Latest Zweig screen stocks

The compromise is to look at the most recent figures and re-assure yourself that the earnings growth acceleration is holding steady and that there aren't any hidden surprises. And what is clear is that those analysts who have used Zweig's ideas in bear and bull markets - like those at the AAII and Validea - think it's the best way to spot fast-growing reasonably priced shares. If markets are going to be choppy, and possibly even moving sideways over the next few months, one particular type of share is more likely to outperform - fast-growing individual growth stocks, where the management is exploiting a powerful competitive market position to grow even in a slowdown.

Running the Zweig screen across the UK market currently produces just four companies - all of the companies in the table below are growing faster than ever, boast a reasonable price-to-earnings ratio and have shares that have outperformed the market in recent months.

Current Zweig shares - price performance:

Current Zweig shares - financial metrics

The companies in detail:

(the links lead to pages with more articles and financial data about the company)

FDM

Some analysts had been worried that IT staff supplier FDM, whose consultants are known as Mounties, not to be confused with tall Canadian men with the power to arrest grizzled criminals - might be hit by a sudden downturn in demand from big clients in the investment banking sector.

Those fears have been overdone though. The company put out a trading statement just before Christmas that suggested that business was booming, despite the slowdown. The statement noted that that the company's "strong trading performance has continued throughout the final quarter of the year. As a consequence the Board now believes that the Company's results for the year to 31 December 2007 will be materially ahead of their previous expectations", with improved gross margins on the way as well. "FDM can further report that it has experienced no impact from the well publicised problems affecting the banking and financial services sector. Indeed, demand for FDM's services in all the sectors it focuses on continues to be robust. Productivity has improved and FDM's conversion ratio will be ahead of last year's figure and significantly above the industry average."

One crucial part of its growth plans are those Mounties - certified and company trained IT consultants that work in sectors such as investment banking, with utilisation rates of at least 98 per cent. Dig beneath this news and you can begin to see why FDM is the perfect Zweig candidate - its shares have consistently outperformed in a weak market, powered by sales that have been growing at between 15 per cent and 30 per cent a year for the past couple of years. Profits have also shot up from £1.6m in 2005 to a forecast £4.38m in 2007.

First Derivatives

First Derivatives, a supplier of specialist software and IT consulting to the financial services industry, has a similar story to tell. Again, there have been worries that reliance on financial services companies will cost it dear but, so far, there's no evidence that sales are suffering. Ian Mitchell, an analyst at Charles Stanley, rates the shares a "buy" and has set a target price of 368p a share. Mr Mitchell believes that the company is about to increase scale and profitability - and his analysis is backed up by the October results, which stated that "we are continuing to experience strong levels of demand for our consultants and are achieving high utilisation levels".

Those results saw an increased first half pre-tax profit of £1.85m compared with £1.11m in the corresponding period of the previous year, while revenues were up at £5.64m (£4.18m in 2006) and EPS increased by 73 per cent to 10.2p. Big sales wins were also announced with clients such NYSE/Euronext, HypoVereinsbank (HVB) and the Financial Services Authority. The only slight concern was an increase in borrowing (£3.25m) to fund new premises - a further three properties in Manhattan plus two in central London. However First Derivatives did add that it is repaying its debt quickly and that the loan to value ratio on its property portfolio is less than 60 per cent.

JKX Oil & Gas

Ukrainian oil and gas specialist JKX is one of the most popular second-rank exploration and production plays on the London market. Both sales and profits have been growing quickly but the share price, although strong relative to the wider market, has lagged behind key strategic developments. For example, a Ukrainian billionaire has recently emerged as a 12.6 per cent shareholder. Igor Kolomoisky, a prominent international businessman with a huge range of business interests, picked up the stake through Ralkon Commercial. Curiously, the market responded to this announcement by marking down the shares.

JKX has license interests in the Ukraine, Russia, Georgia, Bulgaria, Turkey, Hungary, Italy and the US and is hugely popular among most oil analysts. KBC Peel Hunt recently increased its rating on the stock to "buy" from "hold" following sharp increases in the price of gas produced by JKX. The broker noted that Gazprom and the Ukraine government have agreed a gas price of $179.50 per thousand cubic meters for 2008. JKX achieved a premium of around $10 per thousand cubic metres over the agreed Russia-Ukraine gas price in 2007, and the broker notes that the new price allows JKX to realise over $5 per thousand cubic feet in 2008. That means the shares are trading at around 10 times the 2008 earnings forecast, and below the broker's estimate of core net asset value of 390p. Many analysts are also excited by the recently acquired Koshkhablsky field in Russia, which will also benefit from rising gas prices.

Serco

By far the largest company on this list is Serco, the outsourcing specialist that runs the Docklands Light Railway, the UK's nuclear warning systems and also prisons and detention centres. Serco is still one of the most successful companies in the fast-expanding outsourcing services sector. Since floating in 1987, revenues have increased from £50m to £2.8bn. Last year, sales were up 10 per cent and EPS 27 per cent ahead. And Serco has expanded from defence into transport, health and home affairs, as well as powering ahead internationally, where contracts account for 25 per cent of business. That excellent growth record is reflected in the high forward PE ratio, which stands at just under 23 - but it's clear that growth is accelerating. In December, the group issued a trading statement estimating likely recent contract wins worth £3.3bn. It also announced that it expects double-digit growth for the foreseeable future as well as higher profit margins. Most analysts believe that growth in 2008 should be even more impressive than in 2007 - a view confirmed by management, who declared that the group is "on track for another successful year with great visibility of future revenue". As analysts at Merrill Lynch noted, it looks like Serco is the classic 'defensive' high growth stock in an environment of slowing GDP growth and earnings downgrades elsewhere.

The full Zweig portfolio