This article was originally published at RealMoney on September 26, 2007.

My article last week about mining the PPI report for stock ideas was so well received I thought I’d share another of my favorite taxpayer-provided idea generators, the durable goods report. Published by the U.S. Census Bureau, the report has a similar breakdown by industry of durable goods orders, shipments, inventories and backlog.  I came away with 28 potential ideas for further research.

In line with much of the recent economic data, the headline durable goods number was weaker than expected. To quote from the report, “New orders for manufactured durable goods in August decreased $11.3 billion or 4.9 percent to $219.5 billion, the U.S. Census Bureau announced today…. Shipments of manufactured durable goods in August, down two of the last three months, decreased $3.4 billion or 1.6 percent to $216.7 billion.”

But in this case, I think focusing on the forest means you could miss out on some of the more attractive trees. I gathered the data from the Census Bureau and created charts showing the year/year change in durable goods statistics for a variety of industries hoping to find some areas worth further consideration. Keep in mind, this is an initial screen for idea generation, not a full-fledged analysis of any of the names. You wouldn’t want to buy the stocks listed here without further research. That caveat aside, let’s look at some of the better performing industries.

First up is technology – computers and electronic products. Although 3.3% order growth year/year and essentially flat shipments may not be the type of growth investors typically look for from tech, it is a clear improvement from recent months. Inventories are starting to be drawn down and backlog remains strong.

But there are areas of strength and weakness within tech. Specifically, computers (and related products) themselves are starting to look strong, with backlog headed through the roof and inventories in check.

The fairly obvious stock ideas from this industry include Apple (AAPL), IBM (IBM - Annual Report) and Hewlett Packard (HPQ - Annual Report). If things keep getting better (and the company figures out how to file its required regulatory reports) Dell (DELL) might even look interesting again. Stretching a bit further, Sun Microsystems (a href="http://stockmarketbeat.com/blog1/category/tech/sunw/">SUNW - Annual Report) and Lexmark (LXK) come to mind. And don’t forget the storage plays, which also showed up on the PPI hotlist. The names I mentioned then were Brocade (BRCD), EMC (EMC - Annual Report), Iomega (IOM), Hutchinson (HTCH), Quantum (QTM), SanDisk (SNDK - Annual Report), Seagate (STX - Annual Report) and Western Digital (WDC).

Communications equipment is also showing some signs of strength. Though the latest month was down, the trend seems to be up.

I have actually analyzed Motorola (MOT - Annual Report), so that would be a play to include here. Cisco (CSCO), Research in Motion (RIMM), 3Com (COMS), Nokia (NOK) and Corning (GLW - Annual Report) also come to mind.

And finally, turning away from technology, I hope you didn’t think the aircraft boom was over. If anything, it looks to be picking up steam.

Ways to play this include Boeing (BA - Annual Report), Embraer (ERJ), General Dynamics (GD - Annual Report), United Industrial (UIC) and Cessna parent Textron (TXT). Parts suppliers include Rockwell Collins (COL), Curtiss Wright (CW - Annual Report), and LMI Aerospace (LMIA).

So there you have it: 28 potential stock ideas from what looked at first glance to be a negative report on durable goods.

Disclosure: Long RIMM put options at time of publication.

Mid Cap Watch List (Track at Marketocracy) member United Industrial Corporation (NYSE: UIC) announced today that holders of the 3.75% Convertible Senior Notes due 2024 (”Senior Notes”) can convert their Senior Notes into shares of UIC common stock during the calendar quarter from July 1, 2007 through September 30, 2007.

A holder electing to convert Senior Notes will receive either cash or 25.4863 shares of UIC common stock (or a combination of cash and common stock) per $1,000 principal amount of Senior Notes. Conversion is at the option of the holder. Payment in cash and/or UIC common stock is at the option of UIC. This event is triggered by UIC’s stock price remaining above $47.09 (120 percent of the initial conversion price) for at least 20 consecutive trading days during the last 30 trading days of the quarter ended June 30, 2007.

If the Senior Notes are converted into common stock, holders will forfeit their right to receive 3.75% annual interest on the Senior Notes and will instead be entitled to receive future dividends (if any) on UIC common stock. Such dividends are currently $0.40 per share per year, equivalent to an annual dividend yield of 0.67% based on the closing stock price on June 29, 2007.

With UIC shares currently trading at $62.24, conversion would yield $1,586 worth of value for each $1,000 bond. The $0.40 annual dividend would result in a cash flow of $10.19 per year, compared with the current $37.50 from the bond interest. Investors in a high tax bracket would also benefit from the lower tax on dividends than on interest income, which would narrow the differential.

On the other hand, investors who choose not to convert will continue to have the higher annual payments for another 17 years, and will have an effective limit to any stock market losses should the share price decline.  If I were a bondholder, the only reason I’d be likely to convert would be if I thought the shares were as high as they could go. Otherwise, I’d just hang on to the higher annual payments and the valuable long-term call option.

I am proud to host this edition of the Festival of Stocks. Since you are here for some stock picks, let’s get to them!

Rock Your Stock rang in first with Callaway (ELY) is Hot. He says the stock is on a tear and has the fundamentals to back it up.

Rick Casterline at Once More Unto the Breach figures he can sleep when he dies. No way is he going to do it during day 3 of the Berkshire Hathaway Annual Meeting.

Average Joe at Investment Jungle weighs in with a review of Small Cap Watch List (Track at Marketocracy) member First Regional Bancorp (FRGB). Joe and I have frequently been on the same investment page.

Project Stocks submitted Beat the Market With Only 15 Minutes of Work Each Year. The idea is to buy each year’s top performing fund and hold it for a year. Seems simplistic, but it actually has some support from recent academic research.

Neural Market Trends wonders about the effect of financial asteroids on market trends.

Fiscal Times tells us the stocks Business Week ranks as most innovative tend to perform better.

Big Cajun Man has found a real lu-lu.

TJP at Investor Trip explains what he missed when he first got Sirius (SIRI).

Trader’s Narrative is calling a bubble… in China.

Self Investors outlines a successful day trade in Force Protection (FRPT).

Silicon Valley Blogger offers 5 tips for evaluating your portfolio.

George at Fat Pitch Financials presents his five favorite ways to hack into the web’s resources for investors. I downloaded the Excel add-in and am looking forward to trying it out.

Sox First outlines what went wrong with the planned private equity takeover of Qantas.

And what the heck? I’ll toot my own horn by presenting my take on United Industrial Corp. (UIC).

Hot on the heels of a strong earnings report, Mid Cap Watch List (Track at Marketocracy) member United Industrial Corporation (UIC) announced that its Board of Directors authorized a new $50 million stock repurchase plan. The Board also authorized an additional $50 million of stock repurchases, for a total of up to $100 million, contingent on the company executing an amended or new credit facility of at least $200 million in capacity.

My take: Initially I was skeptical about the seriousness of this buyback, which would amount for a significant slug of the $625 million market capitalization even at the smaller $50 million plan. I figured the buyback would just be soaking up shares converted from the bond issue.

Then I looked at the annual report, and saw that the share count is already down nearly 15% from the 2003 peak. So now I’m thinking they are going the slow-motion self-LBO route. And I generally like companies that take that route.

Large Cap Watch List (Track at Marketocracy) member United Industrial (UIC) reported earnings:

Net sales for the first quarter of 2007 increased 25.0% to $160.8 million from $128.7 million during the same period in 2006. The growth in net sales was primarily due to $10.7 million increased volume on aircraft Maintenance Training Device (”MTD”) programs, $7.7 million of increased sales for the Unmanned Aircraft Systems (”UAS”) One System(R) ground control system including greater developmental efforts supporting the Extended Range Multi- Purpose UAS program and production of the new Remote Video Terminal ground control systems, an increase of $6.3 million in logistical support for fielded Shadow(R) 200 Tactical Unmanned Aircraft Systems (”Shadow 200 TUAS”), and a $2.5 million increase in engineering activities primarily related to new UAS initiatives. In addition, the company’s 2006 acquisitions contributed $18.5 million to net sales in the first quarter of 2007. These increases were partially offset by a decrease of $13.8 million in the Shadow 200 TUAS production program, primarily due to the timing of material requirements in the first quarter of 2007….

Net income from continuing operations for the first quarter of 2007 increased 31.0% to $10.0 million, or $0.75 per diluted share, from $7.7 million, or $0.61 per diluted share, during the same period in 2006.

Net income, including results of both continuing and discontinued operations, for the first quarter of 2007 increased 7.3% to $9.2 million, or $0.69 per diluted share, from $8.6 million, or $0.67 per diluted share, during the same period in 2006.

Analysts had been expecting the company to earn $0.73 on $151 million in sales. Despite the strong growth in sales, orders grew at an even faster pace, boosting backlog:

During the first quarter of 2007, the company received $215.7 million of funded new orders for products and services, an increase of $48.6 million, or 29.1%, compared to $167.1 million of funded new orders during
the same period in 2006.

Funded backlog for the company’s continuing operations was $717.1 million at March 31, 2007, an increase of $54.9 million, or 8.3%, from $662.2 million at December 31, 2006.

With the strong orders growth and the weakest unit now discontinued, UIC could be in for a continued strong run.

Mid Cap Watch List (Track at Marketocracy) member United Industrial Corp. (UIC) has announced that bondholders have the option to convert bonds into shares if they so choose.

United Industrial Corporation announced today that holders of the 3.75% Convertible Senior Notes due 2024 (”Senior Notes”) can convert their Senior Notes into shares of UIC common stock during the next calendar quarter from April 1, 2007 through June 30, 2007.

A holder electing to convert Senior Notes will receive either cash or 25.4863 shares of UIC common stock (or a combination of cash and common stock) per $1,000 principal amount of Senior Notes. Conversion is at the option of the holder. Payment in cash and/or UIC common stock is at the option of UIC.

Since the shares closed at $55.05, the conversion option is currently worth $1,403 for every $1,000 in bond face value. So, should the bondholders convert? It depends. United Industrial notes:

If the Senior Notes are converted into common stock, holders will forfeit their right to receive 3.75% annual interest on the Senior Notes and will instead be entitled to receive future dividends (if any) on UIC common stock. Such dividends are currently $0.40 per share per year, equivalent to an annual dividend yield of 0.72% based on the closing stock price on March 30, 2007.

So by converting now, you would give up more than 3% per yer in interest payments relative to the dividend (although the dividend likely enjoys a lower tax rate.) Furthermore, you don’t lose the option to convert at a later date, although the right to convert could temporarily be suspended if the stock price falls. But on the other hand, you would get hurt if you converted and the stock fell, too.

The bottom line: the bond has a higher yield, less downside and nearly equal upside to the stock. We would say no to conversion. If you want to take some profits, sell the bond (with conversion premium intact) to another bondholder instead.