grade and a two-year price chart.

The next section displays our Earnings Guidance indicator. This indicator tracks the ongoing trend in consensus earnings estimate revisions for the company’s next fiscal year over the last three months. This trend is displayed on one of the charts, which show what the consensus is today and what it was one and three months ago. A similar chart next to it displays the fiscal year earnings per share for each of the last three years, providing context for the current year’s report. Below the indicator grade we display the current consensus estimate, the consensus estimate from three months ago and the change between the two.

The last section of the page displays our Short Interest indicator. MarketGrader tracks the number of shares of every company’s public float (shares not owned by institutions and available to the public) sold short every month as reported by the stock exchanges. When an investor sells a stock short, he borrows the shares, betting that the price will decline and that he will, at a later date, be able to buy back the shares at a lower price, return them to the lender and keep the difference. Stocks with large short interest positions are, in theory, expected to fall in price at least based on the theory that the collective wisdom of all short sellers must be right. However, short interest can also be a contrarian indicator. When too many investors are betting against a stock eventually a large number of them will have to buy the stock back to repay it. If this happens all at once, the resulting jump in price could be pretty sharp. Our Short Interest indicator tracks not only the overall short interest but also the change over several months. This section of the page displays two pie charts depicting public float as a percentage of shares outstanding and short interest as a percentage of float. The table below the indicator’s grade displays the change in short interest over three months as well as totals for shares outstanding and public float.

At the bottom of the new Sentiment page you will find our popular Sentiment History Two Year chart. In it you may track the stock’s sentiment score on a daily basis over the last two years. Below you may see two examples of the new Sentiment page. Please log into your account or take a free trial to see our Sentiment Analysis for any of the stocks we cover. We hope you enjoy this latest addition to MarketGrader.com.