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Stock Screens

By Michael Kaye, CFA

Safe Stocks for a Slowing Economy

S&P found five names that could hold up well as growth—and corporate profits—start to moderate, including J&J and AIG

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From Standard & Poor's Equity Research
The bloom appears to be off the boom. The Aug. 30 release of U.S. gross domestic product showed growth slowing to 2.9% from 5.6% in the first quarter. Add to that concerns about a deceleration in corporate earnings growth, and it's no wonder investors may wish to tread carefully.

With the winds shifting, where should equity investors be looking to put their money? It may be a good time to focus on quality stocks with good track records. This week, we sifted our database for stocks that earn high marks in four important S&P categories. Each stock had to feature:

• An S&P investment rank of 4 STARS (buy) or 5 STARS (strong buy), meaning that S&P equity analysts expect them to outperform the S&P 500 index on a total return basis over the coming 12 months, with the shares rising in price on an absolute basis;

• A ranking of 4 or 5 under S&P's Fair Value system, indicating that the shares are undervalued at current price levels;

• S&P highest Quality ranking (based mainly on long-term earnings and dividend performance) of A+; and

• A corporate credit rating of A+ or better from Standard & Poor's Ratings services. While it should be noted that credit ratings are not meant as an indication of a company's merits as an investment, they can be an effective measure of its financial strength.

Our quest for quality turned up these five names:

Company	S&P STARS Rank	S&P Quality Rank
American Intl Group (AIG)	4	A+
Harley Davidson (HOG)	4	A+
Home Depot (HD)	5	A+
Johnson & Johnson (JNJ)	5	A+
Target (TGT)	4	A+

Kaye, an analyst for Standard & Poor's Portfolio Services, is the author of The Standard & Poor's Guide to Selecting Stocks

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