Minnesota's S&P 500 major league players

  • Article by: PATRICK KENNEDY , Star Tribune
  • Updated: December 5, 2009 - 8:50 PM

For public companies, inclusion on a major index increases analysts coverage and sparks investor interest.

There are 16 Minnesota-based companies in the Standard & Poor's 500 index, which not only means they are the largest public companies in Minnesota but it also virtually guarantees they are among the most widely held, most closely watched and most heavily covered by analysts.

3M Co. is Minnesota's largest company, as measured by market capitalization, and it is covered by 21 analysts who currently are split on the big manufacturer's near-term prospects. While 12 have "buy'' recommendations, another eight have "hold'' recommendations and one analyst advises selling the stock. 3M is also the only Minnesota-based company in the 30-member Dow Jones Industrials index.

The role of an investment analyst is to provide insight into a company by studying its financial statements, its competitors and its prospects and to provide a recommendation for investors to buy, sell or hold a particular stock. Analysts perform heavy analysis on companies so others don't have to. Many analysts specialize in a specific industry, while others are generalists. Analysts with good track records can have considerable influence over how a company is perceived on Wall Street.

A company's stock price can drop if its quarterly results fail to meet analysts' expectations.

While the biggest companies have no trouble getting analyst coverage, smaller and mid-sized companies can go uncovered. ValueVision and Winmark are both members of the Star Tribune 100 and have market capitalizations in excess of $100 million, but neither has analyst coverage. Meanwhile, at least 12 companies with lower market caps have one or more analysts.

Even among the largest Minnesota companies, the amount of analyst coverage varies considerably, ranging from 10 analysts covering Ameriprise Financial and Fastenal up to 35 at St. Jude. Medical device companies such as Medtronic and St. Jude, with their predictable growth and strong cash flows, have been fairly recession-resistant, and they have always drawn a lot of investor interest. As a consequence, device companies get a lot of analyst coverage.

St. Jude Medical, whose $12.4 billion market cap makes it eighth largest, has the most analyst coverage (35), while Medtronic, which has the second-highest market cap at $48.1 billion, has 32 analysts. There is almost complete overlap between those two -- all but three of Medtronic's analysts also cover St. Jude.

Said one analyst who covers Medtronic and St. Jude said: "If you cover medical device companies, you pretty much have to cover Medtronic, and if you cover Medtronic you have to cover St. Jude and a couple of others as well."

Collective information

Investors benefit from individual analyst research but also from the collective information of multiple analysts, which can affirm an investor's decision.

General Mills is drawing the most-positive reviews from its analysts -- of the 22 who follow the big food company, 16 recommend buying and six have hold recommendations. Another food company, Supervalu Inc., which has struggled with a recent large acquisition, has the least favorable coverage: one buy, 11 holds and four sell recommendations, the most sells on the list.

Analysts often continue their coverage of companies after they change firms. Akshay Jagdale joined KeyBanc Capital Markets last November to boost its coverage of consumer companies. Jagdale initiated coverage on Tyson Foods, Sanderson Farms, Smithfield Foods and Hormel in March. They were companies he had covered previously, which allowed him to ramp up coverage quickly.

"I had experience covering [Hormel]; I had a decent relationship with management," he said.

Hormel Foods was the most recent Minnesota addition to the S&P 500; the company joined the index in March. Immediately after joining the S&P 500, trading volume in Hormel spiked. Index-based mutual funds and exchange-traded funds are quick to add new S&P 500 companies to maintain their fund's focus.

Analysts on U.S. Bancorp might be the most bullish. Among 31 analysts covering the bank, there are 13 buys, 16 holds and two sells. But U.S. Bancorp has the most upgrades. Three analysts recently upgraded their recommendations, with two moving from hold to buy in November, and earlier in the year one analyst moved from a sell to a hold. Two of Target's 23 analysts recently upgraded their recommendations, including the strongest move from a Citi analyst, who moved to a buy after maintaining a sell recommendation on Target since February 2008.

Patrick Kennedy • 612-673-7926

  • MINNESOTA'S 16 S&P 500 PLAYERS

    The 16 Minnesota-based companies in the Standard & Poor's 500 Index garner the most investor interest and analyst coverage.

    Friday 12-month Market Analysts

    Company close target price cap* covering Buy Hold Sell

    1. 3M Co. 78.24 87.00 55.4 21 12 8 1

    2. Medtronic Inc. 43.06 47.17 48.1 32 17 15 0

    3. U.S. Bancorp 23.50 27.33 46.3 31 13 16 1

    4. Target Corp 45.64 57.77 35.7 23 15 8 0

    5. United Health Group 27.46 31.87 32.8 24 14 9 1

    6. General Mills Inc. 68.93 71.50 22.5 22 16 6 0

    7. Best Buy Co. Inc. 43.79 44.95 18.1 31 15 15 1

    8. St. Jude Medical 36.8 39.64 12.4 35 21 12 2

    9. Ecolab Inc. 45.21 51.09 10.8 18 11 7 0

    10. Ameriprise Financial 38.39 45.00 9.9 10 5 5 0

    11. CH Robinson Worldwide 57.83 65.08 9.6 21 9 12 0

    12. Xcel Energy Inc. 20.63 20.75 9.3 12 4 6 2

    13. Fastenal Co. 38.93 32.25 5.7 10 4 3 3

    14. Hormel Foods Corp. 38.41 41.21 5.1 11 4 7 0

    15. Patterson Co. 26.36 31.75 3.2 10 4 6 0

    16. Supervalu Inc. 14.50 15.69 3.0 16 1 11 4

    Notes: Companies ranked by market capitalization; analysts recommendations and market capitalization from Dec. 2; the 12-month consensus price target is average price among analysts who provide a target.

    *in billions Source: Bloomberg

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