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Sam Stovall's Sector Watch July 23, 2008, 12:01AM EST

Life Sciences: Positive Results

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S&P 1500 Life Sciences Tools & Services Index vs. the S&P 1500

Companies that provide services to pharmaceutical and biotech companies should see significant growth over the next 12 to 24 months, in Loo's opinion. He believes pharmaceutical and biotech companies will increase their outsourcing of services over the next several years, which he thinks improves efficiency and lowers costs while minimizing the need to expand overseas operations and infrastructure. Also, most emerging biotech companies do not have infrastructure in place and must outsource some services. Beneficiaries of this trend, in his view, will be contract research organizations that provide services for clinical trials of drugs in development.

So, there you have it. The group's strong relative strength is supported by a positive fundamental outlook.

Industry Momentum List Update

Here is this week's list of the industries in the S&P 1500 with Relative Strength Rankings of "5" (price performance in the past 12 months that ranked among the top 10% of the industries in the S&P 1500), along with a stock that has the highest S&P STARS (tie goes to the issue with the largest market value).

High Momentum Industries Company Ticker S&P STARS rank Price (7/18/08)

Biotechnology Genzyme GENZ 5 78

Brewers Molson Coors Brewing TAP 5 57

Coal & Consumable Fuels Peabody Energy BTU 4 64

Construction & Engineering Jacobs Engineering JEC 5 81

Fertilizers & Agricultural Chemicals Monsanto MON 5 112

Gold Newmont Mining NEM 4 48

Home Entertainment Software Electronic Arts ERTS 3 48

Hypermarkets & Supercenters BJ's Wholesale Club BJ 4 41

Industrial Gases Airgas ARG 5 59

Life Sciences Tools & Services Lab Corp. of America LH 5 70

Oil & Gas Drilling Noble NE 5 56

Oil & Gas Equipment & Services Superior Energy SPN 5 50

Oil & Gas Exploration & Production Swift Energy SFY 5 53

Railroads Norfolk Southern NSC 4 63

Stovall, the chief investment strategist for Standard & Poor's Equity Research Services, is the author of the forthcoming book The Seven Rules of Wall Street: Crash-Tested Investment Strategies That Beat the Market.

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

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