By Ken Shea and Robert Gold On Feb. 25, 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 America West Holdings (AWA
; recent price, $10) and Lennar (LEN
; $46) with Caremark Rx (CMX
; $32) and Qualcomm (QCOM
Like all the stocks in the portfolio, Caremark and Qualcomm carry S&P's highest investment ranking, 5
STARS (buy). America West and Lennar maintain their 5-STARS rankings.
Qualcomm provides digital wireless telecommunications
products and services based on its Code Division Multiple Access (CDMA) and other technologies. We believe it is a compelling investment amid the group of communications equipment companies we cover and think that it will benefit from rising demand for its CDMA integrated chipsets. Our 12-month target price for the stock is $80.
Caremark provides prescription services to over 1,200 health plan sponsors. Our enthusiasm toward the stock is fueled by the planned acquisition of AdvancePCS (ADVP
; $69), pending necessary approvals, and our bullishness on the pharmacy benefits management sector. Our 12-month target price for the stock is $38.
Year-to-date through January 30, 2004, the S&P Top Ten portfolio rose 0.18%, vs. a gain of 1.84% 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
Strong growth profile, market dominance
Caremark Rx (CMX)
Proposed acquisition of AdvancePCS
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
Improving outlook for chipset demand
For more information about the Top 10 portfolio, please visit http://www.businessweek.com/investor/content/jun2002/pi20020617_8998.htm Shea is director of global equity research, and Gold a senior portfolio group analyst, for Standard & Poor's Equity Research