America's Top 500 Companies

Fortune is out this week with it's annual 500 list.  But before we get to that Barron's has published it's own top 500 List of corporations in America including Canada.

What is interesting about the Barron's methodology (described below) is it's heavy reliance upon sales.  While you want to see strong and steady top line growth in our view it gets a bigger weighting than it deserves in their calculation.

• The Barron's 500 is an exclusive ranking of the 500 largest publicly traded companies in the U.S. and Canada, as measured by sales in the latest fiscal year. The survey is prepared by HOLT, a unit of Credit Suisse, which grades and ranks all companies on the basis of three equally weighted measures: median three-year return on investment, based on a proprietary cash-flow metric called CFROI; the change in CFROI in the latest fiscal year relative to the three-year median, and sales growth in the latest fiscal year, adjusted for divestitures (and, in the case of cigarette companies, for taxes that are collected and remitted to the government.) HOLT's CFROI metric strips out the effects of inflation and adjusts for accounting distortions. For financial companies, the firm calculates cash-flow return on tangible equity. All data are based on the companies' latest reported fiscal year, which for most is 2011. Each company is graded in three categories. The top quintile gets an A, the bottom, an F. HOLT then calculates the total grade-point average, or GPA, for each company, with 4.0 the highest. Ties are broken using one-year CFROI relative to the three-year median. The Barron's 500 excludes companies restating financial data or operating under bankruptcy protection. To identify companies with especially cheap shares, Barron's asked FactSet to re-rank this year's list by price/earnings ratio, based on profit estimates for the current fiscal year. "Combing the Barron's 500 for Underpriced Shares" focuses on the 30 components with the lowest P/Es.

Top 5 Companies

1. CF Industries (Ag) [Below is a one year chart]
2. Apple (Tech)
3. Southern Copper (Materials)
4. Qualcomm (Tech)
5. Visa (Services)

Full disclosure we own Apple in DWCM Fund, I own Apple and Visa in personal account