By Kenneth Shea, Robert Gold, and Steve Biggar
On Apr. 8, 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. We at S&P added International Speedway (ISCA ; recent price: $56.74) to the portfolio, replacing consumer products maker Chattem (CHTT ; $44.28).
International Speedway operates 11 racetracks nationwide and promotes more than 100 races annually, and generates 85% of its revenues from the 20 races it promotes in partnership with NASCAR. Like all stocks in the S&P Top 10 portfolio, International Speedway carries our top investment ranking, 5 STARS (strong buy). In our view, ISCA will continue to benefit from an improving economy, increased TV broadcasting of motorsports events, and the associated rise in attendance and advertising dollars. We believe NASCAR has been the fastest growing sport over the past decade and that its ratings now exceed those of the National Basketball Assn. and Major League Baseball (See BW Online, 3/22/05, "Fast Times at International Speedway").
We project fiscal year 2005 (ending November) earnings per share of $3.02 on a 16% revenue gain. Our 12-month target price of $71 is based on a combination of discounted cash flow and relative valuation metrics.
Though Chattem was removed from the Top 10, we still carry a 5-STARS ranking and a 12-month target price of $50 on the stock.
The S&P Top Ten portfolio was launched on Dec. 31, 2001. From inception through Mar. 31, 2005, it has gained 24.5%, vs. 8.77% for the S&P 500 index on a total return basis. For all of 2004, the S&P Top Ten rose 19.2%, vs. a gain of 10.9% for the S&P 500 (total return). Year-to-date through Mar. 31, the portfolio rose 3.3%, vs. a decline of 2.15% for the S&P 500.
Here's the latest list:
|Company||Ticker||Price (4/11/05 close)||12-Month Target||Investment Rationale|
|Burlington Northern||BNI||52.70||65||Strong market share, rising shipping volume|
|International Speedway||ISCA||56.74||71||Dominant position with NASCAR|
|Cooper Cos.||COO||74.37||105||Expect gains in market share|
|FMC Corp.||FMC||51.79||65||Improving profit outlook|
|Guitar Centers||GTRC||54.44||69||Attractive valuation|
|Ingersoll-Rand||IR||79.99||100||Expect improvements in several end markets|
|Landstar System||LSTR||33.15||46||High returns on assets and equity|
|St. Jude Medical||STJ||36.04||55||Positive ICD market data|
For more information, Meet S&P's Top 10 List
Shea is director of global equity research, and Gold and Biggar are senior portfolio group analysts, for Standard & Poor's Equity Research