S&P Capital IQ Publishes Quality Trends, An In-Depth Analysis of "Quality" in the Equity Markets

NEW YORK, Nov. 17, 2011 /PRNewswire/ -- S&P Capital IQ Equity Research believes that U.S. stocks are in an extended bull market characterized by high profit margins, but slow economic improvement from depressed levels, according to the latest issue of the group's Quality Trends publication.  

"High Quality Ranking* (QR) issues strongly outperformed low Quality Ranking issues in the recent market decline and underperformed only marginally in the October snap-back," said Richard Tortoriello, an S&P Capital IQ equity analyst and author of the report. "We believe slow economic growth and continued market uncertainty bode well for high QR performance going forward."

This issue of Quality Trends also looks at International Quality Rankings (IQRs), which rank nearly 19,000 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 countries with the highest percentage of B+ and better IQRs include South Africa (42%), India (28%), China (27%), France (27%), Thailand (25%), and Japan (23%).  By contrast, the U.S. has 22% of QR companies ranked B+ or better.

The report includes three different high QR strategies:

• A strategy based on dividend growth and dividend yield.  The strategy looks for high-yielding stocks that have seen a strong 12-month improvement in the Dividend Score.  The Dividend Score is a numerical component of the Quality Ranking, along with the Earnings Score.  This is used as a timing indicator.
• An EBIT to invested capital and free cash flow to price strategy, which looks for undervalued stocks (on a free cash flow basis) of companies that are generating strong returns on capital invested in their businesses.
• A strategy based on high QR cyclical stocks (energy, materials, industrials, consumer discretionary, financials, and info tech) and S&P Capital IQ's sector-based multi-factor quant models (QScores).  The strategy seeks to identify cyclical stocks for investment during the seasonally strong November through May period.  

The largest capitalization stocks identified in these three strategies are:  Baxter International (NYSE:  BAX); Chevron (NYSE: CVX); Dominion Resources (NYSE: D); Exxon Mobil (NYSE: XOM); International Business Machines (NYSE: IBM); Lockheed Martin (NYSE: LMT); 3M Co. (NYSE:  MMM); Microsoft Corp. (NASDAQ: MSFT); Oracle Corp. (NASDAQ: ORCL), and Southern Co. (NYSE: SO).  The report can be purchased by calling 1-877-219-1247.  

* S&P Capital IQ Equity Research defines high Quality Ranking issues (high QR) as those with S&P Quality Rankings of A+, A, and A- and low Quality Ranking issues (low QR) as those with S&P Quality Rankings of B, B-, C, and D.  Companies with a B+ Quality Ranking are considered average.  S&P Quality Rankings, also called S&P Earnings & Dividend Rankings, have been in use by long-term investors since 1956.

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

About S&P Capital IQ

S&P Capital IQ, a brand of the McGraw-Hill Companies (NYSE: MHP), is a leading provider of multi-asset class data, research and analytics to institutional investors, investment advisors and wealth managers around the world. We provide a broad suite of capabilities designed to help track performance, generate alpha, identify new trading and investment ideas, and perform risk analysis and mitigation strategies. Through leading desktop solutions such as Capital IQ, Global Credit Portal and MarketScope Advisor desktops; enterprise solutions such as S&P Securities Evaluations, Global Data Solutions, and Compustat; and research offerings including Leveraged Commentary & Data, Global Market Intelligence, and company and fund research, S&P Capital IQ sharpens financial intelligence into the wisdom today's investors need.

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 S&P Capital IQ is impersonal and not tailored to the needs of any person, entity or group of persons.  Past performance is no indication of future results. S&P Capital IQ 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 Capital IQ 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 Capital IQ nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information.

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

SOURCE S&P Capital IQ