On Feb. 15, Standard & Poor's Equity Research Group made changes to the S&P Top Ten Portfolio -- those stocks it considers to be the best candidates for capital gains over the next 6 to 12 months. S&P added watch maker Movado Group (MOV
), which carries a strong buy recommendation, and took out gas company Oneok (OKE
), which continues to be ranked buy.
S&P initiated coverage of Movado earlier this month with a 5-STARS, strong buy opinion. This reflects our view of its growing product assortment in the healthy luxury goods market, including its namesake brand of fashion watches, its record of earnings and dividend growth (S&P Quality Ranking of A-), and solid finances (See BW Online, 2/7/06, "Movado: Time Is on Its Side").
S&P views Movado's valuation as attractive. The stock trades at about 16 times our earnings per share estimate for fiscal year 2006 (ending January) of $1.27, and at 14 times our forecast for fiscal year 2007 of $1.43. Our 12-month target price of $24 implies about 20% upside potential from current levels.
About the S&P Top Ten
A dynamic model portfolio concept, the S&P Top Ten was launched on Dec. 31, 2001. From inception through Jan. 31, 2006, it has gained 28.24% vs. 19.7% for the S&P 500 (total return basis). Year to date through Jan. 31, the S&P Top Ten rose 3.5%, vs. a gain of 2.65% for the S&P 500 (total return).
On Oct. 26, 2005, the Senior Portfolio Group within the S&P Equity Research Group modified the selection process associated with the construction of the S&P Top Ten Portfolio concept. Effective on that date, stocks in the portfolio that have been downgraded to 4 STARS (buy) can remain in the portfolio if the committee believes that the fundamentals are sufficiently intact despite the S&P analyst's modified stance. Here's the S&P Top Ten list:
S&P TOP TEN PORTFOLIO