S&P's New Picks of the Crop
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.
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 $1,787 for the S&P 500.
Here's the roster for the S&P PowerPicks 2005 Portfolio:
|Ticker||Company||Mkt. Cap ($ Mln)||S&P Earns & Divd Rank||S&P Index||STARS||Dividend Yield (%)||Subindustry|
|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|
|BF.B||Brown-Forman||5,959||A||500||5||1.8||Distillers & Vintners|
|WAG||Walgreen Co.||39,019||A+||500||5||0.6||Drug Retail|
|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|
|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|
|COO||Cooper Cos.||2,275||B||600||5||0.1||Health Care Supplies|
|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|
|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|
|KDN||Kaydon Corp||916||A-||600||5||1.5||Industrial Machinery|
|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|
|VCLK||ValueClick||1,046||NR||None||5||-||Internet Software & Services|
|DOW||Dow Chemical||47,592||B||500||5||2.7||Diversified Chemicals|
|CTL||CenturyTel||4,430||A||500||5||0.7||Integrated Telecommunication Services|
|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