S&P Equity Research Publishes Quality Trends, an In-depth Analysis of "Quality" in the Equity Markets

NEW YORK, May 13, 2011 /PRNewswire/ -- Standard & Poor's Equity Research believes that U.S. stocks are in an extended bull market characterized by high profit margins, projected record high earnings, modest valuations, and slow but sustained economic improvement from depressed levels, according to the latest issue of the group's Quality Trends publication.

"With valuation premiums on high Quality Ranking (QR) issues versus low QR issues compressed, we recommend  increased focus on high QR stocks," said Richard Tortoriello, a S&P equity analyst and author of the report. "Our data show that investors' appetite for riskier securities is diminishing.  Both U.S. and International Quality Rankings show a marked decline in low Quality outperformance over the 12 months ending March 31, 2011."

This issue of Quality Trends also looks at International Quality Rankings (IQRs), which rank nearly 18,000 companies in over 100 countries.  The report provides a list of A+ ranked issues globally, a list of select high IQR companies in Brazil and China, and a screen of high IQR issues with high ROE and low price-to-book value.

The report includes three different high QR strategies:

• A strategy based on Quality Scores, the numerical scores underlying the Quality Rankings.  This strategy looks for the top stocks by 6-month change in both earnings and dividend Quality Scores and then selects the lowest valuation stocks, by enterprise value-to-EBITDA.
• A dividend yield, dividend growth, and free cash flow yield strategy that seeks to identify high-yielding companies with strong cash flow that are using cash to grow dividends.
• A strategy based on buying defensive stocks (staples, health care, utilities) during the seasonally weak May-October period and cyclical stocks during the seasonally strong November-April period.  The strategy employs our QScore sector-based multi-factor models to provide a list of high QR defensive stocks that may be attractive for purchase.

The top-ten largest market capitalization high QR companies identified in the screens are: General Electric (NYSE:  GE: $20); Comcast (NASDAQ:  CMCSA: $26); Walgreen (NYSE:  WAG: $43); Lockheed Martin (NYSE: LMT: $79); Encana (NYSE:  ECA: $33); Johnson & Johnson (NYSE: JNJ: $66 ); Wal-Mart Stores (NYSE:  WMT: $56); Colgate-Palmolive (NYSE:  CL: $85); Express Scripts (NASDAQ:  ESRX: $60); and UnitedHealth Group (NYSE: UNH: $51).

The report can be purchased by calling 1-877-219-1247.

About Standard & Poor's Equity Research Services

As one of the world's largest producers of independent equity research, Standard & Poor's licenses its research to global institutions for their investors and advisors.  Standard & Poor's team of experienced U.S., European and Asian equity analysts use a fundamental, bottom-up approach to assess a global universe of equities across industries worldwide.  Follow Standard & Poor's equity analysts' U.S. market commentary each day at http://www.equityresearch.standardandpoors.com/.

Standard & Poor's keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of Standard & Poor's may have information that is not available to other Standard & Poor's business units. Standard & Poor's has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. Standard & Poor's does not trade for its own account.  The analytical and ethical conduct of Standard & Poor's equity analysts is governed by the firm's Research Objectivity Policy, a copy of which may also be found at www.standardandpoors.com or by clicking on the following link   http://www.standardandpoors.com/ResearchObjectivityPolicy

Disclosures

The strategies discussed herein are based on quantitative methodologies which are different from the qualitative and subjective rankings of the Standard & Poor's STock Appreciation Ranking System (STARS). Because the quantitative methodologies and the STARS methodology reflect different criteria, assumptions and analytical methods, quantitative evaluations may at times differ from or even contradict STARS recommendations. Strategies discussed herein are model portfolios only, presented as a general guideline and are not collective investment funds. Assets managed in accordance with the strategies may lose money. All information provided by Standard & Poor's is impersonal and not tailored to the needs of any person, entity or group of persons.  Past performance is no indication of future results. Standard & Poor's and its affiliates provide a wide range of services to, or relating to, many organizations, including issuers of securities, investment advisers, broker-dealers, investment banks, other financial institutions and financial intermediaries, and accordingly may receive fees or other economic benefits from those organizations, including organizations whose securities or services they may recommend, rate, include in model portfolios, evaluate or otherwise address. This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only current as of the stated date of their issue. Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested. Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate. Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. The information contained in this report does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you nor is it considered to be investment advice. Before acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice.

This material is based upon information that we consider to be reliable, but neither S&P nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Neither S&P nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

For more information contact:
Marc Eiger, Communications, Tel.: 212-438-1280
[email protected]

SOURCE Standard & Poor's

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