Six Four-Way Winners


By Michael Kaye, CFA In this column, we typically use one or more of Standard & Poor's proprietary equity-investing metrics to help identify attractive stocks. But this time around, we're going to borrow a measure from our colleagues at another part of S&P -- its well-known

credit ratings -- to help us in our search.

The stocks featured in this week's screen had to run a gauntlet of S&P measures. First, we sifted for those issues with S&P investment rankings of 4

STARS (accumulate) or 5 STARS (buy) from analysts at S&P Equity Research Services. Stocks with those designations are expected to outperform the overall market over the next 6 to 12 months.

The next hurdle: The stocks had to have the highest

S&P Fair Value rankings of 4 (moderately undervalued) or 5 (significantly undervalued) under S&P's proprietary quantitative model.

INDICATOR OF HEALTH. Then, we sorted for those stocks with the highest S&P

Quality rankings -- a measure of earnings and dividend growth over a 10-year period -- of A- or better.

Then we moved over to the ratings side. A corporate credit rating -- it should be emphasized here that these are not investment recommendations -- can say a lot about a company's overall health. Ratings agencies evaluate a variety of financial performance -- including changes in earnings and cash flow, debt levels, and margins -- as well as competitive position and industry trends, to come up with a credit rating.

To clear the final obstacle in our course, each name on the list had to carry a corporate credit rating from Standard & Poor's Ratings Services of A-, which would place it in the upper tier of S&P's rating scale.

Our search uncovered these six names:

Company

Ticker

STARS Rank

Fair Value Rank

Quality Rank

Credit Rating

Abbott Laboratories

ABT

4

4

A

AA

Ambac Financial Group

ABK

4

4

A+

AA

Home Depot

HD

4

5

A+

AA

Johnson & Johnson

JNJ

5

4

A+

AAA

Pfizer

PFE

5

5

A

AAA

State Street Corp.

STT

4

4

A

AA-

Kaye is an analyst for Standard & Poor's Portfolio Services


American Apparel's Future
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus