TUESDAY AFTERNOON

the Federal Reserve is widely expected to announce a pause to its two-year string of interest-rate increases. What would such a decision mean for your portfolio? The Fed has no idea. Nor do I. Wall Street pros opining on the subject beforehand are mostly faking it.

That's because each interest rate change includes a piece of good news and a piece of bad news. A rate hike is designed to dampen the price-inflating effects of a strong economy (strong economy: good news) by making it more expensive to consumers and businesses to borrow (bad news). A pause suggests borrowing won't get much more expensive for now (good news), but it also signals that the economy might be slowing (bad news). Add one more layer of confusion. In addition to the mixed signals, it's difficult to say to what extent expected outcomes are already priced into the market. So a pause Tuesday could send the market soaring or sliding, or it could go ignored.

Obsessing over interest rate changes in the short term, then, is fairly futile. Better to look for good companies that rate-watchers are betting against, and buy their shares. Consider Regal-Beloit, a Wisconsin-based maker of industrial and electrical parts. Its stock is up 103% since we recommended it two years ago and 43% since we did the same a year ago. That's despite a pair of analyst downgrades in the past four months, both of which cited concerns that rising interest rates will slow the economy. More on that in a moment.

Regal turned up recently on our Price/Sales screen, which uses the less-known but more-telling sibling of the price/earnings ratio to find bargain stocks. Sales are less subject than earnings to results-skewing accounting charges and gains, which makes them more reliable for valuation purposes. Research from the likes of writers-turned-money-managers James O'Shaughnessy and Ken Fisher have shown that low P/S ratios are better than low P/Es at predicting strong stock performance. See our screen recipe for details on our search criteria and use our stock screener to run the search for yourself. It recently produced eight survivors from a starting database of 8,000.

Back to Regal. It makes motors, power generators, switches gears and more used in everything from refrigerators to cars. The company operates more or less as a roll-up for industrial component makers, buying businesses and squeezing out greater profits. It has made 30 such acquisitions in 26 years.

Second-quarter sales for Regal increased 18% to $435.3 million. Just over $10 million of that came from an acquisition (Sinya Motor), but sales for the quarter were also reduced by around $4 million from the sale of a cutting tools business, which the company unloaded to better focus on motors and electrical components. Earnings for the second quarter jumped 81%. Management said every major division did well. Hot weather may have helped sales of cooling equipment, for which Regal makes components. Debt during the quarter fell $27 million to $393 million. That's a $144 million drop from a year ago.

Chicago-based Barrington Research, which downgraded its recommendation on the stock to Market Perform from Outperform (to Hold from Buy, essentially) in June, changed its rating back to Market Outperform on Aug. 3. Two reasons: The stock had fallen around 8% since the downgrade, and Barrington analyst Alexander Paris saw some comforting signs from the economy. "We had been looking for a slowdown in the U.S. industrial sector," he wrote in a note announcing the upgrade. "But...the 2007 outlook remains positive [and] Regal has become much more of an international company in recent years, including a growing presence in Asia/Pacific."

All told, Regal is projected to increase its earnings by 40% this year and by 12%, on average, over the next five years. That makes the stock, at less than 14 times this year's earnings forecast, look too cheap. Also, the stock's P/S ratio, at 0.85, stands at a discount of about 15% to the machine tools and accessories industry and more than 40% to the S&P 500 index's median P/S ratio. On Tuesday afternoon the Fed governors can freeze rates, hike them or dress like bards and recite lyrics about activist inflation targeting. None makes Regal's trade in industrial innards less brisk, or its current share price, less alluring.