The single greatest sporting event dates back to a game with humble beginnings.

The very first college basketball championship trophy was broken when Oregon guard Bobby Anet smashed into a table chasing a loose ball. Oregon went on to beat Ohio State to win the game, but the tournament finished in the red, losing $2,531. The National Association of Basketball Coaches, who sponsored the event, gave up and handed the tournament over to the NCAA.

In 2008 advertisers alone will spend more than $500 million

So, things tend to change ... like revenue sources.

A lot of our sacred trophies may be broken, but that doesn't mean the game of capitalism is out of the tournament. It's still our most important export.

We know capitalism is flourishing by virtue of the fact we're starting to lose so many key contests. We don't dominate the league anymore, and I choose not to view that as good or bad, rather as simply different.

The U.S. dollar Index is down 39% since March Madness 2001.


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The problems with a weak dollar are clear and significant. So may be the upside earnings surprises for companies selling into markets with strengthening currencies. I follow two baskets of stocks within the Russell 1000: one with significant overseas sales and one with little or none.

The mismatch in performance has been substantially in favor of those who sell to many growing economies instead of to one slowing one. The cost of converting those overseas sales back into dollars has plunged over the past quarter. It's not unreasonable to expect these sales have planted the seeds of upside surprise in earnings estimates made before the dollar's recent fall.

I took my basket of stocks and organized a 64-stock tournament with one qualifier: more than 64% of sales - as of my most recent data - had to be from overseas. I then split my teams into 4 regions, each with specific characteristics. Whittling further, I got to the Sweet 16, which is detailed below.

The Tar-Heel Regional

I screened for teams capable of an up-tempo game, looking not only for fast growth but accelerating growth that kicked in just when other teams start to wear down.

Screening for accelerated revenue and earnings growth -- growth of growth -- and running through a battery of other growth drills yields the finalists:

Mettler-Toledo (MTD)
Corn Products (CPO)
Agco (AG)
Colgate-Palmolive (CL)


The Jayhawks Regional

Grinders. These teams are sprung from the mold of a coach whose margins have increased quietly over the years, despite not winning the big one (until he takes the Riverwalk in San Antonio). Just watching his gnashing teeth on the sideline makes me interested in calls on his dental premiums.

I screened these stocks for EBIDTA (Earnings Before Interest Depreciation Taxes and Amortization) margins higher than the field of 64's already sparkling 27% average. Narrowing further to companies growing these margins at 1.2 times or higher and increasing their own 5-year average margin, plus one further round of cuts brings us to the following finalists.

Transocean (RIG)
Corning (GLW)
Applied Materials (AMAT)
ACE (ACE)


The Longhorns Regional

Homers. These companies don’t have to leave the state if they want to go from Austin to Houston over to San Antonio. They have also quietly beaten more #1 and #2 seeds than any other.

These stocks keep numbers close to the vest. Despite regularly beating quarterly earnings estimates, they are still underrated. Whittling the field even further to firms that beat expectations in each of the past four quarters yet have not had meaningful upward analyst revisions for 2008 produces these finalists:

Nvidia (NVDA)
Noble (NE)
Avon Products (AVP)
Autoliv (ALV)


The Erin Andrews Regional(s)

Instead of using the Bruins as comparison, who you would most like to see climb that ladder? Is it really Lorenzo Mata Real?



Not on my watch. Let’s agree that regardless of who's winning, the real strength is just off the edge in sideline reporters. The same goes for stocks. I chose the last four based on relative strength.

Using monthly, quarterly and yearly comparisons as well as a few other relative strength signals brings us to these finalists:

Mosaic (MOS)
CTC Media (CTCM)
Aflac (AFL)
Haliburton (HAL).

These stocks were listed in no particular order. There are no opinions mixed in, just a tournament where they competed against each other on numbers alone. The scoreboard for the entire field is impressive by itself.

For us, this sort of analysis is just a starting point.

We run tournaments like this every week of the year. We put each qualifier through a more intense set of drills where we rank each and then look carefully at those who score well in completely different areas. Ranking candidates (lowest score wins) and looking for ones that perform well over broad categories is one of our favorite recipes - and the closest I'll ever get to golf.

I prefer the squeak of sneakers any day, and as my little boy seems to think about sports - if there is not a lot of yelling and pushing involved what’s the point?

We call this final sausage grinder for stocks at our firm “Kaizen,” which is a Japanese word meaning improvement. We look for change.

To us, the market is never good or bad, just different. When we get different inputs, the outputs should change too.