On Dec. 5, Standard & Poor's equity research group made a change 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. Biotech outfit IDEC Pharmaceuticals (IDPH) will replace homebuilder Hovnanian (HOV).
S&P downgraded shares of Hovnanian to 3 STARS (hold) from 5 STARS (buy) to reflect a more conservative stance on homebuilders given an expectation for slightly higher mortgage
rates in 2003, and a belief that a peak in the homebuilding cycle is near at hand.
Replacing Hovnanian is IDEC Pharmaceuticals, a leading developer of therapeutics for cancer and autoimmune diseases. Ranking among the select few profitable biotech companies, we at S&P see it posting earnings per share of 84 cents in 2002 and $1.16 in 2003. Based on a net present valuation of IDEC's products and pipeline, we feel the shares are worth $45 to $50. IDEC stock is ranked 5 S&P STARS (buy), along with the other names in the portfolio.
Here's the latest list:
S&P Top 10 Portfolio
New products, improved distribution
Procter & Gamble
Foreign exchange trends, recent share-price drop
Rising market share, strong international growth
Pure play in microcontroller chips
Natural-gas activity expected to rise
Leading developer of cancer treatments, profitable
Strong demand, favorable costs
New products, lower costs, stock buybacks
Solid business model, franchise
Valuation, resolution of asbestos issue
For more information about the Top 10 portfolio, please visit http://www.businessweek.com/investor/content/jun2002/pi20020617_8998.htm By Ken Shea and Robert Gold