The dollars companies invest in new plants and machines don't get subtracted from their profits all at once come reporting time. They're taken out little by little over however many years established guidelines say the investment is likely to pay off. That process is called depreciation, and the rationale behind it is called the matching principle.

The matching principle states that, to keep profits reflective of current operations instead of volatile investment spending, costs should be matched with associated revenues for accounting purposes, even if that means rearranging a few dates and dollar amounts. (The earnings statement, after all, is designed to keep the growth story tidy for stock investors. The cash flow statement tells lenders the sometimes-messy truth about ability to pay.)

Research spending would seem to qualify for special treatment under the matching principle. Companies lay out vast sums today to develop new products that bring in sales in future years. However, research is a vague thing, which makes it easy for companies to cheat. Allow bonus-hungry managers to defer development costs as they see fit, and soon they'll dress the marketing department in lab coats and declare sales calls behavioral research. Better to disallow special treatment for research spending than try to police it, regulators figure.

That restriction has given rise to an accounting quirk that investors can exploit. Research spending makes companies look less profitable right away, so managers tend to increase research spending only when they're confident in the results. A University of Illinois study found that when research-intensive companies suddenly spend more in the lab, their profit margins tend to increase faster than those of their peers over the next five years. A Georgetown University study treated research and development like earnings by using a price/R&D ratio to shop for bargains, just as investors use price/earnings. Over a 20-year study period, low-P/R&D stocks beat the market by about six percentage points a year.

The three companies below each increased their research spending by more than 10% over the past year and have relatively low P/R&D ratios.

Pfizer

R&D increase: 10%
P/R&D ratio: 14

The world's major drug makers have single-digit P/E ratios, on average, because of a looming parade of patent expirations and a dearth of new blockbuster medicines. Pfizer is among the cheapest, at less than seven times earnings. Lipitor, the company s treatment for high cholesterol, will likely face generic competition next year; Viagra, for impotence, the year after; and Celebrex, for arthritis, in 2014. Meanwhile, the company's $68 billion purchase of Wyeth last year caused it to halve its dividend payment and take on debt. Shares have fallen since the deal was announced, even though the broad market has rallied during that time. The good news for today's buyers is that the worst seems priced into the stock, the company's cash flow is more than sufficient to reduce its debt in coming years and that dividend payments are likely to grow larger as that happens. The stock yields 4.9% now.

Western Digital

R&D increase: 16%
P/R&D ratio: 12

Earnings per share for hard-drive maker Western Digital are expected to jump 47% this year. That's due mostly to a recovery from last year's dismal spending pace for computers and partly to market share gains. Over the past year, the company turned 15 cents of each sales dollar into operating profit, versus a dime in 2007. In the hard-drive industry, plump margins are generally a sign that manufacturers are about to increase supply, driving profits lower. Then again, Western Digital trades at just five times earnings, and three times earnings if we subtract its cash hoard from its stock price. The company recently began a push into enterprise drives used in company networks, a lucrative segment of the market dominated for now by others.

McAfee

R&D increase: 21%
P/R&D ratio: 15

McAfee makes security software for computers: virus scanners, firewalls, data backup programs and more. In recent years, the company has bolstered its products for companies and made distribution deals with computer makers and Internet service providers. Sales increased 20% last year and 22% the year before. Analyst forecasts call for increases of about half that size this year and next. The company is debt-free with cash equal to more than 15% of its stock price, and it turns about 20% of its sales into free cash. For now, it spends the bulk of that cash on acquisitions and product development. There's no dividend payment. If management so desired, it could easily fund a 3% yield at today's price.