Zacks.com Featured Expert Kevin Matras Highlights: Commonwealth Telephone Enterprises, GE, American Financial Group and AAR Corp.

CHICAGO -- Kevin Matras looks at how to find winning stocks in the winningest sectors. Stocks in this week's article are: Commonwealth Tele. Enterp., Inc. (NASDAQ:CTCO), General Electric (NYSE:GE), American Financial Group, Inc. (NYSE:AFG) and AAR Corp. (NYSE:AIR). Click here for the full story exclusively on Zacks.com: http://at.zacks.com/?id=109

Screen of the Week written by Kevin Matras of Zacks Investment Research:

Nearly half of a stock's price movement is tied to the performance of its respective group (Sector and Industry). That being said, most great stocks from great groups often have some great peers as well. If you find yourself in a killer trade (or wished you were in one), take a look at the characteristics of THAT STOCK and then hunt within its group to find OTHER STOCKS that share the same characteristics.

Does a certain outstanding stock exhibit great sales growth? Kevin Matras is sure there are at least a few within its group that are also showing similar numbers. What about increasing margins? If the stock is doing well, it's likely that the industry itself is experiencing meaningful increases in margins too.

This type of screening is often called 'modeling'. Figure out the components of what makes something successful and concentrate on that. If you're in love with a certain stock or sector, but it's not doing anything, ... or worse, moving against you, move on. If you see great stocks in great groups while you're bemoaning your misfortune in laggards or non-movers, find what stocks are successful and model them. If the winningest stocks in a particular sector or industry are trading at PE ratios that you generally won't consider, ... instead consider this; if you had considered them, they would be winning for you.

So therefore, see what characteristics some of the best stocks have in common and try getting on some of those.

Here's something to start you off.

The top three Sectors based on the percentage of stocks at (or within 10% of) their 52 week highs are as follows:

Utilities 54%

Conglomerates 51%

Finance 50%

(Aerospace came in 4th at 44%)

This differs from the end of February 05's top 3, which were:

Oils-Energy 69% (now 35% and in 7th place)

Conglomerates 65% (now 51%, but still in 2nd place)

Utilities 63% (now in 1st place, but with 54%)

(Finance came in 4th last time, but is now #3 at 50%)

Here's a few stocks within those groups that look great; (for Tues., 5/31/05);

CTCO Commonwealth Tele. Enterp., Inc. - Utilities

GE General Electric - Conglomerates

AFG American Financial Group, Inc. - Finance

(AIR AAR Corp. - Aerospace)

Now try screening for stocks in these Sectors that are in the best Industries. Search for the best performers and then compare the valuations such as P/E, Cash Flow, Sales or Net Margins. Or how about its Price/Book Value or Debt/Equity Leverage. Maybe you'll see a pattern of upward EPS revisions or an increase in broker ratings or even perhaps new coverage.

Simply put, modeling the best stocks is a great way to find other high probability winning stocks.

To search for the best stocks yourself, sign up for your 2 week FREE trial to the Research Wizard. Remember the key to successful screening is in discovering those screens that have produced profitable results in the past. http://at.zacks.com/?id=111

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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