Markets & Finance

PowerPicks Top "500" in March


By Ken Shea The S&P PowerPicks 2003 portfolio -- representing S&P analysts' top picks for the year -- outperformed its benchmark, the S&P 500 index, once more in March. The portfolio gained 1.1% on the month, vs. the index's rise of 0.8%. Year to date through Mar. 31, the portfolio's performance was also ahead of the "500", at 2.1% vs. -3.6%.

Among the top performers in the portfolio in March: consumer-related stocks such as Quiksilver (+22%) and P.F. Chang's (+12%). Gains in these issues more than offset big drops in technology issues Microchip Technology (-22%) and Sybase (-12%).

Year to date through Mar. 31, 24 stocks beat the "500", while 16 did not.

About the S&P PowerPicks 2003 Portfolio

The portfolio represents the collective "best ideas" of the Standard & Poor's equity research staff.

Each of the 35 industry analysts on S&P's equity research staff has chosen one of the stocks they follow as the best-positioned for superior growth. The S&P PowerPicks 2002 Portfolio is diversified across all the 10 S&P economic sectors comprising the S&P 500 index.

The portfolio is a "frozen" one, meaning that it will undergo no changes throughout the entire year. The objective of the portfolio is to exceed the total return (capital appreciation plus dividends paid) generated by the S&P 500 during the year.

Sector/Company

Market Cap $bil.

Investment Rationale

CONSUMER DISCRETIONARY

Lear

2.3

Favorable shift in product mix, low valuation

Newell Rubbermaid

8.3

New CEO, better vendor relations

News Corp.

44.1

Prospects for improved ad market

P.F. Chang's

0.9

Exceptional growth characteristics

Quiksilver

0.6

Market share gains, margin improvements

Toys "R" Us

2.6

Free cash flow and p-e should grow

Wal-Mart

223.1

Continued market share gains, strong growth

CONSUMER STAPLES

Kraft Foods

68.6

Defensive appeal, superior prospects

Sysco

19.7

Positive sales trend continue

ENERGY

Apache

8.4

Shares attractively valued

Nabors Industries

5.5

Natural-gas activity rising

Questar

2.2

EPS growth to 2005 beats peers

FINANCIALS

Chelsea Property

1.3

Stronger earnings growth

Citigroup

182.0

Shares trading at a big discount to historical valuation

IndyMac

1.0

Attractively valued

Lehman Bros.

12.9

Strong franchise, undervalued, takeover candidate

MetLife

19.7

Restructuring initiatives

Moody's

6.3

Strong free cash flow and profit margins

National Commerce Financial

4.9

Strong market demographics

HEALTH CARE

Amgen

64.8

Undervalued vs. peers, with less risk

Boston Scientific

17.0

Explosive growth prospects

Cardinal Health

27.6

Strong performance expected from all business segments

Dentsply International

2.9

Attractive valuation

Invitrogen

1.6

Expect 10% growth over the long term

Lilly (Eli)

72.4

Unmatched product pipeline

INDUSTRIALS

Corinthian Colleges

1.6

Growing market share of for-profit institutions

FedEx

15.5

Stock attractively valued

Jacobs Engineering

2.0

Strong bookings from refining market

Precision Castparts

1.3

Potential upturn in aircraft manufacturing

INFORMATION TECHNOLOGY

Affiliated Computer Services

6.4

Solid defensive play in current market

Cisco Systems

96.8

More market-share gains likely

Microchip Technology

5.0

Pure play in microcontroller chips

Nokia

78.6

Leading market position

Overture Services

1.7

Good fundamentals, attractive valuation

Sybase

1.2

Valuation, balance sheet, strong management

Synopsys

3.3

Potential upturn in electronics markets

MATERIALS

IMC Global

1.3

Poised to benefit from industry rebound

Nucor

3.3

Attractive valuation

TELECOM SERVICES

ALLTEL

15.9

Solid EPS quality, stable balance sheet

UTILITIES

Entergy

10.1

Earnings growth above peers

For more on the S&P PowerPicks 2003 portfolio, please visit

http://www.businessweek.com/investor/content/dec2002/pi20021231_4149.htm Shea is director of global equity research for Standard & Poor's


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