"Midyear is as good a time as any to pause and reflect," says Richard Moroney in Dow Theory Forecasts -- a newsletter that has been published for over 50 years.

Here, he reviews the state of the market and offers a look at trio of favorite stocks which he considers "fundamentally superior" companies: Biogen Idec (NASDAQ: BIIB), Comcast (NASDAQ: CMCSA), and Oceaneering International (NYSE: OII).

"The Dow Theory indicator remains in the bearish camp, as the last confirmed signal was the move to new lows in March.

"But both the Industrials and Transports have staged significant rallies since March, so the pathway to a bull-market signal has been established.

"If at least one average can hold above a March low on a signifi cant market correction and then both averages rebound above the closing highs established in the current rally, the Dow Theory will return to the bullish camp.

"While the average U.S. stock is no longer particularly cheap, many attractive values are available. Among S&P 500 stocks, more than 100 have trailing P/E ratios below 10 — down from 230 in March but well above the 18-year norm of 42. Some 77 stocks in the S&P 500 have P/Es between 10 and 12 — more than double the 18-year norm.

"While bulls and bears appear sharply divided, we see no reason to make an all-or-nothing decision on be found among the fundamentally superior companies favored by Dow Theory Forecasts.

"Fortunes at Biogen Idec are leveraged to three drugs: Rituxan (rheumatoid arthritis and non-Hodgkin’s lymphoma), Avonex (multiple sclerosis), and Tysabri (Crohn’s disease and MS). Over the next 12 months, Biogen will rely on these drugs to sustain its operating momentum. 

"Biogen plows its strong cash flow into research and development, spending an average of 32% of sales on R&D for the past five years. The pipeline includes 20 drug candidates in the late stages of clinical trials that could broaden Biogen’s portfolio.

"In May, a Tysabri patient fell ill with progressive multifocal leukoencephalopathy (PML), a rare but often fatal brain infection. This marks the seventh PML case linked to Tysabri since its reintroduction in July 2006, and the third in 2009.

"Despite its side effects, Tysabri has gained acceptance among neurologists; it is regarded as the most effective MS treatment available. Trading at 12 times trailing earnings, a discount to the three-year average of 31, Biogen is a Focus List Buy and a Long-Term Buy. 

"Anticipating that subscribers will upgrade to more expensive packages, Comcast is shifting toward a fully digital platform.

"New services will include access to 10,000 OnDemand choices and also triple the number of high-definition stations to 100. The transition won’t require new TV set-top boxes and has been successful in test markets. 

"Comcast plans to roll out the initiative in more than half of its markets this year and expects completion by 2010. Despite these plans, management expects to reduce capital expenditures ($5.75 billion, or 17% of sales, in 2008) in both dollars and as a percentage of sales in 2009. 

"CEO Brian Roberts considers Comcast’s primary operations, video and broadband services, as intertwined.

"He says he does not expect a material impact from 'cord cutters' — those who cancel cable subscriptions and watch video on the Internet. Comcast is working on a Web service that will stream cable-TV shows only to subscribers.

"The consensus predicts 2009 per-share profits will increase 13% on 4% higher revenue. Over the next five years, profit growth is expected to average 11%. Already a Long-Term Buy, Comcast is being upgraded to a Focus List Buy. 

"Whether it is deep sea or deep space, Oceaneering International helps customers reach distant environments.

"In March, Oceaneering won a $180 million contract to design NASA spacesuits, but the company gets 90% of its revenue from selling equipment and services to offshore oil and gas drillers. 

"In 2009, Oceaneering will likely find growth in its Remotely Operated Vehicles (ROVs). Accounting for nearly half of operating income, the ROV fl eet should expand at least 8%, and most of these new vehicles already have contracts.

"Further out, prospects looks bright for the other segments. Oceaneering controls 30% of the global market for subsea umbilicals, for which orders are expected to leap 60% over the next five years.

"Deepwater markets have proved less vulnerable in the downturn because of their massive scale and contract lengths, which frequently exceed five years.

"This year, management expects per-share profits of $3.10 to $3.60. Oceaneering is not a bargain at current prices but trades at a reasonable 14 times trailing earnings, a 30% discount to the five-year average. Oceaneering is a Focus List Buy."