EARNINGS ARE UP,

interest rates are still low and the Dow is a couple of greedy days away from 10,000. Does anyone else worry when the news is all good?

This might not seem like the time to search for stocks to hold when the market slips. But we think sunny days are the best time to line up some foul-weather friends for the future. Our Foxhole screen can help.

One of its main ingredients should sound Greek to you: beta, a key measure of volatility. Here's how it works. An index like the Standard & Poor's 500 is assigned a beta of 1.0. A 36-month regression analysis (don't ask) is then used to determine a beta for each stock based on its volatility relative to the index. A stock with a beta of 1.2, for example, has been 20% more volatile than the index, either rising or falling. One with a beta of 0.8 has moved 20% less dramatically. Negative betas show negative correlation.

Beta, mind you, isn't exactly a complete safety measure. For one thing, while low-beta stocks are great to hold in a sagging market, they also underperform in a rising one. So this screen is for those who are more interested in principal protection right now than in runaway gains. Also, beta looks only at the past. That's why, when we screen for beta, we also like to search for such things as earnings stability and balance sheet strength.

Don't worry about us working too hard, though our stock-screening tool makes it all a snap.

We recently searched our 8,300-stock database for betas below 0.5 and below their industry medians. We also made sure long-term earnings growth projections were in their industry's top quartile. Debt had to be manageable, and price/earnings multiples below average. See our recipe on the right side of this page for details on all of the criteria we used. Our search flagged 16 companies.

Lexington, Mass-based defense contractor Raytheon last year sold $16.8 billion worth of things that blow up, things that launch things that blow up, and things that prevent others' things from blowing up near Raytheon's customers. The U.S. and NATO are its largest buyers, but it also sells products based on less-sensitive military technologies to private customers. (Got $3.6 million to spend? Make a bid on this 1997 Beechjet

So, assuming you're not a member of the Taliban, Raytheon's products help keep you safe. (At least that's the idea.) But what can its shares do to defend your portfolio?

The stock's beta is 0.23, meaning that it has experienced less than a quarter of the broader market's volatility in recent years. And its Barra Risk Factor is 14, meaning the stock is "forecasted to have more price volatility than 14% of the stocks in the broad market," says Barra. The Barra Risk Factor incorporates not just past volatility but also a host of current fundamental measures. Within the defense and aerospace industry, Raytheon is projected to be more volatile than just six out of 63 stocks.

What's more, Raytheon shares are available at well below their normal trading multiple, thanks to a Securities & Exchange Commission investigation launched Sept. 9. The news sent the stock into a 15% tailspin.

But that reaction might be overblown. The matter involves the timing of revenue recognition within Raytheon's aircraft unit between 1997 and 2001. An informal inquiry began in January; on Sept. 9 the investigation was made formal. "The adjustments that might be necessary would shift revenue among various quarterly periods the total revenue, earnings and cash flow should not change," wrote Jefferies analyst Sam Pearlstein in a Sept. 10 research note. (Pearlstein doesn't own Raytheon shares; Jefferies has an investment banking relationship with the company.)

These days, any whiff of accounting irregularities can send a stock plummeting. But since this issue, at worst, appears only to be earnings- and revenue-neutral, panicking might not be warranted. Pearlstein said last month that a negative investor reaction would produce an attractive valuation. We'll be the judge of that.

At $27.60, shares trade at 15.9 times Reuters Research's 18-analyst 2003 earnings consensus of $1.74 per share. That's less, indeed, than Boeing's 35.0, Lockheed Martin's 19.8 and Northrop Grumman's 20.7. And Raytheon is projected to increase earnings by 11.5% annually over the next five years, a smidgen faster than the industry average of 11.0%. All told, Raytheon shares now boast a price/earnings growth, or PEG, ratio of 1.4, compared with Boeing's 2.9, Lockheed's and Northrop's 2.0 and the S&P 500's 1.7.

Here are two last safety fun facts for you to consider. Raytheon's dividend yield, now fattened to 2.9%, would make a cozy foxhole companion should the market cool off for a while. And its 8% free cash yield cash generated after all expenses as a percentage of market value is the highest in its group.

To see the rest of our Foxhole stocks, click here.