NEW YORK – It’s not always easy being a market leader. Someone is always gunning for you. Still, advantages that accompany this status–such as the ability to establish price benchmarks for an industry and attract top-level employees–can be tremendous. And in an economic slowdown, industry leaders can gain market share at the expense of weaker competitors.

One unheralded market leader in the technology space is Acxiom (nasdaq: ACXM – news – people), a developer of real-time software for managing customer information across multiple databases. The firm’s flagship program is a package called AbiliTec.

John Schneller, analyst at CIBC World Markets, thinks Acxiom can stave off the competition thanks to partnerships with companies such as Oracle (nasdaq: ORCL – news – people), IBM (nyse: IBM – news – people), Compaq (nyse: CPQ – news – people), Lockheed Martin (nyse: LMT – news – people) and PricewaterhouseCoopers. “These technology players have made a big bet on Acxiom,” says Schneller. The company recently completed 12 long-term contracts.

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NEW YORK – “We’re slightly overweighted in technology, which is weird given that we were underweighted six months ago,” muses Thyra Zerhusen, portfolio manager of the Alleghany/Chicago Trust Talon Fund (CHTTX) , a mid-cap blend fund with $30 million under management.

Despite the weakness in technology, Zerhusen’s bet on stocks such as Unisys (nyse: UIS – news – people) and Legato Systems (nasdaq: LGTO – news – people) has helped the fund post a 7% return so far this year versus a 4% decline in the Standard & Poor’s MidCap 400 Index.

Like other successful growth investors, Zerhusen keeps an eye on value. On a price-to-earnings basis, this means choosing stocks trading at estimated P/Es that are less than the projected earnings growth.

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NEW YORK – Inktomi is one of the stocks featured in Larry Waschka’s new book, Ten Stocks That Could Change the World. Foster City, Calif.-based Inktomi specializes in search software and applications for speeding up Internet traffic. Customers include high-profile names such as Yahoo! and Reuters.

Waschka surely didn’t pick Inktomi (nasdaq: INKT – news – people) for its profitability. In 2000 the company lost $9 million, or 9 cents a share, and is expected to earn less than a penny a share this year.

“I don’t use multiples such as P/E,” says Waschka, a hedge fund manager and author of The Complete Idiot’s Guide to Getting Rich and co-author of Managing Family Trusts. To value these stocks, Waschka prefers to use ratios such as price-to-tangible book value (book value excluding goodwill) and price-to-sales (price divided by trailing sales per share). In fact, based on trailing 12-month sales, Inktomi’s price-to-sales ratio comes in at 6. Waschka calls a price-to-sales ratio of 10 ideal for a company that has superior growth potential.

Full story at Forbes.com

A powerful movement in the U.S. over the past several decades is the de-integration of manufacturing: Witness, for example, the rise of such horizontal companies as Intel, Microsoft, Dell and Oracle in a field that was once dominated by the vertically integrated IBM. But for every trend there is a countertrend from which investors can make money. On this page we focus on companies that are conspicuous for their degree of vertical integration.

Furniture Brands International manufactures furniture in 20 plants and retails the goods in some 100 franchise-owned stores in the U.S. (under the Thomasville brand). It’s a smart strategy, says Margaret Whelan, an analyst at UBS Warburg, not adequately recognized in the multiple (11 times estimated 2001 profits) at which Furniture Brands trades.

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NEW YORK – “Picking stocks is really about picking the right sectors,” says James Floyd, co-portfolio manager of the Leuthold Select Industries Fund (assets: $7 million). This market-timing strategy is tricky, but Floyd and co-manager and company chairman Steve Leuthold have been successful so far.

From its inception last June, the fund’s total returns were 31.4% through the end of the year. In contrast, S&P 500 lost 10.6%. As of year end 2000, Leuthold Weeden Capital Management had $177 million under management in three public funds and private portfolios.

Floyd and his colleagues at Leuthold start with a universe of 125 industry groups, mostly drawn from S&P and Morgan Stanley Capital International classifications. From there, the 125 groups are ranked using 31 factors such as earnings and sales growth rates, price-to-earnings and price-to-book ratios, insider activity, price momentum, relative strength, and other technical and fundamental metrics.

While using 31 investment criteria might seem a bit unwieldy, Floyd and his colleagues assign the 31 factors into 8 categories, such as value, growth, insider activity and relative strength. Another category, called judgmental, factors in Steve Leuthold’s opinion. Very long-term momentum, the final category, is measured by using algorithms based on long-term upward trends in price and relative strength. Leuthold then cooks up a composite score for each of the 125 sectors.

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NEW YORK – Bollinger bands, Elliot waves, Gann analysis, Fibonacci retracements, breakouts and stochastics are terms used in the mysterious world of technical analysis. Technical practitioners pick stocks by looking for patterns and trends in price movement and trading activity.

Such analysis can get quite complicated, and the rules on how to interpret trends and patterns can vary according to market conditions. “Where technical analysts earn their money is knowing which technical indicators to use and when to use them,” says John Schlitz, vice president and director of technical research at Instinet Research.

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NEW YORK – The unemployment rate may have held steady at 4% for the month of December, but that hasn’t stopped the parade of grim headlines announcing job cuts at old- and new-economy companies such as Ameritrade, eToys, Fox, General Motors, Lockheed Martin, Sears and Xerox.

Is there a silver lining in the cloud of pink slips? “Some industries have been hurt by tight labor markets but, by their very nature, haven’t been able to benefit from the technological revolution that has offset higher wage costs,” says François Trahan, equity strategist at Brown Brothers Harriman. In particular, says Trahan, this has impacted sectors relying heavily on minimum-wage labor.

San Diego-based retailer Factory 2-U Stores (nasdaq: FTUS – news – people) is one of many retailers that could benefit from a cooling labor market. This company, which operates off-price stores in seven Western states, has traditionally found its hiring efforts hampered by larger competitors offering superior incentives.

Factory 2-U’s forward earnings multiple stands at 21, versus 26 for the retailing industry. The company is projected to post a relatively robust 28% average annual earnings growth over the next three to five years. “They are at their infancy in terms of growth,” says Annie Erner, vice president and retail analyst at Salomon Smith Barney.

Full story at Forbes.com

NEW YORK – While it will take time for the Federal Reserve’s surprise rate cut to work its way through most parts of the economy, investors are likely to target stocks that will be obvious beneficiaries of lower rates. Take, for example, companies in the timber and forest products industry.

“I think investors are going to shift their focus from weak profits today to ten or 12 months from now, when lower interest rates start to stimulate the housing market,” says Peter Ruschmeier, analyst at Lehman Brothers. Ruschmeier likes stocks such as Tacoma, Wash.-based Weyerhaeuser (nyse: WY – news – people), which are particularly well positioned to benefit from a lower interest rate environment. “Right now, earnings are very depressed in the wood-products business,” he says, “that’s why share prices of companies like Weyerhaeuser have sold off pretty heavily over the last 12 months.”

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NEW YORK – “Debt is a fixed expense,” explains David Elias, president and chief investment officer at Elias Asset Management, “so when revenues take a hit, you’ve got a problem.” This also means that companies without a heavy debt burden are better prepared to ride out a business slowdown.

Some industries, despite their great need for new plants and equipment, typically do not carry a lot of debt. The best example is semiconductors. Intel’s (nasdaq: INTC – news – people) debt to equity is only 2%. “The capital intensity and unpredictability of the semiconductor business has typically argued against debt financing,” says Richard Whittington, semiconductor analyst at Banc of America Securities. Whittington notes that the big chipmakers have little trouble raising money in the equity markets.

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Each year we ask a dozen Wall Street pros to pick one stock for year-ahead performance. We also ask five bears to each pick one stock for a short sale.

Results: The picks of our five bears declined an average of 23%, handily beating the S&P 500, which was down only 5% over the span of our contest (Dec. 3, 1999 to Nov. 13, 2000). Our 12 bullish contestants had a 3% loss, scarcely beating the market.

The star bear: Joseph L. Toms, president of Hilspen Capital. His short call last year, Internet Capital Group, an incubator of Internet companies, is off 88%. So much for the B2B bonanza.

Runner-up bear is Lou A. Cardinali of Fiero Brothers, who predictedthat 4Kids Entertainment would fall once the Pokemon craze subsided. Good call. The stock is off 74%. Now Cardinali perceives Krispy Kreme, a recently public company trading at 129 times trailing earnings, as another fad: “It is just an overvalued doughnut shop.”

Fulls story (reg. required) at Forbes.com