Strategic vision: Stephens Inc.'s research team weighs in on promising sectors for 2003.

Publication: Buyside

Publication Date: 01-MAR-03

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COPYRIGHT 2003 Adams Business Media

With current national and world events creating uneasiness amongst today's investors, finding places to make money work best remains a challenge. However, for Stephens Inc., an investment banking firm located in Little Rock, Ark., discovering good investment ideas often overlooked by the Street is all in a day's work. Founded in 1933 and owned by the Stephens family, the company consistently seeks to provide thoughtful independent research products.

"We focus on small- to mid-cap stocks," says Research Director Brian Bush. "The majority of our coverage is in the $100 million to $2 billion market cap range. We focus on that segment because it is under-followed, especially today, given the consolidation within the securities industry. We believe that is where we can really add research value."

Buyside profiled the Stephens team in October 2002 and learned that it covers 180 stocks, with specialized research on industries that include business software and services, commercial and consumer products, commercial aerospace and defense, security and defense IT services, financial services, healthcare and life sciences, power and energy solutions, restaurants, specialty retailing, supply chain technologies, and transportation. We spoke with Bush and several team members about the sectors they believe may have the impetus to outperform in 2003.

DEFENSE RAMPS UP

"The aerospace and defense sector is developing new sources of revenues right now," Bush says. "Defense spending is growing as a percentage of our national GDP as we re-capitalize our military following a decade of declining spending." Additionally, the U.S. military is undergoing a transformation to more efficient weapons and communications systems. "The U.S. is developing a military that is designed for today's conflicts," Bush says. "Military forces have to be very mobile with the ability to react quickly to situations around the world."

Having a more technologically advanced military has its advantage. "Enhanced communications and information technology allow the military to avoid or reduce civilian casualties--by limiting the number of bombs that...

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