Bangkok--20 Apr--Standard & Poor's
Sector Should Remain the "Sweet Spot" for Retail and Institutional Investors in 2007
Going against the tide of many Wall Street firms' predictions for outperformance by large-cap stocks, Standard & Poor's Equity Research Services reasserted today that the mid-cap asset class is where investors should stay focused in 2007. As of April 17, the S&P MidCap 400 Index is handily outperforming the large-cap S&P 500 Index year-to-date, rising 8.9% vs. only a 3.8% advance for the blue chip index. Standard & Poor's Equity Research first noted its bullish 2007 outlook for mid-caps in the January 24th edition of the company's investor newsletter, The Outlook.
Standard & Poor's Equity Research believes that following several years of strong earnings, it will be difficult for many large-cap companies to continue to post double-digit EPS advances, due to the shear size of gains needed. Conversely, Standard & Poor's believes mid-caps, defined as companies with market capitalizations ranging from $1 billion-$5 billion, are generally at an earlier point in their growth trajectories, leaving them with a potentially longer asset class profit cycle.
According to Alec Young, Equity Strategist for Standard & Poor's Equity Research, "In a slowing economic environment characterized by decelerating, single-digit EPS growth for the U.S. large-cap equity asset class, we believe investors are gravitating towards mid-caps' ongoing profit momentum. We expect 2007 EPS growth for the S&P MidCap 400 Index to rise 13% vs. a 7% gain for the S&P 500 Index." In addition, Young adds, "the S&P MidCap 400 Index boasts a 2007 estimated PEG ratio of only 1.4X vs. 2.2X for the S&P 500 Index, highlighting what we view as its more attractive relative valuation."
These investment recommendations are incorporated into the investment products, such as model portfolios, that Standard & Poor's Equity Research delivers everyday. Detailed allocations for Standard & Poor's model portfolios that have a strong position in mid-caps, as well as Stock Reports on mid-cap equities that Standard & Poor's Equity Research has a 5-STARS (Strong Buy) recommendation on can be found at www.outlook.standardandpoors.com. Updated in real-time, this database contains complete STARS coverage and Stock Reports, including detailed financial information, such as valuation models, sector and peer group analysis, and proprietary Standard & Poor's metrics like Fair Value and Quality Rankings on nearly 1,600 U.S.-listed equities, and is the same information used by market professionals.
About Standard & Poor's Equity Research Services
As the world's largest producer of independent equity research, Standard & Poor's licenses its research to over 1,000 institutions for their investors and advisors, including 19 of the top 20 securities firms, 13 of the top 20 banks, and 11 of the top 20 life insurance companies. Standard & Poor's team of 120 experienced U.S., European and Asian equity analysts use a fundamental, bottom-up approach to assess a global universe of approximately 2,000 equities across more than 120 industries worldwide. Follow Standard & Poor's equity analysts' U.S. market commentary each day at http://www.equityresearch.standardandpoors.com/.
The equity research reports and recommendations provided by Standard & Poor's Equity Research Services are performed separately from any other analytic activity of Standard & Poor's. Standard & Poor's Equity Research Services has no access to non-public information received by other units of Standard & Poor's. Standard & Poor's does not trade for its own account. The analytical and ethical conduct of Standard & Poor's equity analysts is governed by the firm's Research Objectivity Policy, a copy of which may also be found at www.standardandpoors.com or by clicking here.
For more information contact:
Jeff Sexton, Communications, Tel.: 212-438-3448
[email protected]