A green light on the economy: Isaac Green's focus on earnings was a winner. (Stock Update).

A year ago, Isaac H. Green, president and CEO of Durham, North Carolina-based Piedmont Investment Advisors L.L.C., sensed that the trend toward strengthening earnings growth among publicly traded companies was a signal that better days were ahead for stocks. He put together a diversified portfolio of companies for our Private Screening column, and it held up well under some of the worst market conditions in memory.

"I selected some defensive issues that would do better in a negative environment, then added some stocks sensitive to the economy that would perform well in anticipation of a recovery," says Green.

In fact, Green's Private Screening picks fetched a 2.47% gain during the 52-week period from May 10, 2002, to May 9, 2003. By comparison, the Standard & Poor's 500 index dropped 11.52% and the Dow Jones industrial average fell 13.43% during the same period.

Green's selection of Providian Financial (NYSE: PVN), a credit card issuer that gained market share by extending credit to higher-risk consumers, rebounded nicely when the average credit profile of its customers improved. This rebound fueled a 15.69% increase in share price, from $7.01 to $8.11.

Clear Channel Communications (NYSE: CCU) was hurt by a lawsuit accusing the radio broadcaster of unfair competitive business practices. The stock dropped 15.38%, from $46.80 to $39.60. Now that the dust has settled, Green says he will hold the stock because, "it is a dominant player in the industry with strong cash flow that makes it attractive."

Unfortunately United Technologies (NYSE: UTX) did not benefit from its status as a defense industry supplier during the Iraq war because it was hurt by the loss of its airline parts business. The stock fell 4.30%, going from $67.44 to $64.54. Green sold it in April because of its exposure to the airline industry.

Green says he will continue to own Altria Group (NYSE: MO) even though the cigarette and food maker's stock dropped 38.72%, going from $51.73 to $31.70. He says it is a long-term play because of the stock's 6% dividend and the continued undervaluation of its assets caused by the fear of ongoing tobacco settlement cases.

Oracle (Nasdaq: ORCL) was a big winner. It jumped a staggering 55.06% from $8.01 to $12.42. Says Green, "We bought Oracle because it was underpriced and we thought the company would improve as the economy came back." He sold the stock in May because its valuation was no longer attractive, saying that it is also important to take some profits in the current volatile environment.

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