Smart Picks from the IQ List

Here are the top scorers under S&P's Investability Quotient system, which ranks stocks according to their potential for return

By Michael Kaye, CFA

Standard & Poor's offers a number of investing tools to help investors make smart decisions. Our offerings cover a range of analytical approaches, including qualitative, quantitative, and technical. And we've also developed a "metric of metrics" that combines four different investing models incorporating our proprietary analytical products. It's called Investability Quotient (IQ), and it's a way to rank stocks according to their potential for medium- to long-term return.

S&P's IQ model combines models using proprietary analytical tools, technical measures, liquidity and volatility indicators, and quantitative analysis to come up with a total score. Under the IQ system, companies are scored on a scale of 1 to 250 -- similar to the standard measure of human intelligence -- with the higher numbers signaling stronger potential.

The IQ model is a combination of four different sub-models:

• An S&P proprietary model based on STARS ranking, quality of ( earnings and dividend), and an outfit's credit rating;

• A proprietary, multi-factor statistical model that includes valuation, profitability, risk, and momentum factors.

• A liquidity and volatility model that measures liquidity and downside risk.

• A technical model that looks at six-month relative strength.

The following are the 10 companies with the highest S&P IQ score (in descending order):

Smarter than your average stocks
Company/ticker S&P STARS Rank S&P IQ Rank
Anheuser-Busch (BUD ) 5 183.0
Lehman Bros. (LEH ) 5 168.0
Alberto-Culver (ACV ) 5 166.5
Black & Decker (BDK ) 5 158.5
MBNA Corp. (KRB ) 4 155.5
Lennar (LEN ) 5 148.0
Gannett (GCI ) 5 140.5
Exxon Mobil (XOM ) 5 140.4
Bank of America (BAC ) 5 139.0
Sysco (SYY ) 5 130.0

Kaye is a portfolio services analyst for Standard & Poor's

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