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Reaping the Tax Refund Bonanza


By Michael Kaye, CFA Get out the shoeboxes: With the Apr. 15 filing deadline fast approaching, Americans are completing their 2003 tax returns. This year, the IRS is predicting that a higher percentage of filers will be getting refunds. And the aggregate amount of refunds issued is expected to easily top the previous year, thanks to tax-code changes, notes S&P senior economist Beth Ann Bovino.

How will consumers deploy the cash they get back from the government? Some of it will be salted away, but much will be spent on things like spring wardrobes, DVD players, and steak dinners (that's if John and Jane Public have much left over after filling their SUVs with $2-a-gallon gasoline). It stands to reason that stocks of companies that provide those types of goods and services may benefit from the increased cash coming into consumers' wallets.

SPENDING TARGETS. That's the thought behind this week's screen. We started with the businesses in the leisure, retail, and restaurant subindustry groups within S&P's consumer-discretionary sector.

We wanted to be sure that the names we turned up had attractive fundamentals -- and good potential for capital appreciation. So we then screened for those issues that got top marks from the analysts at Standard & Poor's Equity Research -- those ranked 5

STARS, or buy. That means S&P analysts expect those stocks to outperform the overall market by a very wide margin.

When we ran the numbers, these nine names turned up:

Ready to Reap Refunds

Company/ticker

S&P STARS Rank

Avon Products (AVP)

5

BJ's Wholesale (BJ)

5

Best Buy (BBY)

5

CSK Auto (CAO)

5

eBay (EBAY)

5

Neiman Marcus Group (NMG.A)

5

P.F. Chang's China Bistro (PFCB)

5

Ryan's Family Steak Houses (RYAN)

5

SCP Pool (POOL)

5

Kaye is an analyst for Standard & Poor's Portfolio Services


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