StockScouter spots energy, telecom plays

Energy stocks continue to outperform the major stock indexes, but the sector is no longer the unequivocal market leader it was for most of the past year.

The meteoric rise in energy stocks succumbed to gravity as investors began to anticipate slower economic growth would crimp energy demand.

The Standard & Poor's Energy Index put on 0.7% in August and was up 18.5% on the year, compared with a 4.4% gain for the S&P 500-stock index ($INX, news, msgs) through August. For 2005, the sector index -– dominated by integrated oil and gas companies -- gained 29% versus a 3% rise for the broader index.

Today, the energy sector provides some of the best opportunities for investment gains, according to an analysis from independent research firm Gradient Analytics that incorporates the StockScouter rating tool used by MSN Money.

Energy stocks dominate the September list of the 50 picks best positioned to appreciate. None of the big, integrated energy companies is on the list. Instead, it is well represented by wholesale and retail suppliers of oil and natural gas, such as El Paso (EP, news, msgs) and Northwest Natural Gas (NWN, news, msgs).

Even more prominent on the list are regional electric utilities, including CenterPoint Energy (CNP, news, msgs), Teco Energy (TE, news, msgs) and PG&E (PCG, news, msgs).

Also noticeable on this month's list are companies that provide landline or mobile telephone services to customers around the world. The analysis uncovered telecom plays in the Philippines -- Philippine Long Distance Telephone (PHI, news, msgs) -- Russia -- Mobile TeleSystems (MBT, news, msgs) -- and the United States -- CenturyTel (CTL, news, msgs).

MSN Money and Gradient Analytics built the StockScouter tool to help individual investors quickly analyze and assess a stock's potential for outperforming the broad market. StockScouter depends on advanced mathematics, software and an innovative mix of measurements and historical testing to forecast the short- and long-term outlook for all U.S. companies that have traded on the three major exchanges for at least the past six months.

Other analytical tools are also brought to bear in developing the list of stocks below. Only stocks with a final closing price above $3 are eligible for the list.

• Check here for more on how the tool works.

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