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S&P Capital IQ Publishes Quality Trends, An In-Depth Analysis Of "Quality" In The Equity Markets

Stocks in this article: BAX CVX D IBM LMT MHP MMM MSFT ORCL SO XOM

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.  

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