S&P's New Picks of the Crop

These 40 stocks -- the PowerPicks 2005 portfolio -- represent S&P analysts' top choices from among the 1,500 that they cover

By Stephen Biggar and Robert Gold

For investors, it can seem like hard work keeping track of 15 stocks. But analysts at Standard & Poor's Equity Research follow and issue investment recommendations on approximately 1,500 U.S. stocks across all 10 economic sectors and nearly all of the 125 industries in the S&P SuperComposite 1500 index (the combined S&P 500, S&P MidCap 400, and S&P SmallCap 600 indexes). And the subindustries within those industries cover a lot of ground -- from advertising to water utilities.

How could we put our broad industry coverage to work for investors? Several years ago, we decided to combine that breadth with our analysts' stock-picking prowess to come up with a single equity portfolio. The result was the S&P PowerPicks Portfolio, which we first launched on Jan. 1, 1997. And we're pleased to announce the ninth and latest edition.

POTENTIAL WINNERS.

  PowerPicks 2005 represents the collective best ideas of Standard & Poor's U.S. equity-research staff. Each of the 40 contributing analysts considers the stocks highlighted below -- from their own coverage universe -- to be those best-positioned for superior appreciation during 2005. PowerPicks 2005 is diversified across all 10 of the economic sectors that make up the S&P 500-stock index.

The portfolio will be frozen, meaning that it will undergo no changes during 2005. Its objective is to exceed the total return (capital appreciation plus dividends paid) generated by the S&P 500 during 2005.

The median capitalization of PowerPicks 2005 is about $13.5 billion, ranging from a high of $291 billion for Microsoft (MSFT ) to a low of $717 million for Chattem (CHTT ). By contrast, the median market capitalization of the S&P 500 is about $9.8 billion, ranging from a high of $360 billion for General Electric (GE ) to $489 million for Winn-Dixie (WIN ). PowerPicks 2005 comprises 25 large-capitalization stocks (market cap above $6 billion), eight mid-cap issues ($2 billion to $5.99 billion), and seven small-cap issues (below $2 billion).

AHEAD OF THE PACK.

  The sector representations within PowerPicks 2005 are broadly representative of those within the S&P 500. On an equally weighted basis, the most significant weightings in the portfolio are in the information technology, health-care, financials, and consumer-discretionary sectors, which collectively account for approximately 63% of the portfolio. On a market-cap-weighted basis, the collective weightings of these sectors within the S&P 500 is about 61%.

From inception in 1997 through Nov. 30, 2004, PowerPicks has generated a cumulative total return of 124.1%, vs. 78.7% for the S&P 500. On an annualized basis through Nov. 30, 2004, PowerPicks total return since inception is 10.8%, vs. 7.6% for the S&P 500. Year-to-date through Nov. 30, 2004, PowerPicks 2004 generated a total return of 8.8%, vs. 7.2% for the S&P 500.

How much would $1,000 invested in the portfolio on Jan. 1, 1997, be worth on Nov. 30, 2004? The total return would have been $2,241, vs. a total return of $1,787 for the S&P 500.

Here's the roster for the S&P PowerPicks 2005 Portfolio:

  THE S&P POWERPICKS 2005 PORTFOLIO
Ticker Company Mkt. Cap ($ Mln) S&P Earns & Divd Rank S&P Index STARS Dividend Yield (%) Subindustry
Consumer Discretionary              
BBY Best Buy 18,290 B 500 5 0.8 Computer & Electronics Retail
GTRC Guitar Center 1,225 NR 600 5 - Specialty Stores
HET Harrah's Entertainment 6,881 B 500 5 2.1 Casinos & Gaming
LQI La Quinta 1,513 C None 5 - Hotels Resorts & Cruise Lines
NWS News Corp. 52,569 NR None 5 - Movies & Entertainment
PSUN Pacific Sunwear of California 1,647 B+ 400 5 - Apparel Retail
Consumer Staples              
BF.B Brown-Forman 5,959 A 500 5 1.8 Distillers & Vintners
CHTT Chattem 717 B None 5 - Personal Products
PEP PepsiCo 84,072 A+ 500 5 1.8 Soft Drinks
WAG Walgreen Co. 39,019 A+ 500 5 0.6 Drug Retail
Energy              
CVX ChevronTexaco 115,676 B+ 500 5 2.9 Integrated Oil & Gas
DVN Devon Energy 20,131 B+ 500 5 0.5 Oil & Gas Exploration & Production
NBR Nabors Industries 7,775 B 500 5 - Oil & Gas Drilling
Financials              
ALL Allstate 34,654 B+ 500 5 2.2 Property & Casualty Insurance
C Citigroup 232,241 A+ 500 5 3.6 Other Diversified Financial Services
CBH Commerce Bancorp 4,956 A+ 400 5 1.2 Regional Banks
GS Goldman Sachs Group 50,723 NR 500 5 1.0 Investment Banking & Brokerage
NDE IndyMac Bancorp 2,181 B+ 400 5 4.2 Thrifts & Mortgage Finance
SPG Simon Property Group 13,770 B+ 500 5 4.2 Real Estate Investment Trusts
Health Care              
COO Cooper Cos. 2,275 B 600 5 0.1 Health Care Supplies
IVGN Invitrogen 3,099 B- 400 5 - Biotechnology
KCI Kinetic Concepts 4,339 NR None 5 - Health Care Equipment
PDLI Protein Design Labs 1,731 C 400 5 - Biotechnology
WAT Waters Corp 5,638 B 500 5 - Health Care Equipment
WLP WellPoint 14,063 NR 500 5 - Managed Health Care
Industrials              
ASD American Standard 8,353 B- 500 5 - Building Products
BNI Burlington Northern Santa Fe 16,932 A- 500 5 1.5 Railroads
FDX FedEx 28,563 B+ 500 5 0.3 Air Freight & Logistics
IR Ingersoll-Rand 12,816 A 500 5 1.3 Industrial Machinery
KDN Kaydon Corp 916 A- 600 5 1.5 Industrial Machinery
Information Technology              
ADP Automatic Data Processing 26,523 A+ 500 5 1.2 Data Processing & Outsourced Services
DELL Dell Inc. 101,163 B+ 500 5 - Computer Hardware
EMC EMC Corp 32,158 B 500 5 - Computer Storage & Peripherals
MXIM Maxim Integrated Products 13,322 B+ 500 5 1.0 Semiconductors
MSFT Microsoft 291,467 B+ 500 5 1.2 Systems Software
QCOM Qualcomm 68,219 B 500 5 0.7 Communications Equipment
VCLK ValueClick 1,046 NR None 5 - Internet Software & Services
Materials              
DOW Dow Chemical 47,592 B 500 5 2.7 Diversified Chemicals
Telecommunications Services              
CTL CenturyTel 4,430 A 500 5 0.7 Integrated Telecommunication Services
Utilities              
TXU TXU Corp. 18,293 B 500 5 0.8 Electric Utilities

Biggar is director of North American equity research and Gold is a senior portfolio group analyst for Standard & Poor's Equity Research Services

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