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COPYRIGHT 2003 Adams Business Media
In the past 10 years it has tripled in value, outstripping the Standard & Poor's 500 index by more than 100 percentage points. It's a broad-based portfolio, spanning the gamut of industries and market capitalizations, and even in recent market turmoil it has advanced six percent over the last five years while the S&P 500 slipped 30%.
That portfolio consists entirely of S&P's five-star rated stocks, an ever-changing selection culled by S&P's 80-strong squad of equity analysts--60 in New York, 10 in London, and 10 in Singapore. Headquartered in New York, Standard & Poor's Equity Research Group is a multifaceted financial information provider, and since 1966, has been a division of the publicly-traded media and education giant McGraw-Hill Cos. They apply a rigorous multi-layered financial analysis to every company in the S&P 500 and many more that aren't, encompassing all 10 sectors and 160 industries of S&P's proprietary Global Industry Classification Standard. "Our team is not only good at assessing industries and analyzing financial data but stunningly effective at picking stocks," stresses Kenneth Shea, a former food and beverages analyst who has spearheaded S&P's U.S. equity research department since 1998 and assumed the global directorship last year. "Leveraging our tremendous stock selection track record is one of my top priorities."
Another priority is to expand the department's institutional client base. Ever since Shea, 40, joined S&P in 1986 the department's "core constituency," has been dominated by retail investors and its equity research overshadowed by the corporate debt rating service it actually predates. "When people thought of S&P, they first thought of our credit rating agency and then the S&P 500 benchmark. And that was probably all," Shea acknowledges.
One reason S&P's equity research has had this Rodney Dangerfield-like problem may be that historically, it was purely informational in purpose; before 1987, stocks weren't rated and recommendations were never part of the picture. But on January 1,1987, the firm elaborated on its motto of obliging "the investor's right to know"--a saying supposedly favored by Henry Varnum Poor, who launched Poor's Publishing Co. in 1860, which in 1941 merged with the Standard Statistics Bureau to become the Standard & Poor's Corp.--and offered opinions for the first time. Thus S&P's Stock Appreciation Ranking System (STARS) was born. From five stars for "Buy" down to a single star to connote a "Sell," every stock report from S&P began carrying a rating. "Everyone knows that in the long run the S&P 500 beats most actively-managed funds," observes Chief Investment Strategist and frequent media presence Sam Stovall. "The point of our STARS system is to offer investors a selection of stocks that are likely to outperform the S&P 500 and a...
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