S&P Capital IQ Publishes Quality Trends, an in-depth analysis of "quality" in the equity markets
NEW YORK, May 24, 2012 /PRNewswire/ -- S&P Capital IQ Equity Research believes that U.S. stocks continue to be in an extended bull market likely to carry indices to record highs, although it also expects significant bumps along the road, according to the latest issue of the group's Quality Trends publication.
"We believe the early bull market of strong low Quality Ranking* (QR) outperformance is over, as many low Quality issues have become more fully valued," said Richard Tortoriello, an S&P Capital IQ equity analyst and author of the report. "We project relatively balanced performance between high and low Quality Ranking issues going forward."
The report includes three different back-tested portfolio strategies:
- The EBIT (Earnings Before Interest and Taxes) to invested capital and free cash flow to price strategy. The strategy looks for what are believed to be highly profitable companies that are selling at low valuations relative to current cash flow.
- A variation on the "sell in May and go away" adage, which we adapt as "sell cyclicals in May and buy defensives."
- A dividend-based strategy that focuses on companies that have had three-year increases in dividends and relatively low valuations, on an enterprise value to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) basis.
The report also reviews International Quality Rankings (IQR), for the first time providing an extended performance history (1997-2011), a list of A+ IQR companies, and a high IQR screen based on return on equity and price to book. The study also provides statistical data on the fundamental characteristics of high IQR companies: sales, debt, profit margins, and return on equity.
One of the screens in the report shows A+ ranked top performers for the 12 months ended March 2012 ranked in terms of total return. All stock prices are closing prices on May 21, 2012. The stocks identified by this screen are: Church & Dwight (NYSE: CHD, $53); CVS Caremark (NYSE: CVS, $45); International Business Machines (NYSE: IBM, $198); Lorillard (NYSE: LO, $126); Nike (NYSE: NKE, $107); Ross Stores (NASDAQ: ROST, $60); TJX Companies (NYSE: TJX, $40); UnitedHealth Group (NYSE: UNH, $56); WW Grainger (NYSE: GWW, $189); and Yum Brands (NYSE: YUM, $69)
* S&P Capital IQ Equity Research defines high Quality Ranking issues (high QR) as those with S&P Quality Rankings of A+, A, or A- and low Quality Ranking issues (low QR) as those with S&P Quality Rankings of B, B-, C, or D. Companies with a B+ Quality Ranking are considered average. S&P Quality Rankings, also called S&P Earnings & Dividend Rankings, have been published since 1956.
The report can be purchased by calling 1-877-219-1247.
About S&P Capital IQ
S&P Capital IQ, a business line of the McGraw-Hill Companies (NYSE: MHP), is a leading provider of multi-asset class and real time data, research and analytics to institutional investors, investment and commercial banks, investment advisors and wealth managers, corporations and universities 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 Valuations, 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. For more information visit www.spcapitaliq.com.
S&P Capital IQ, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness or adequacy of this material, and S&P Parties shall have no liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of the information provided by the S&P Parties. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information contained in this document even if advised of the possibility of such damages.
The strategies discussed herein are based on quantitative methodologies which are different from the qualitative and subjective rankings of S&P Capital IQ'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. 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.
For more information contact:
Marc Eiger, Communications, Tel.: 212-438-1280
SOURCE S&P Capital IQ