The S&P Best of Breed model managed by Conrad Leifur is designed with the goal of outperforming the S&P 500. It does so by investing in large and liquid S&P 500 stocks that have the potential to outperform others within their sector while maintaining representative sector weights. Another goal of the model is to minimize turnover and trading costs by making few changes.
One of the top positions in this portfolio is Target Corp. (NYSE:TGT). When looking at competitors in the sector, TGT has a low price to earnings ratio which indicates that it might not be overpriced. Their net revenues have grown consistently over the past four years and their earnings per share increased in 2010. As insecurity over economic improvement continues, it is possible that TGT’s earnings will continue to impress.
Another retail company in the top position of the S&P Best of Breed model is Gap Inc. (NYSE:GPS). The clothing retailer has several different stores under its belt including the more economical Old Navy and the higher end Banana Republic. They’ve also expanded their offerings with the shoe and accessory retailer Piperlime. Their price to earnings ratio is low compared to competitors and while their gross income has steadily increased over the past four years along with their net income and earnings per share, their operating expenses have decreased.
Lastly, let’s take a look at the top holding 3M Co. (NYSE:MMM). MMM products are present in many industries including healthcare and transportation. They’re also present in just about every office in the U.S. The company has a low price to earnings ratio when compared to competitors but has seen a drop in net revenues over the past three years. Their net income in 2009 was the lowest it had been in four years.
