Zacks.com featured expert Kevin Matras highlights: Lasalle Hotel Properties, Raven Industries and Moody's Corporation.

CHICAGO -- Kevin Matras looks at how to find winning stocks in the winningest Sectors. Stocks in this week's article are: Lasalle Hotel Properties (NYSE:LHO), Raven Industries, Inc. (NASDAQ:RAVN) and Moody's Corp. (NYSE:MCO). 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:

Kevin Matras has mentioned it here before, but it's worth saying again; 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 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 listed below.

(Kevin would like to note too that when analyzing a group, he thinks looking at the number of stocks trading near their 52-week highs is better than simply looking at the percentage price change. Kevin says that because if you have a group like the Oils and Energy sector for instance that has had a huge run up over time, but then pulls back sharply in a wholesale manner (often times signaling a sector rotation), that group can still conceivably have a better average price change than other groups because the recent drop is 'lost' within the preceding price run-up. But monitoring their percentages from their 52-week high can always be detected, regardless of how great their previous run-up was, which in turn lets you cleanly analyze how the good the group is really doing.

Current standings:

1 Finance - 42%
2 Conglomerates - 35%
3 Business Services - 30%

Previous standings from May (the last time I wrote about this):

1 Utilities - 54% (now at 25% and in 7th place)
2 Conglomerates - 51% (now at 35%, but still in 2nd place)
3 Finance - 50% (a bit lower at 42%, but now the top sector)

(Note: Oils and Energy was one of the top sectors a few short weeks ago, but is now dead last with only 13% of the stocks trading within 10% of their 52-week highs. (Even though it's still one of the 'top' groups based on it's % price change over the last six months.)

Here's a few stocks from each of those current top sectors (for Tues., 10/25/05);

LHO Lasalle Hotel Properties - Finance
RAVN Raven Industries, Inc. - Conglomerates
MCO Moody's Corp. - Business Services

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 two-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. And that's exactly what you get with the powerful Screening and Backtesting ability of Research Wizard. You can do it. Learn how, today. 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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