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Andrew T. Gillies is Director of Communications at the Center for Audit Quality, an affiliate of the American Institute of CPAs, in Washington, DC. Based in Washington since 2002, he has also worked in editorial and communications roles at the Investment Company Institute, the World Bank, Forbes, and Vault.com. His policy-themed writing has focused on aerospace and defense, energy and environment, transportation, and financial services.

Wednesday, May 30, 2001

Stock Focus: Large Cap Opportunities

NEW YORK - With the second quarter of 2001 almost at a close, big capitalization stocks have moved off their lows from earlier in the year but are still in a funk. The Dow Jones industrials are up just 2% so far this year, while the broader-based Standard & Poor's 500 is down 4%.

Allan Rudnick, president and chief investment officer of Kayne Anderson Rudnick Investment Management, a Los Angeles-based money manager with $7 billion in assets, cautions against abandoning large cap stocks. "Our message to clients is that you shouldn't move from one asset class to another to play a cycle," he says. In fact, Rudnick sees opportunities in large caps, particularly given the S&P's 11% correction over the past year.

One stock Rudnick recommends is Gap (nyse: GPS - news - people ), which is off 17% from its 52-week high, due to investors' concerns about weakness in same-store sales and declining earnings. In mid-May, Gap announced that quarterly earnings were off 51% versus the same quarter a year earlier.

Gap, however, satisfies several of Rudnick's criteria, notably a healthy latest 12-month return on equity of 25% and annualized earnings growth of 27% over the last five fiscal years.

Full story at Forbes.com