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Number Cruncher

Looking for stocks with a foot in the future Add to ...

What are we looking for?

Which big U.S. companies are ramping up investment in their future.

More about today’s screen.

This screen lists the 22 companies among the members of the S&P 500 that have increased spending on research and development the most over the last four quarters. It also shows the percentage of overall revenue that has been allocated to R&D in the period. Share profit growth and revenue growth over the last year are included as performance measurements.

What we found

The U.S. companies increasing their R&D budgets the most are mainly from the technology or medical sectors.

Sandisk Corp., for example, designs and manufactures flash memory storage that is used in consumer electronics items such as smart phones. Celgene Corp. is a biopharmaceutical company that develops and commercializes various therapies to treat cancer and immune-inflammatory related diseases.

Several firms on this list specialize in automotive or industrial engine design and manufacturing. Cummins Inc. designs and builds diesel and natural gas engines. BorgWarner Inc. makes engineered automotive systems. Both are spending a little more than 3 per cent of their revenues on R&D.

Newmont Mining Corp., one of the world’s largest gold miners, is the only resource company on the list, landing the No. 2 ranking. Top spot is held by the conglomerate Leucadia National, whose R&D costs were driven higher by its medical product unit Sangart, which is conducting clinical trials of a drug for trauma patients.

The results highlight the frustrating gap that can lie between R&D and profits. There is little correlation between how much the firms on the list spend on R&D spending and rising revenue or sales. Priceline.com, Cummins, Celgene and Apple stand out as companies able to turn investment into better performance.

Half of the companies on our screen actually saw their profits decline over the last year, and most of the listed equities trade at a price-to-earnings multiples above the S&P 500 average. Tomorrow we will look at which TSX-listed companies have boosted R&D spending the most.

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