On Dec. 11, Standard & Poor's equity research group made changes 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. S&P replaced generic drugmaker Barr Laboratories (BRL
; recent price, $76) with brewing giant Anheuser-Busch (BUD
Like all the stocks in the portfolio, Anheuser-Busch carries S&P's highest investment ranking, 5 STARS (buy). Barr was removed from the portfolio after it was downgraded to 3 STARS (hold) from 5 STARS on Dec. 10.
Anheuser-Busch is the name behind well known beer brands Budweiser, Michelob, and Busch, and has other operations in entertainment, glass manufacturing, theme parks, and real estate. S&P is encouraged by favorable beer pricing trends which, along with anticipated market share gains in U.S. and abroad, are expected to drive a gain in estimated 2004 earnings per share of around 13%, to $2.79. Additionally, we
feel that likely investor rotation into higher quality names in 2004 will allow for some expansion of Anheuser's p-e multiple. Our 12-month target price for the stock is $63.
Year-to-date through Nov. 30, the S&P Top Ten portfolio climbed 39.4%, vs. a gain of 22.3% for its benchmark, the S&P 500-stock index (both of these performances include dividends).
Here's the latest list:
S&P Top 10 Portfolio
Affiliated Computer (ACS)
Long-term trend toward IT outsourcing
America West Holdings (AWA)
Outperforming peers; valuation
Strong growth profile, market dominance
Increasing synergies from broadband acquisition
DR Horton (DHI)
Better-than-expected industry trends
Firming business, low valuation
Cost controls and product focus; valuation
Recovery in worldwide chip demand expected to drive growth
Landstar System (LSTR)
High returns on assets and equity
Favorable business model, sector strength
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