Qualcomm Called into S&P's Top Ten

S&P likes the wireless telecom gear maker as demand grows for its CDMA chipsets. Also added: pharmacy-benefits provider Caremark

By Ken Shea and Robert Gold

On Feb. 25, 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. S&P replaced America West Holdings (AWA ; recent price, $10) and Lennar (LEN ; $46) with Caremark Rx (CMX ; $32) and Qualcomm (QCOM ; $62).

Like all the stocks in the portfolio, Caremark and Qualcomm carry S&P's highest investment ranking, 5 STARS (buy). America West and Lennar maintain their 5-STARS rankings.

Qualcomm provides digital wireless telecommunications products and services based on its Code Division Multiple Access (CDMA) and other technologies. We believe it is a compelling investment amid the group of communications equipment companies we cover and think that it will benefit from rising demand for its CDMA integrated chipsets. Our 12-month target price for the stock is $80.

Caremark provides prescription services to over 1,200 health plan sponsors. Our enthusiasm toward the stock is fueled by the planned acquisition of AdvancePCS (ADVP ; $69), pending necessary approvals, and our bullishness on the pharmacy benefits management sector. Our 12-month target price for the stock is $38.

Year-to-date through January 30, 2004, the S&P Top Ten portfolio rose 0.18%, vs. a gain of 1.84% for its benchmark, the S&P 500-stock index (both of these performances include dividends).

Here's the latest list:

S&P Top 10 Portfolio

Company Price (2/25/04 close) 12-Month Target Investment Rationale
Affiliated Computer (ACS ) 49.19 67 Long-term trend toward IT outsourcing
Anheuser-Busch (BUD ) 53.50 63 Strong growth profile, market dominance
Caremark Rx (CMX ) 32.42 38 Proposed acquisition of AdvancePCS
Comcast (CMCSA ) 29.93 39 Increasing synergies from broadband acquisition
DR Horton (DHI ) 30.46 41 Better-than-expected industry trends
Flextronics (FLEX ) 17.76 24 Firming business, low valuation
Hologic (HOLX ) 19.61 23 Cost controls and product focus; valuation
Intel (INTC ) 29.62 45 Recovery in worldwide chip demand expected to drive growth
Landstar System (LSTR ) 34.97 48 High returns on assets and equity
Qualcomm (QCOM ) 62.08 80 Improving outlook for chipset demand

For more information about the Top 10 portfolio, please visit http://www.businessweek.com/investor/content/jun2002/pi20020617_8998.htm

Shea is director of global equity research, and Gold a senior portfolio group analyst, for Standard & Poor's Equity Research

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