APRIL 27, 2006



Stock Screens

By Michael Kaye, CFA


A Little Inflation Insurance

The market's worries about a resurgence haven't gone away. Here are some companies in a stronger position to withstand inflationary effects


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Investors continue to fret about a possible resurgence in inflation, with rising energy prices and a still-strong economy stoking the market's fears. While inflation gauges have remained relatively stable, investors may want to position their equity portfolios for a potential acceleration in prices.


That's the thinking behind this week's screen. We believe companies with solid profit margins are in a better position to withstand inflation concerns. If a business can maintain steady levels of profitability -- or elevate them -- it's an indication that it retains pricing power in its key markets. So for our first criterion, we looked for outfits with a net profit margin of at least 15% for their latest full year. That places them in the top 10% of the S&P 1500 index.

And we wanted to make sure that their longer-term profitability trend was positive, so each had to have posted an increase in their net profit margin percentage in each of the past five years.

Finally, to ensure that these were stable, liquid stocks, each had to be priced above $5 per share and have a market capitalization above $500 million. When we ran the screen, these eight names emerged:

CompanyTicker
BHP BillironBHP
Chicago Mercantile ExchangeCME
CoachCOH
ITT Educational ServicesESI
HydrilHYDL
Interactive DataIDC
Moody'sMCO
Quality SystemsQSII



Kaye, an analyst for Standard & Poor's Portfolio Services, is the author of The Standard & Poor's Guide to Selecting Stocks


All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report.
Standard & Poor's Regulatory Disclosure

Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.
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