In addition to its rankings of individual stocks (via our STARS system) Standard & Poor's Equity Research also issues recommendations on the sectors that make up the S&P 500 index. We thought it would be a good idea to combine the two approaches this week to find a fresh list of attractive investing candidates for our readers.
We first sifted through our database for the list of companies ranked 5 STARS (strong buy) by Standard & Poor's equity analysts, meaning that S&P equity analysts expect them to outperform the S&P 500 index on a total return basis over the coming 12 months, with the shares rising in price on an absolute basis.
Next, we screened for the stocks that were members of one of the S&P 500 sectors that carry an "overweight" recommendation from S"P: Financials, Consumer Staples, and Telecom Services.
From that list, we culled the stocks with the largest differential between their current trading price and the 12-month target price assigned by S&P equity analysts. Two stocks were selected from each of the overweight recommended sectors.