As you know, The Rayno Report is religious about finding low-PEG stocks. Like a little child before Christmas, I get excited about finding them under the tree. Some of our low-PEG Hall of Fame stocks are Apple (Nasdaq: AAPL), Celgene (Nasaq: CELG) and Gilead Sciences (Nasdaq: GILD), low-PEGers that we found on these pages before they steadily took off like rocket ships.

What's a low-PEG stock? It's a stock that is priced by the market below its growth rate. Common wisdom is that "growth" stocks, with fast rates of profit and revenue growth, receive premium market valuation -- they have earned the right to be expensive. But what's interesting is that the market doesn't always assign a premium valuation to growth stocks. Sometimes they can be found on sale, for whatever reason: the market is skeptical of the name, the market thinks that growth will slow, there may be issues with the company, or our favorite reason -- the market is being irrational and wrong.

The reason I like the low-PEG stock strategy is that it lowers the risks you take for the potential for great rewards. Odds are, the crowd is wrong that a high-growth company should be valued below market rates. Take a look at Apple: the crowd has been proven wrong again and again.

These are the specific situations we seek: the market irrationally pricing in a cheap valuation on a quality growth name. So how is valuation "measured" and rationality assessed? Fortunately we have metrics like the price/earnings ratio and the PEG ratio. I like to define cheap or expensive in the terms of the price/earnings (P/E) ratio, which is generated by dividing the share price by the earnings per share (EPS). The PEG ratio is generated when you take the P/E ratio and divide that in turn by the earnings growth rate. Let's take an example: Let's say fictional Community Growth Corp. has a share price of $20, earnings of $2 per share, and a growth rate of 15% annual. The P/E ratio would be 10 ($20/$2) and the PEG would be .66 (10/15).

A low-PEG stock by my definition is any stock trading below a PEG of 1, meaning that it's P/E ratio is lower than its earnings growth rate. You might think by my description that low-PEG stocks are rare and hard to find. Oddly, in this market, they aren't! In fact Apple Inc. (Nasdaq: AAPL) by definition has been a low-PEG stock throughout its meteoric rise.

In fact, it seems like every time we run a stock screen of your basic Low-PEG ideas, Apple pops up.  But everybody knows Apple right? Its PEG is currently an absurd .48 -- low for what is considered basically to be the best company in the world. Why is this? I think the market discounts Apple because 1) it is so huge and 2) it's worried that at any minute one of its core franchises will come under sudden pressure 3) Highly publicized manufacturing issues with labor and quality control problems in China. Apple stock just dropped $100, trading closer to $600 than its all-time high of $700. If you think any of these issues is overdone buy the thing.

What about some new stuff?

I spent some hours on the weekend looking up some screens and scouring the charts for some interesting names. Two I like that meet my valuation criteria are Syntel Inc. (Nasdaq: SYNT) and Cirrus Logic Inc. (Nasdaq: CRUS).

Syntel is an IT outsourcer based in Troy, MI. Specialities include data warehousing and Web solutions, with a focus on the financial and healthcare sectors. Syntel has very solid numbers including annual net income of about $180 million on revenue of $708 million for an operating margin of 33%. It's got zero debt and $422 million in cash -- nearly $10 per share! With Syntel's shares recently trading hands at $61, it had a forward P/E of about 15 and a PEG of .87. Pretty good numbers for a company with mounds of cash, no debt, and large margins. I love situations like this.

Stock #2 is a little more well-known -- it's Cirrus Logic Inc. Now, Cirrus Logic is a manufacturer for Apple, so if you own Apple you need to be aware of the correlation. But like Apple and Syntel, Cirrus has great numbers. What's good about it is that with a $2.4 billion valuation, there is still a lot of room for growth. Cirrus earns about $90 million per years on $433 million in revenue, for a profit margin of about 19%. It's got a return on equity (ROE) of 20. The forward P/E is 12 and the PEG is .80. All of these are good numbers, in our book. In the last year or so the company has doubled its revenues and quadrupled its profits. I don't see any reason why it can't do that again, yielding a doubling in stock price.

Those are our stocks for the week. Let's see what the screens come up with next week -- I'll have more.

Well, the 3Par bidding war saga looks to be coming to an end as HP's final $33 offer has been accepted and Dell has pulled out of the race.

It makes you wonder about the "efficient market" theory, doesn't it? I mean, here is a stock that was trading around $10 and basically flatlined for about a year, only to suddenly increase by more than 300% in a period of three weeks. The market certainly wasn't efficient at pricing 3Par shares.

Here are the latest stats on 3Par at the current near-$33 level:

Market Cap: $2B

Forward P/E: 122

Revenue (TTM) $203M

Price/Sales (TTM): 9.84

Enterprise value/EBITDA: 294

Hmmm. Not sure I'd call that a bargain.

Onto the rest of the news:

• The Atlantic coast of the U.S. is prepping for Hurricane Earl (New York Times).
• Andy Roddick is out at the U.S. Open (Wall Street Journal). But the real reason to cite this story is because of this great line: "Andy Roddick’s early exit breaks the hearts of T.V. producers dependent on repeated Brooklyn Decker reaction shots"
• 3G Capital is acquiring Burger King (Wall Street Journal). Will that yield downloadable mobile burgers?
• Bernanke admits he "wasn't straightforward" on Lehman (Bloomberg). According to my thesaurus, here are some synonyms for being "not straightforward": dishonest, crafty, crooked, deceitful, evasive, fraudulent, oblique, shady, shifty, sly, surreptitious, tricky.
• Jobless claims decline (CNNMoney.com). Barely.
• Ten questions and answers on Apple TV (PCMag). Silliest uestion: Does Apple have a Twitter killer?
• In case you haven't refinanced yet, you might want to note the current 30-year mortgage is at 4.32% which is a new all-time record since records starting being kept in 1971 (did they not have mortgages before 1971?) (Wall Street Journal).
• Most interesting financial headline of the day: "I'm selling the house and piling the proceeds into Greek government bonds." (Telegraph)
• The verdict is in: People hate the new Digg (Mashable). Yes, I do too.

Is there a more explosive economic concept than combining iProducts with China? Didn't think so. In that vein, MarketWatch reports that China Unicom starts to ship iPhone 4 in China next month.

Our mind is boggled by the concept of hundreds of millions of frenetic Chinese citizens roaming the fastest growing country on earth clutching iPhones and iPads.

On to the rest of the news:

Well, what's more important -- a generous severance package or avoiding being disgraced by a sketchy expense-account scandal involving a sub-contractor that happens to be a reality-show actress? That's the moral balance former HP boss Mark Hurd is contemplating this morning.

Hurd resigned on Friday after the Hewlett-Packard board had decided he had broken company policies by falsifying expenses and conducting a personal relationship with a contractor named Jodie Fisher, a former "actress" (yes she has been in porn) and a reality TV contestant. Meanwhile, Hurd's severance package could reach $40 million, reports CNBC.

Pretty weird. Pretty creepy, and I imagine it will only get more so. Here's some other goings-on in the news:

• Skype files to raise $100 million in an IPO (Bloomberg). The phone calls might be free, but the investment bankers won't be, I'm sure.
• Naomi Campbell took blood diamonds from a brutal dictator. She also flirted with him. Mia Farrow is testifying against her, saying she lied about it (ABCNews). I just find this story fascinating. Maybe Mark Hurd is involved as well?
• Yet another Black Swan event: Tiger Woods now sucks at golf (WSJ). He might not even make the Ryder Cup.
• Apple's executive in charge of the iPhone has left the company after only one year (PCWorld). Yeah, but how weird is it that his name is "Mark Papermaster"? Is he related to Chris Moneymaker?
• Is Net Neutrality Socialism? (PCWorld). Some broadband apps are more equal than others.
• A giant ice-sheet is breaking off a Greeland glacier (BBC). I don't know if y'all saw "Day After Tomorrow," but I think that means it's about to get really cold, before it gets really hot. Or something. As long as it doesn't involve Randy Quaid playing a scientist again, I'm cool with that.
• Needham says AAPL will go to $375 (Macnn). But can they do it with out Mark Papermaster?
• Why do people hoard (Time). I'm glad we have those serious journalists over at Time to answer these important questions for us.

The engine of value creation, economic growth, and mortgage payments is jobs. To build stuff, you still need to hire people. Unfortunately this morning's jobs report was a bit of a disappointment, as private-sector jobs creation fell short of expectations, growing by only 71,000 for the month.

Unemployment remains elevated, with the number of unemployed persons, at 14.6 million, and the unemploymen rate, at 9.5 percent, unchanged in July, according to the Bureau of Labor Statistics (BLS) report.

Where are the jobs? Healthcare, and surprisingly, manufacturing. Healthcare added 27,000 jobs and manufacturing employment increased by 36,000 jobs in the month.

I've been doing my own research in the technology industry, and I will say, I have noticed an uptick in activity lately. Two sources at Internet jobs boards indicated that jobs listings are growing. Individual companies have also been expanding their hiring. For example, take a look at the "Careers" page of Right Now Technologies, a local company I have been following here in Montana. Their listings have expanded to 58 people.

Now, 58 jobs is not enough to counteract the macro trend, but it's clear that there is still growth in innovation markets (hey, I had to find the positive spin somewhere).

On to more of the news:

• CNN's take on the jobs market. Before you read this, you have to realize the big headline loss was in temporary Census workers.
• Wheat prices are hitting highs on the Russian drought situation. Meanwhile, millions of metric tons of wheat are rotting in India (AP).
• Activision Blizzard fell on disappointing results (AP). No blizzard of cash, apparently.
• Yoko Ono says the Beatles won't be coming to iTunes any time soon (AppleInsider). As long as they keep Yoko Ono's music off iTunes as well, we'll be okay.
• Mixed metaphor of the day: "RIM, Adobe, and Microsoft Grasping at Mobile Straws" (PCWorld). I am trying very hard to imagine what a mobile straw is. Aren't all straws mobile?
• All 1,000 studemts at Kearns High School in Utah will get an iPod touch (Salt Lake Tribune). And just in case you don't know how to get some people riled up -- point out that these were bought with stimulus money!
• Neither Google or Verizon officials are talking about the latest net neutrality kerfuffle -- the rumors that they're going to do a "deal" for tiered traffic pricing (CNET). Meanwhile, I'm still campaigning for beer neutrality -- all the beer you can drink.
• 1 million little brown bats have been killed by a disease known as white-nose syndrome (BBC). That's not to be confused with white-man syndrome, which renders Silicon Valley executives unable to stomp their feet in rhythm to soul music.
• Japanese social games company DeNA is on track for $1B in revenue (TechCrunch).That's a lot of sushi.
• Avere Systems raises $17 million (VentureBeat).

Well, who doesn't like to say, "I told ya so?" I certainly do, which is why I'm pointing out that Intel has settled (again) with the Federal Trade Commission (FTC), promising to stop using bundled pricing to keep down the competition. On June 24 we pointed out that a variety of sources were expecting a settlement soon, with a minor wrist slap for Intel.

It has turned into a complete non-event. Investors today reacted with a yawn, as Intel shares in afternoon trading were exactly flat, at $20.71. 

In other news:

• BP says it has the oil spill solved (Washington Post). Really. No, this time, you should believe them.
• Apple rumor mills are already cranking up for the fall, with speculation over the iPhone 5 and iPad mini (CNET). Also coming: iPad Double-mini, iPhoneMiniPad, the iPodPad, the iToilet, and the iToldYaSo.
• Why the UAE is done with the Blackberry (WSJ).
• ISM service index expanded in July (Bloomberg). Apparently, there was a surge in sales of Big Macs.
• Billionaires like Bill Gates and Larry Ellison are pledging more money to charity (WSJ).
• Time Warner revenues and earnings increased (TheStreet.com). Just in case it sounds foreign, let's repeat that: Time Warner revenues and earnings increased!
• ADP sees slight uptick in jobs (Forbes). Apparently that Big Mac surge forced McDonalds to hire.
• Priceline and Electronic Arts helped boost tech stocks (MarketWatch).
• Toyota's back with $2.2B in profit (Detroit Free Press). I don't know why I used the DFP link. Mildly sadistic, I guess.
• Senators are taking for-profit education to the woodshed (Reuters). Fifteen schools investigated.

Very interesting article by Peter Kafka in AllThingsD this morning about Time Inc.'s frustration with Apple. Apparently Time executives are mystified as to why Apple won't give them control to sell their own subscriptions via an app for the iPad.

Well, I'll tell you why: Apple loves to control the billing relationship. They don't want to give it up. This was the brilliance of iTunes and how they ended up taking control of digital music from the music industry. It was the music industry's huge strategic error. Apple knows that if they control the billing relationship, they control the access to the customer, and therefore can dictate the terms of just about any ecommerce relationship.

Why Time Inc. executives are so "mystified" by this is a mystery to me. Apparently their magazine executives are not talking to executives in the same company that got reamed in the music business. Apple wants to control billing, they want to control pricing, and they want to control the consumer. Period. You want to try to mess with that? Take a hike.

This is one reason why I don't think the iPad will be the "savior" of the media industry that everybody has made it out to be. Unless Apple opens up, and starts sharing a bigger piece of the pie with content and applications producers, it will be the same movie all over again.

The Wall Street Journal pay survey is a fascinating read. My initial impression was surprise that Steve Jobs was only number five. But the thing that shocked me the most is that Barry Diller, the CEO of IACI, is number two on that list, having made $1.14B over the years 2000-1010.

This is egregious. Not because Barry Diller is incompetent. He's a a smart guy, and a media visionary. It's because it's way out of line with what his company did. If you include Expedia shares, an IACI spinoff, IACI shareholders lost 18% over the decade period in which Dillar's compenstation was measured, according to the Wall Street Journal. In fact, IACI alone stock fell 80% during the time that Barry Diller made $1B.

I read somewhere recently that watching the market these days is like watching a squirrel trying to cross the street. It zigs, it zags, you're not sure if it will make it to the forest or get flattened by a bus. Couldn't think of a better metaphor.

How else to explain a market that gives up 8% one month and gains it all back another, only to sell off when consumer confidence numbers are announced? And by the way, how do you explain the fact that the market is at highs while consumer confidence is at a five-month low? The answer: We are all squirrels, zigging and zagging randomly across a economically screwed up landscape, trying to find our way.

If there's any good news to be had, it's that the cost of debt is approaching an all-time low. Greeaaaattttt!!! Go borrow some money (if anybody will lend it to you). Yes, today, the 30-year mortgage yield hit all-time lows. Can you figure it out? I can't.

Onto more of the news:

• DuPont profits top estimates, raises guidance (Bloomberg). Well, at least we're still selling tons of chemicals.
• So, we're now back to zero (Bloomberg). Is that really something to get excited about?
• Apple has a new "27-inch Cinema Display." (Apple) Translation: Apple is selling TVs.
• Yes, ComScore is cooking Yahoo's numbers (TechCrunch). And Yahoo is pissed.
• BP CEO Tony Hayward -- one of the most popular people in the Gulf States -- is being banished to Sibera (AP).
• Among Hayward's parting words, before he heads of to a Siberia oil-executive slave camp (we wish): BP was 'a model of social corporate responsibility' (The Guardian). Can somebody, uh, shut this guy up?
• Funnest headline of the day: Blagojevich lawyer may be muzzled (Chicago Tribune). Why stop with the lawyer?
• Fannie and Freddie conference to convene (MarketWatch). Lawmakers said to start with a game of "pin the losses on the asshole."
• Home prices show stability after modest gain (CNNMoney). All five people who still have equity in their homes said to be ecstatic.

Tech earnings reports are rolling in like Budeweisers in a NASCAR infield, and we've got it covered. What's striking is the range of results, from earnings bombs like Netflix, and Amazon, to solid efforts from blue chips Apple and Microsoft.

Here's our recap of the Winners and Losers of earnings season: