Private screening: crunching the numbers for profit.

You might say Kenneth Johnson has a philosophy that's in step with this era of alleged UFO cover-ups, White House prosecutor Kenneth Starr and X-Files paranoia: trust no one. And while Johnson, who runs a couple of portfolios for the St. Louis money management firm Investment Counselors Inc., isn't planning to demand a nationwide inquiry soon, he says the numbers corporations release to you and me tell only so much.

What Johnson, 31, has noticed in his six years of investing funds for such clients as Consolidated Paper Co. and the St. Louis City Employees retirement pension is that accountants can doctor corporate earnings figures and revenues any number of ways to make the bosses look good. "Earnings figures help," he notes, "but we've found that scratching past that and getting down to cash flow growth is how we really see how things are going."

Investment Counselors' approach to peeling away inventories and amortizations can get sticky for average investors, even if they've helped the firm rack up an average annual return of 26% over the last three years compared to 22% for the Russell 2000. Still, there are ways for the humble armchair investor to put some of his or her practices into play. Johnson limits himself to companies that have been public for at least three years. "It takes time to get used to being accountable to shareholders," he says. "It's quite a job to meet quarter-to-quarter goals and keep the public happy."

Then, it's important to see how many shares management owns. Johnson's encouraged to see 25%-30% of a company's outstanding stock held by the same people who supervise day-to-day operations. "It certainly shows that the people in charge have to care about profitability," he says. Another screening tip, he says, is to weed out any company with a debt load greater than 30% of its capital. And finally, borrowing the words of famed investor Warren Buffet, get ready to buy and hold. "We typically own a stock two to three years," says Johnson. "If you aim for less, you're essentially speculating and trying to time the market, which on occasion brings short-term success but doesn't always hold out for the long haul."

That's not to say Johnson is playing it strictly conventional these days. Echoing the sentiment of many managers who've recently appeared on these pages, he says large corporations are looking a bit pricey. Even though the S&P 500 has had an annual gain of over 30% the last three years, he believes the time has come for small and midcap stocks to strut their stuff. "Since valuations for large caps are so high, there's a lot more risk in that segment of the market," he says. His solution: look for smaller companies with higher growth and lower price-to-earnings (P/E) ratios.

Chart Industries (NYSE: CTI) is a stock that clears Johnson's long row of hurdles. The fact that the company, which makes and transports specialized gases used in the production of metals, is slated to expand earnings at a decent 16% average annual rate over the next five years, doesn't hurt either. "Capital goods companies like Chart are benefiting from a strong economy," says Johnson, "and besides that, management has worked hard to get new products out and boost efficiency." And despite Chart's rocketing growth rate, it sells at a wee P/E of 13 times 1998 projected earnings.

Technitrol (NYSE: TNL), a maker of electronic components for telecommunications and computer networks, is another high flyer in Johnson's eyes. According to his calculations, the company should raise earnings an average 20% annually over the next five years, yet its stock fetches a P/E multiple of just 17 times this year's profits. To top it all off, says Johnson, management is putting its money where its stock is; currently 20% of Technitrol shares are in the hands of management, up 12% since February.

Think of Hughes Supply (NYSE: HUG) as the Home Depot of whole sale construction goods--plumbing, air conditioning and heating supplies--and it's easy to see why Johnson has them pegged for a 15% growth rate. "This is a consumer cyclical that is getting a boost out of a strong economy and the money a lot of folks are putting into their homes as a result," he notes.

Johnson's also a fan of Symantec (Nasdaq: SYMC), maker of specialty anti-virus and database software. The reason: new products such as PC Anywhere, a software that enables traveling business folk to check into the computer network at headquarters, are off to a roaring start. Symantec is growing earnings at an 18% annual clip and sells at a P/E multiple of 14.

Finally, Johnson has a soft spot for a St. Louis local, Spartech (NYSE: SEH), which makes thermoplastics used for housewares and toys. The company is North America's largest producer in several key industry segments, and Johnson applauds its strategic policy based on savvy acquisitions. He thinks Spartech should grow earnings 16% annually over the next five years. Meanwhile, the stock trades at a rather modest 18 times projected 1998 earnings.