Oakmark Funds, a chicago-based unit of Harris Associates that oversees $15 billion in assets, calls value investing its cornerstone. With the Nasdaq down 70% from its March 2000 high, the technology sector has drawn Oakmark’s attention. On its shopping list: Israeli stocks carried on U.S. exchanges.

Why look for a stock pick from a place like the Middle East? Robert Taylor, an investment analyst with Oakmark’s $1.5 billion (assets) International Fund, points to as good a reason as any: low taxes. Under Israel’s “approved enterprise” program, Israeli firms spending certain amounts of money locally on research and capital expenditures get their tax bill chopped by up to two-thirds.

Its favorable tax environment helps explain why Israel, a country with a population of just 6.4 million, attracted more venture funding ($3.3 billion) last year than Italy ($2.7 billion), Korea ($1.6 billion)and Taiwan ($1.1 billion), according to PricewaterhouseCoopers.

The tax rate of Check Point Software Technologies, a maker of encryption software for computer networks, is just one example. In its latest fiscal year, ended last December, Check Point’s effective tax rate was 15.6%, up slightly from 14.4% in 2000, but still well under the standard Israeli tax rate of 36%.

Christopher D. Alderson, head of emerging-market equities with T. Rowe Price, likes Check Point’s 95% gross margins and $500 million in cash and equivalents. “That’s pretty extraordinary for a company that’s only been going seven years,” he says.

Full story (reg. required) at Forbes.com

One investing rule of thumb says to look for companies with high returns on equity. The approach is perfectly logical.

Return on equity (ROE), calculated by dividing net income by shareholder equity during a particular period, measures the return that management has produced on the money invested into the business. It makes sense that investors, i.e. shareholders, would seek out companies with healthy double-digit returns on equity.

So, why would anyone consider a company with low ROE? For starters, companies with low ROE may get overlooked or beaten down more than warranted because of their lackluster returns. And, sometimes, a slump in profitability may not be representative of long-term potential.

Take, for example, Andrew Corporation, a maker of cables, antennas, power amplifiers and other equipment for wireless and fixed-line communications. On a latest 12-month basis, return on equity for the Orland, Park, Ill.-based company stands at 9%, down from a three-year average of 11% and a five-year average of 15%.

Given the ongoing drought in capital spending and the ugly overall situation in telecommunications, it’s not difficult to understand why Andrew’s profits have suffered. The market, however, may have treated the stock a bit too harshly. At a recent $13, Andrew shares have fallen 47% since hitting a 52-week high in January.

If investors warm again to wireless stocks, Andrew looks poised to benefit. The company has taken advantage of its healthy balance sheet to make acquisitions and shore up its market position. In early June, the company completed its $470 million acquisition of Celiant, thereby becoming the leading U.S. maker of wireless-signal amplifiers.

To assemble our list of companies with low ROEs but promising prospects, we screened for companies with the following characteristics: ROE in the single digits and below their three-year and five-year averages; latest 12-month price-to-earnings multiple of 30 or less; and market capitalization greater than $500 million.

Full story at Forbes.com

Despite a 31% drop since the beginning of the year, it still may be premature to call a bottom for the Nasdaq Composite. The index managed to lose 5% last week and was off another 3.4% through midday on Monday. But, whatever the market’s immediate direction, some Nasdaq stocks look pretty attractive.

We screened for Nasdaq-listed stocks that have held up well relative to the overall index but still look cheap relative to their estimated earnings growth potential.

Example: Clearwater, Fla.-based Lincare Holdings (nasdaq: LNCR – news – people ), the country’s No. 2 provider of home respiratory services. The company delivers oxygen supplies to home-based patients suffering from such ailments as emphysema, chronic bronchitis and asthma.

Lincare, which has nearly 600 operating centers in 44 states, has been steadily increasing its share of the fragmented $4.5 billion home respiratory market through acquisitions and internal growth. In 2001, for example, the company acquired 18 smaller outfits, thus adding 15 operating centers to its roster.

Analysts reporting to Thomson Financial/IBES expect more such growth ahead for Lincare, forecasting that the company’s revenue will increase to $958 million in 2002 and to $1.1 billion in 2003, from $812 million for its latest fiscal year (ended December).

As for earnings, analysts predict Lincare’s profits will show annualized increases of 21% over the next three to five years. This means the stock, trading at just 17 times estimated next 12-month earnings of $1.76 per share, has a 12-month forward price-to-earnings growth (PEG) ratio of 0.8.

An investing rule of thumb says that stocks with PEGs less than 1 are undervalued. To assemble our table of Nasdaq picks, we started with stocks that carry low PEGs. For the group, 12-month forward price-to-earnings multiples average 17, while 2003 estimated P/Es average out at 14.

Full story at Forbes.com

NEW YORK – Found just under the “cash and equivalents” line on the balance sheet, accounts receivable refers to money owed a business for goods or services already provided. It’s useful to consider this item in the context of sales performance. In other words, if sales are rising while receivables are falling, it’s a pretty good sign that customers are either paying faster or the company is having fewer collection problems.

Example: Fluor, a contracting and engineering firm based in Aliso Viejo, Calif. The company’s swelling backlog of new projects has hit $11.6 billion as of its March quarter, a 14% increase from levels a year earlier. Recent engagements range from building a 365-room Ritz-Carlton resort in the Grand Cayman Islands to constructing test facilities for the Army Corps of Engineers’ missile defense research.

Fluor’s balance sheet suggests that customers are also paying their bills. For the most recent quarter (ended in March), receivables stood at $564 million, down 25% from $748 million a year earlier. Meanwhile, sales rose 31%, to $2.5 billion, during the same period.

Fluor looks like a company that will benefit from a recovering economy, but the stock hasn’t attracted quite the same attention that investors have paid to cyclical sectors such as natural resources or media. Shares of Fluor are trading 38% off a 52-week high set a year ago, and the stock’s 2003 estimated P/E of 14 falls well below the S&P 500’s estimated multiple of 21.

Full story at Forbes.com

NEW YORK – Considering the large number of companies with depressed stock prices and the weakened state of many industries, there has been a dearth of corporate takeovers or leveraged buyouts. If such activity heats up, however, one of the items many dealmakers will be looking at is the enterprise multiple. The ratio, a company’s enterprise value to its operating income, often uncovers value where other metrics suggest the opposite.

Enterprise value is the price that Wall Street puts on business operations. It’s the sum of the market value of common stock, the liquidation value of preferred stock and all debt, minus cash and equivalents. Operating income here is defined as profits before depreciation and amortization, interest and taxes.

To see the enterprise multiple at work, consider the case of two stocks in the computer services category: Computer Sciences and Electronic Data Systems. Measured by the price-to-earnings (P/E) yardstick, the latter company appears to be the better bargain. It sells for just 19 times latest 12-month earnings, while Computer Sciences has a trailing multiple of 24.

However, EDS’ enterprise multiple is 8, a slender premium to Computer Sciences’ 7.8. A glance at the two companies’ balance sheets reveals the reason why: EDS’ ratio of long-term debt to total capital stands at 39%, versus 34% for Computer Sciences. Anyone wishing to take over EDS would have to assume $4.6 billion in total debt.

Computer Sciences derives 25% of its business from technology projects for the U.S. government. With the prospects of more government spending on defense and security technologies, shares of the El Segundo, Calif.-based firm enjoyed an impressive bounce in the fall and winter. The stock has eased somewhat lately, though, and now trades 11% off its 52-week high.

The enterprise multiple can also come in handy when there aren’t any earnings multiples to compare. Looking elsewhere in the computer services sector, Unisys (nyse: UIS – news – people ) has a net loss for its past four reported quarters. Hence, no meaningful price-to-earnings ratio.

But Unisys does have an enterprise multiple, 17.8, which looks awfully high compared to those of both Computer Sciences and EDS. The computer service sector as a whole has an average enterprise multiple of 11.4.

Full story at Forbes.com

NEW YORK – Each autumn, we ask 17 Wall Streeters to try to beat the market over the coming year with one stock they love–or hate. We have 12 contestants who go long, while five finger a stock for a short sale. Successful participants are invited back for another year.

At the current contest’s halfway mark, the bears are in trouble. Since the first of November, the S&P 500 has sagged 1%. No such luck for the short picks, which are up an average 33% since that time.

The bulls don’t exactly have the right to gloat. As a group, their picks show a 5% decline. Were it not for one pick, however, the bulls would be ahead 4%. First-time contestant Michael Mauboussin, chief investment strategist at Crédit Suisse First Boston, bet last fall that Enron would either stage a recovery or see a takeover premium from a proposed merger with Dynegy. At the time, Enron shares traded at $12.

Full story at Forbes.com

NEW YORK – As part of this year’s survey of chief executive compensation at America’s largest companies, Forbes analyzed pay and performance of individuals who have held the top job for three years or less. Of these 172 executives, 62, or 36%, have delivered to shareholders annualized total returns of 15% or greater during their brief tenures.

Some of these corporate chiefs owe their star status to simply being in the right company or industry at the right time. But for others, it’s more than coincidence at work.

Take Waste Management, for example. In November 1999, A. Maurice Myers took the helm at the Houston-based waste disposal concern. Between then and April 5, 2002, Waste Management shares show an annualized total return of 24%, significantly outpacing the -8% return for the S&P 500 during that time.

Prior to Myers’ tenure, the company had been dogged by numerous problems, including an accounting scandal, a heavy debt load and insider-trading charges related to its merger with USA Waste in 1998. Myers set about divesting non-core assets and refocusing on the company’s North American solid waste business. The insider-trading charges were settled in November 2001 with a $457 million payment to plaintiffs.

Result: Waste Management’s net income went from a loss of $398 million in 1999 to a profit of $503 million in the firm’s latest fiscal year, ended in December. Perhaps more important than net results, Waste Management’s excess cash flow margins have improved from 3% in 1999 to 9% in 2001.

Full story at Forbes.com

NEW YORK – Among children’s emotional health issues, perhaps none has stirred more controversy than the use of drugs to treat attention deficit/hyperactivity disorder. Parents, health professionals, teachers and legislators have raised concerns about such medications–including abuse, harmful side effects and the temptation for school officials to “dope up” any child who acts up in class.

The American Academy of Pediatrics estimates that attention deficit/hyperactivity disorder (ADHD) affects between 4% and 12% of school age children, while the National Institute for Mental Health says there is at least one child in every American classroom who needs help dealing with the condition.

Despite the widespread recognition of the effectiveness of ADHD drugs in the context of a comprehensive and well-supervised course of treatment, concerns remain. No surprise, politicians are getting involved in this issue. In June 2001, for example, Connecticut Governor John Rowland signed a bill–passed unanimously in that state’s legislature–prohibiting school personnel from directly recommending psychotropic drugs for any child.

The controversy hasn’t kept drug companies from entering the field. A June 2001 report from the Pharmaceutical Research and Manufacturers of America listed 14 pediatric psychiatric drugs in the development pipeline. Seven of these drugs were described as attention-deficit treatments.

Jake Nunn, principal with MPM Capital’s BioEquities Fund, estimates that the market for ADHD drugs is growing at an 8% to 10% average annual clip and will exceed $1 billion this year.

Among the big drug companies, Eli Lilly (nyse: LLY – news – people ) hopes to grab a piece of the ADHD market. In late October, the Indianapolis-based company filed an new drug application (NDA) with the Food & Drug Administration for atomoxetine, a non-stimulant based ADHD therapy. The NDA review process usually lasts a year and a half.

Beyond countering the “doped-up” image that accompanies stimulant-based drugs, such as Novartis’ (nyse: NVS – news – people ) widely-prescribed Ritalin, atomoxetine is long-acting, so children need not visit the nurse for a dose during the day. “Marketing something with less stigma could give a firm a nice boost and bring interesting growth to the category,” says Nunn.

Full story at Forbes.com