On July 10, Standard & Poor's equity research group made changes to the S&P Top 10 portfolio -- those issues it considers to be the best candidates for capital gains over the next 6 to 12 months. S&P replaced e-commerce concern InterActive Corp. (IACI) with Fair Isaac (FIC), which provides analytic, software, and data management products and services.
The departure of InterActive (formerly USA Interactive) from the portfolio came after S&P downgraded the stock from 5 STARS (strong buy) to 4 STARS (accumulate) on July 9. S&P analyst Scott Kessler says he took a slightly less positive stance on the shares based on risk-reward considerations.
Like all the stocks in the portfolio, Fair Isaac carries our highest investment ranking of 5 STARS. Kessler, who also covers Fair Isaac, believes it represents an appealing investment in the application software sector, and thinks the company's diverse and largely recurring revenue stream will allow for significant revenue and EPS growth despite a sluggish economy and restrained corporate IT budgets.
Based on S&P's
discounted free cash-flow model, Kessler's 12-month price target on the stock is $63.
Year-to-date through June 30, the S&P Top Ten portfolio gained 13.69% vs. an advance of 11.76% for its benchmark, the S&P 500-stock index (both of these performances include dividends).
Here's the latest list:
S&P Top 10 Portfolio
Boston Scientific (BSX)
Explosive growth prospects
Foreign exchange trends, recent share-price drop
Compass Bancshares (CBSS)
Valuation, positive fundamental trends
DR Horton (DHI)
Better-than-expected industry trends
Fair Isaac (FIC)
Firming business, low valuation
Jacobs Engineering (JEC)
See strong bookings from refining customers
Annual revenue growth of nearly 100% seen through fiscal 2004
Nabors Industries (NBR)
Natural-gas activity expected to rise
Trading at a discount to its industry peers
For more information about the Top 10 portfolio, please visit http://www.businessweek.com/investor/content/jun2002/pi20020617_8998.htm By Ken Shea and Robert Gold