By Numer de Guia The sages at the National Bureau of Economic Research's Business Cycle Dating Committee say the U.S. economy dipped into recession in March, 2001, after a decade-long expansion. (The committee determined that a peak in business activity occurred in the U.S. economy that month.) By the NBER's lights, a peak marks the end of an expansion and the beginning of a recession.
The committee has yet to weigh in on when (or if) the economy reached the bottom of its latest down-cycle. By other widely used definitions of "recession" -- specifically, two consecutive quarters of declining economic activity, as measured by gross domestic product -- the U.S. economy is now in recovery mode. But for many companies, the distinction is academic because the business environment remains challenging. One example: Robust top-line (revenue) growth has been hard to come by.
FINDING WINNERS. However, some companies are swimming against the tide, of course, and at S&P we set out to find them in this week's screen. We looked for outfits that have enjoyed well-above-average revenue growth in the six quarters since the committee's signal flashed.
Based on data provided by S&P CompuStat, their trailing 12-month sales have grown at least 5%, on average, in each quarter vs. the preceding quarter -- without any reduction at all to their corresponding gross margins. Over the same time, the average quarterly revenue for the companies in the S&P 1500 (the combined S&P 500, S&P MidCap 400, and S&P SmallCap 600 indexes) declined 7.6%.
And of these companies, we culled those with S&P's highest investment ranking, 5 STARS (buy). That means our equity analysts expect them to outperform the overall market in the next 6 to 12 months. These nine names emerged:
Affiliated Computer Services (ACS)
Commerce Bancorp (CBH)
Electronic Arts (ERTS)
IDEC Pharmaceuticals (IDPH)
SCP Pool (POOL)
Teva Pharmaceutical (TEVA)
WebEx (WEBX) De Guia is a portfolio services analyst for Standard & Poor's