International Speedway Races Into S&P Top 10

The racetrack operator replaces consumer products maker Chattem in the list of S&P's best investment ideas

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:

  S&P TOP 10 PORTFOLIO
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
Covance CVD 45.88 59 Attractive valuation
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
Lennar LEN 57.05 71 Attractive valuation
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

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