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Recession? Not for These Companies


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)

Coinstar (CSTR)

Commerce Bancorp (CBH)

Electronic Arts (ERTS)

IDEC Pharmaceuticals (IDPH)

Moody's (MCO)

SCP Pool (POOL)

Teva Pharmaceutical (TEVA)

WebEx (WEBX) De Guia is a portfolio services analyst for Standard & Poor's


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