Mar 15 2005
Homebuilder, Lennar, replaces credit-card lender MBNA in the list of S&P's best investment ideas.
On Mar. 15, Standard & Poor's Equity Research Group made changes to the S&P Top 10 portfolio -- those issues it considers to be the best candidates for capital gains over the next 6 to 12 months. We at S&P added homebuilder Lennar (LEN ; recent price: $57.03) to the portfolio, replacing credit-card lender MBNA (KRB ; $25.60).
Like all stocks in the S&P Top 10, Lennar carries our top investment ranking, 5 STARS (strong buy). Though it exits the portfolio, MBNA retains its 5 STARS ranking.
Our renewed enthusiasm for Lennar reflects our expectation of continued sales momentum and increasing financial contributions from real-estate joint ventures. With the stock price down in recent weeks amid a modest uptick in intermediate-term interest rates, we see a good entry point for these high-quality shares.
Lennar is a member of the S&P MidCap 400 index, with an S&P Quality Ranking of A-. Our 12-month target stock price is $71, assuming an appropriate, in our view, price-earnings multiple of 10 on our $7.05 EPS estimate for fiscal 2005 (ending November). Year-to-date through Feb. 28, 2005, the S&P Top Ten rose 3.16% vs. a decline of 0.38% for for its benchmark, the S&P 500-stock index (both on a total return basis). For all of 2004, the portfolio rose 19.2%, vs. a gain of 10.9% for the 500.