Markets & Finance

International Speedway Races Into S&P Top 10


By Kenneth Shea, Robert Gold, and Steve Biggar On Apr. 8, 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. We at S&P added International Speedway (ISCA

; recent price: $56.74) to the portfolio, replacing consumer products maker Chattem (CHTT

; $44.28).

International Speedway operates 11 racetracks nationwide and promotes more than 100 races annually, and generates 85% of its revenues from the 20 races it promotes in partnership with NASCAR. Like all stocks in the S&P Top 10 portfolio, International Speedway carries our top investment ranking, 5 STARS (strong buy). In our view, ISCA will continue to benefit from an improving economy, increased TV broadcasting of motorsports events, and the associated rise in attendance and advertising dollars. We believe NASCAR has been the fastest growing sport over the past decade and that its ratings now exceed those of the National Basketball Assn. and Major League Baseball (See BW Online, 3/22/05, "Fast Times at International Speedway").

We project fiscal year 2005 (ending November) earnings per share of $3.02 on a 16% revenue gain. Our 12-month target price of $71 is based on a combination of discounted cash flow and relative valuation metrics.

Though Chattem was removed from the Top 10, we still carry a 5-STARS ranking and a 12-month target price of $50 on the stock.

The S&P Top Ten portfolio was launched on Dec. 31, 2001. From inception through Mar. 31, 2005, it has gained 24.5%, vs. 8.77% for the S&P 500 index on a total return basis. For all of 2004, the S&P Top Ten rose 19.2%, vs. a gain of 10.9% for the S&P 500 (total return). Year-to-date through Mar. 31, the portfolio rose 3.3%, vs. a decline of 2.15% for the S&P 500.

Here's the latest list:

S&P TOP 10 PORTFOLIO

Company

Ticker

Price (4/11/05 close)

12-Month Target

Investment Rationale

Burlington Northern

BNI

52.70

65

Strong market share, rising shipping volume

International Speedway

ISCA

56.74

71

Dominant position with NASCAR

Cooper Cos.

COO

74.37

105

Expect gains in market share

Covance

CVD

45.88

59

Attractive valuation

FMC Corp.

FMC

51.79

65

Improving profit outlook

Guitar Centers

GTRC

54.44

69

Attractive valuation

Ingersoll-Rand

IR

79.99

100

Expect improvements in several end markets

Landstar System

LSTR

33.15

46

High returns on assets and equity

Lennar

LEN

57.05

71

Attractive valuation

St. Jude Medical

STJ

36.04

55

Positive ICD market data

For more information, Meet S&P's Top 10 List Shea is director of global equity research, and Gold and Biggar are senior portfolio group analysts, for Standard & Poor's Equity Research


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