St. Jude Medical Moves into S&P Top 10

The cardiac-device maker replaces Qualcomm in the list of S&P's best investment ideas

By Kenneth Shea, Robert Gold, and Steve Biggar

On Jan. 20, 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. We at S&P added St. Jude Medical (STJ ; recent price: $39) to the portfolio, replacing Qualcomm (QCOM ; $38).

Liker all stocks in the S&P Top 10, Cooper carries S&P's top investment ranking, 5 STARS (strong buy). While it has exited the portfolio, Qualcomm retains its 5-STARS recommendation.

The inclusion of St. Jude reflects our belief that the company is well positioned to capitalize on rising cardiac defibrillator implantations in the U.S. We believe the eligible patient pool for these devicess will double, aided by favorable clinical data that should boost physician demand and raise Medicare reimbursements.

Our 12-month target price on St. Jude is $55, based on a forward p-e-to-growth (PEG) ratio of 1.5, in line with its industry peers.

For all of 2004, the S&P Top Ten rose 19.2%, vs. a gain of 10.9% for its benchmark, the S&P 500 index (both on a total return basis).

Here's the latest list:

  S&P TOP 10 PORTFOLIO
Company Ticker Price (1/20/05 close) 12-Month Target Investment Rationale
Amgen AMGN 63 80 Attractive valuation
Burlington Northern BNI 46 54 Strong market share, rising shipping volume
Chattem CHTT 33 43 Strong consumer product portfolio
Cooper Cos. COO 75 86 See gain in market share
FMC Corp. FMC 45 54 Improving profit outlook
Guitar Centers GTRC 54 68 Attractive valuation
Ingersoll-Rand IR 75 95 Expected improvements in several end markets
Landstar System LSTR 37 44 High returns on assets and equity
MBNA KRB 27 32 Strength in consumer lending
St. Jude Medical STJ 38 55 Positive ICD market data

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 and Biggar are senior portfolio group analysts, for Standard & Poor's Equity Research

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