Our buy rating for General Dynamics has not changed since July 2003. This rating is based on strengths such as revenue growth, an impressive record of earnings per share (EPS) growth and compelling growth in net income. Sales, earnings and operating margins increased in all four General Dynamics business groups in the second quarter of fiscal 2008. The Combat Systems group experienced increased sales in its armored vehicle and tank programs compared with the year-ago period and significant margin growth.

New-aircraft volume in the Aerospace group, increased shipbuilding activity in Marine Systems and continued strong demand for tactical communications and computing systems in the Information Systems and Technology sector also contributed to the overall strong performance. Revenue for the second quarter rose 10.8% year over year. This growth appears to have boosted the company's net income and EPS, which improved by 25% and 26%, respectively.

While the stock is trading 12.7% higher than it was a year ago, it should go without saying that even the best stocks can fall in an overall down market. However, we believe that the company's strengths outweigh the risks inherent in this industry.

ConocoPhillips ( COP) operates worldwide as an integrated energy company. The company is headquartered in Houston, and operates in nearly 40 countries. It centers its business on four core activities: exploration and production; refining, marketing, supply and transportation; natural gas gathering, processing and marketing; chemicals and plastics.

ConocoPhillips has been rated a buy since April 2003. While the company currently shows low profit margins, we feel that strengths such as its robust revenue growth, compelling growth in net income, attractive valuation levels and notable return on equity justify our rating. For the second quarter of fiscal 2008, the company's revenue surged 55.5% year over year.

This appears to have helped boost earnings per share, which rose dramatically from 18 cents in the second quarter of fiscal 2007 to $3.50 in the most-recent quarter. At the same time, net income increased 1,707.0% in the second quarter. Net operating cash flow increased 14%, while the company's return on equity exceeded that of the same quarter one year prior, rising from 12.86% to 19.07%.

The company recently signed an interim agreement to develop the Shah gas field in Abu Dhabi and also approved the continued funding for the development of the Yanbu Export Refinery Project. Additionally, the company plans to expand the Keystone crude oil pipeline system in North America.

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