After more than two decades, the STARS still shine bright.
Regular readers know that we're referring to Standard & Poor's Stock Appreciation Ranking System, under which our equity analysts assign rankings to individual stocks ranging from 1 STARS (strong sell) to 5 STARS (strong buy). The rankings indicate how S&P analysts expect the stocks to perform vs. the broader market in the next 12 months.
Our equity analysts have a proven record of choosing 5 STARS stocks that beat the Standard & Poor's 500-stock index. Just look at the long-term outperformance of S&P's 5 STARS picks. Since the STARS system was initiated on Dec. 31, 1986, the portfolio of 5 STARS-ranked stocks is up 2,029.6%, vs. a 472.2% gain for the S&P 500 (through April). (Of course, readers should note that past performance is not a valid indicator of future results.)
S&P equity analysts apply a deep and rigorous analytical method to each stock covered by STARS. One of the first steps is to determine each company's profit potential. And their analysis sometimes turns up instances where their projections surpass the consensus (median) view of Wall Street analysts by a substantial margin. In other words, their findings suggest that the rest of the Street may be underestimating the potential for earnings growth at a number of companies.
So where do S&P equity analysts have a differentiated viewpoint today? In this week's screen, we looked for stocks with our two highest rankings, 4 STARS (buy) and 5 STARS, where S&P's estimate of 2008 per-share earnings is at least 10% higher than the Street estimate.
Eight stocks made the cut:
Company
Ticker
S&P STARS Rank
American Eagle Outfitters
AEO
5
Cimarex Energy
XEC
4
Crown Holdings
CCK
4
Gibraltar Industries
ROCK
4
Glatfelter
GLT
5
ON Semiconductor
ONNN
5
St. Mary Land & Exploration
SM
4
Swift Energy
SFY
5