On Sept. 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 medical-device maker Boston Scientific (BSX) with Intrado (TRDO), a leading provider of U.S. "911" emergency response infrastructure for both wireline and wireless telecom networks (See BW Online, 9/8/03, "Where Emergency Calls Are Welcome").
Boston Scientific left the portfolio after S&P analyst Robert Gold downgraded the stock's investment ranking to 4 STARS (accumulate) from 5 STARS (strong buy) on Sept. 9. (All the stocks in the portfolio are ranked 5 STARS.) Gold cited regulatory risks to the company's stent products and increased concerns over a possible price battle with rival Johnson & Johnson (JNJ),which led him to reduce his 12-month target price for the stock to $68 from $75.
Meanwhile, S&P analyst Todd Rosenbluth believes that Intrado will be a primary beneficiary of several regulatory trends, which should help boost profit growth. He also sees greater demand for Intrado's mass-disaster notification services. Based on a blend of ~~discounted cash-flow
Year-to-date through Aug. 29, the S&P Top Ten portfolio gained 24.42% vs. an advance of 15.95% 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
Increasing synergies from broadband acquisition
Compass Bancshares (CBSS)
Valuation, positive fundamental trends
See extended growth period; undervalued
DR Horton (DHI)
Better-than-expected industry trends
Fair Isaac (FIC)
Firming business, low valuation
Recovery in worldwide chip demand expected to drive growth
Regulatory trends should help
Jacobs Engineering (JEC)
See strong bookings from refining customers
Annual revenue growth of nearly 100% seen through fiscal 2004
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