Stocks: The Right Mix of Growth and Value

Standard & Poor's latest list finds 16 top-ranked names that represent the best of both worlds

by Beth Piskora From Standard & Poor's Equity Research

Is there anywhere investors can turn to escape the carnage in the markets? Although midcap stocks (as measured by the S&P MidCap 400 index) and small-cap issues (as measured by the S&P SmallCap 600 index) performed better than large-cap shares (as measured by the S&P 500 index) in the first two months of the year, Standard & Poor's Chief Investment Strategist Sam Stovall still believes large caps are likely to outperform their smaller brethren by the time the year is over.

The reason comes down to valuation, he says. The p-e (using 2008 consensus estimates) for the S&P 500 is only about 13.5 right now, lower than the p-e for either small- or midcap stocks.

Where is the most attractive opportunity among the large caps? One good approach for investors might be to look for "blend" stocks—ones that have characteristics of both growth and value stocks. Growth stocks are those that exhibit strong revenue and profit growth. Value stocks are those that boast a high dividend yield and low valuations on a price-to-sales, price-to-book, and price-to-cash-flow bases. Blend stocks show both growth and value characteristics. But how do you find them?

To build this week's screen, we searched our database for stocks ranked 5 STARS (strong buy) by S&P—those perceived by our analysts to have the highest upside potential in the next 12 months—that are also in the S&P 500 large-cap index and are considered blend issues, based on the factors detailed above.

Making the cut are 16 stocks:

Piskora is managing editor of U.S. Editorial Operations for Standard & Poor's .