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Get Four
|  | FEBRUARY 18, 2005
 STOCK SCREENS By Numer de Guia, CFA Stocks That Are Low-Risk Winners By taking volatility into account, risk-adjusted return is a fairer comparison than absolute return alone. These 30 measure up Are you getting properly compensated for the amount of risk you take on in owning stocks? One way to measure that is by tracking a stock's risk-adjusted return -- its average return over a given period divided by its volatility, or risk, commonly measured in terms of standard deviation of returns. Risk-adjusted return provides a fairer comparison of investment performance than absolute return alone since it takes into account the uncertainty of an asset's potential for profits or loss. MINING FOR GOLD. This week, we decided to mine our database for stocks with the most attractive risk-adjusted returns. As with any statistical computation, the number of observations should be large enough to increase the precision of the analysis. So in this instance we used the monthly returns for the past five years. We used the average annual return in the numerator, and the annual standard deviation in the denominator (which is the monthly standard deviation multiplied by the square root of 12). From the list of stocks with the highest risk-adjusted returns, we then sifted for those issues ranked 4 STARS (buy) or 5 STARS (strong buy) by S&P equity analysts. Stocks with those rankings are expected to outperform the overall market over the next 6 to 12 months. When we ran the numbers, these 30 names emerged:
 De Guia is an analyst for Standard & Poor's Portfolio Advisors All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc. Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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