While the average company in the biotechnology & drugs industry has shed about 2.6 percent of its value over the last three months, the AMEX Biotech index [BTK] is down about 7.8 percent. By comparison, companies comprising the AMEX Pharmaceutical index [DRG] are up about 1 percent, on average. Statistics and sample size help explain the discrepancy.

There are 543 companies in the Reuters biotechnology & drugs industry, but only 20 names in the AMEX Biotech index, many of which have come under pressure recently. Although shares for 14 of those companies have fallen more than 3 percent over the last three months, the index still looks relatively richly priced. The average price to earnings (P/E) ratio for companies in the index that reported positive results is about 85 - significantly higher than the average of 31 for the biotechnology & drugs industry. (Click here for an Excel sheet comparing the companies in the AMEX Biotech index.)

Mortgage companies and other similar consumer financial institutions are feeling the brunt of the slowing housing market. At least 20 subprime lenders, who give high-interest loans to customers with poor credit, have gone out of business, and unease over the health of the housing market has spilled over to other areas. Lumber futures on the Chicago Mercantile Exchange, for instance, are down about 30 percent from a year ago. There's reason to worry: About one-fifth of new home loans in 2006 were subprime, according to the Mortgage Bankers Association.

Consumer financial companies are taking steps to mitigate the damage from a slowing market. Countrywide Financial Corp. (CFC), one of the largest mortgage lenders in the United States, recently instructed employees to stop offering no-money-down mortgages. Still, Countrywide has already felt some sting. Its net profit margin has contracted from a five-year average of 25.1 percent to 23.4 percent over the trailing 12 months [TTM] and its return on assets [ROA] has slipped from a five-year norm of 1.84 percent to a TTM figure of 1.43 percent. On Monday, the firm warned investors that, even though subprime loans account for just 7 percent of its loan portfolio, there might still be an impact on earnings.

There's good reason to hunt for quality. Economists are expecting the pace of U.S. economic growth to ease this year. Even Alan Greenspan, the former chairman of the Federal Reserve, recently used the "R" word, saying a recession is possible down the road. One byproduct of easing economic activity is slowing revenue growth. Competition doesn't help either.

We started our search with the list of 463 companies that recently came across the Reuters Select stock screens. (Click here for an Excel sheet comparing these companies.) Focusing first on balance sheet strength, we filtered for companies with long-term debt to equity and total debt to equity ratios that are below the averages for their respective industries. This cut the list to 229 companies.

We started off with the 11 of the 96 electric utility companies that recently appeared on a Reuters Select stock screen. (Click here for an Excel sheet comparing these 11 companies.) To identify reasonably valued companies that also have relatively little debt, we filtered for firms with debt to equity and long-term debt to equity ratios that are below the industry averages. This reduced our list to seven names.

Of the 473 companies that recently came across the Reuters Select stock screens, 43 names were from the healthcare sector. (Click here for an Excel sheet comparing these companies.) That is still a large swath of firms to choose from, but some further filtering narrowed the field.

In a typical "nothing is ever as good as it sounds" scenario, the productivity rise in the fourth quarter marked a reversal from the third quarter's deterioration, but the 2.1 percent gain for all of 2006 was still the smallest improvement since 1997. Further, there is concern that the latest productivity figures will be revised lower down the road, as a result of higher employment growth.

Strength in personal spending helped drive the fourth-quarter expansion. Indeed, personal consumption expenditures climbed throughout 2006. It started off on a strong note, advancing at a seasonally adjusted annualized rate [SAAR] of 4.8 percent in the first quarter, according to government figures. The pace of growth then slowed to 2.6 percent in the second quarter. But, it picked up in the third and fourth quarters, growing 4.4 percent in the final three months of last year. Given the on-going strength in personal consumption expenditures, we wanted to zero in on companies that have been growing relatively quickly.

We started with the 399 companies in the consumer cyclical sector and then filtered for those names that appeared on at least one of the Reuters Select stock screens. This shortened our list to 26. (Click here for an Excel sheet comparing these companies.)

Many of these "green" companies are already attracting attention. In the days leading up to the State of the Union Address, investors flocked to call options on companies related to ethanol , including Aventine Renewable Energy Holdings Inc. (AVR) and Pacific Ethanol Inc. (PEIX). Additionally, Vinod Khosla, Silicon Valley's biggest alternative energy investor, recently forecasted a rapid rise in cellulosic ethanol production and utility-grade solar power.

With all of the attention on global warming, it should not be surprising to see that many companies are touting their environmental initiatives, including such firms as General Electric Co. (GE) and BP plc (BP). Even Exxon Mobil Corp. (XOM), which Thursday announced record profits thanks to high oil prices, indicated a possible move into ethanol, if it can see a viable business reason.

In the wake of Sept. 11, the government has beefed up military spending to boost national security and finance wars in Afghanistan and Iraq. National defense consumption expenditures and gross investment spending climbed more than 30 percent between 2000 and 2005, according to government statistics (the figures for full-year 2006 are not yet available). During this time, the government's investment in aircrafts and vehicles has more than doubled, while figures for investment in missiles and electronics & software have climbed approximately 52 percent and 41 percent, respectively.

Investors interested in gaining exposure to defense stocks will have plenty to choose from.

People are living longer now than they have in the past, thanks partly to advances in medicine. According to data from the National Center for Health Statistics, the average life expectancy for someone (both sexes, all races) born in 1900 was 47.3 years. By 1950, this had increased to 68.2 years, followed by 69.7 years for someone born in 1960, while someone born in 2003 - the most recent date available - has a life expectancy of 77.5 years.

Of course, living longer also exposes people to increased incidences of various health problems, including cancer and diabetes. This suggests increased demand for healthcare products and services.

ADRs basically serve two purposes. First, they give foreign companies access to U.S. financial markets. Second, they give U.S. investors an easy way to gain exposure to foreign companies.

Out of the nearly 8,850 names in the Reuters.com stock universe, 508 are ADRs. Yet, only 49 ADRs recently cleared the Reuters Select stock screens. (Click here for an Excel sheet comparing these ADRs.)

We focused on three oil-related industries in the energy sector: oil & gas operations, integrated oil & gas, and oil well services & equipment. Over the last month, oil & gas operations companies have, on average, lost nearly 11 percent, while integrated companies have shed about 8 percent. The oil well services & equipment companies have been the hardest hit, on average shedding nearly 13 percent of their value. Yet, the services & equipment sector also had the largest number of oil-related companies appearing recently on the Reuters Select stock screens. Out of the 388 companies from these three sectors in the Reuters.com stock universe, only 24 recently appeared on the Reuters Select stock screens. Of those, 14 were services & equipment companies, nine were operations firms, and only one was an integrated company. (Click here for an Excel sheet comparing the 24 oil-related companies from the Reuters Select stock screens.)

The Reuters Select Contrarian Opportunities screen is designed to find companies that have fallen out of favor with the market. This value screen starts off by filtering for stocks that have fallen more than 15 percent in the last four weeks and performed worse than the industry average. Unit Corp., a member of the oil & gas operations industry, saw its shares slide nearly 16 percent in this period.

The Rising Expectations screen captures candidates by screening for companies that beat analyst estimates in each of the last four quarters. Since we also want to identify companies where analysts are upbeat about earnings down the road, the consensus of analyst EPS estimates must currently stand above the level four weeks ago, and that reading must stand above the mean from another four weeks prior.

PPG was among the 29 names that recently landed on the Rising Expectations screen. No companies from the mining industry in the basic materials sector registered on this screen. (Click here for an Excel sheet comparing all the companies recently appearing on the Rising Expectations screen.)

It's easy to see why some investors might be put off by Wal-Mart's share performance over the last year. The stock has barely budged, advancing just 3.3 percent while the average stock-price gain in the department and discount retail industry has been more than 13 percent. Wal-Mart's revenue and earnings growth have also lagged the industry average over the trailing 12-month [TTM] period, as indicated below.

Both General Motors Corp. (GM) and Ford Motor Co. (F) are working through restructuring plans. But these giants continue to struggle in the face of international competition: Japan's Toyota Motor Corp. (TM) is poised to overtake GM as the world's biggest automaker this year, and Honda continues to enjoy brisk sales in the U.S. market.

The screens are taking notice, too. In total, four out of the 22 companies in the car and truck manufacturers industry highlighted by the Reuters screens were Japanese, including Toyota and Honda. (Click here for an Excel sheet comparing these four companies.)

In stark contrast to the downward revision in third-quarter GDP that led us to focus on non-cyclical stocks in our Dec. 21 article, the labor market showed strength in December. In fact, the final months of 2006 were relatively solid for jobs, according to government figures. For instance, in the January-through-July period, the economy added about 998,000 jobs, although that was off more than 18 percent from the number added in the prior-year period. Yet, in the August-through-December span, the economy created more jobs each month, save one, than it did in 2005. As a result, more than 1.8 million people were added to the payrolls for all of last year, off about only 7 percent from 2005's full-year reading.

More people working suggests more people have income to spend. Combine this with the government-reported increase in wages, and the picture seems to brighten for consumer-cyclical companies from what we saw several months ago. In our search for opportunities in this arena, we started with the list of 399 consumer cyclical companies in the Reuters.com stock universe and then filtered for all the names that recently appeared on at least one Reuters Select stock screen. This left us with a list of 27 companies. (Click here for an Excel sheet comparing these 27 companies.)

To come to Toyota, we focused on the four Japan-domiciled American Depositary Receipts [ADRs] that recently appeared on at least one of the Reuters Select stock screens. (Click here for an Excel sheet comparing these companies.)

The Reuters Select stock screens pointed to Morgan Stanley (MS), whose strong revenues and earnings growth helped land the top-tier investment house on the Relative Growth screen.

We started by focusing on the nine companies from the investment services industry that recently registered on at least one Reuters Select stock screen. [Click here for an Excel sheet comparing these Wall Street firms.]

The Industry Leaders screen is designed to highlight companies that are leading their respective industries according to such factors as superior revenue and earnings growth, wider profit margins, and lower debt. Recently, 622 companies landed on the Reuters Select stock screens, but only 41 registered on the Industry Leaders screen. [Click here for an Excel sheet comparing these companies.]

Our first step was to filter for companies where management has demonstrated an ability to effectively use available capital. As such, we focused on return on investment [ROI], which is calculated as net income divided by shareholder equity, long-term debt, and all other long-term liabilities. We filtered for the companies that had ROI above the norm for their respective industries over two time periods: the last five years and the trailing 12 months [TTM]. This reduced our list of names to 26.

We began by focusing on the 69 banks that recently appeared on the Reuters Select stock screens. Since we are interested in only large-cap names, we then limited our search to banks that have market capitalizations in excess of $5 billion. This shortened our list to only five banks.

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