Stock investors lavish much of their attention on companies with impressive profit growth. Unfortunately, by the time most of us learn which companies are prospering, their stock prices have already risen accordingly. If only we could know ahead of time legally, mind you which reasonably priced companies are headed for a sudden pick-up in profits.

As it turns out, patient investors can make a surprisingly informed guess. To do so, they should track an oft-ignored entry on companies profit-and-loss statements that tends to shrink today s profits but fatten tomorrow s.

The measure is research spending. Technology and drug companies owe much of their fortunes to it. They invest steadily in promising projects ones likely to generate income sooner rather than later. When they invest in things like plants and machinery, called capital investments, they needn t subtract the cost from earnings right away, but rather, may do so little by little as the items are used over the years. That s called depreciation. Research spending gets no such preferential treatment, though, because it s too easy for companies to label undeserving expenses as research. (The boss s new espresso machine, after all, could just as easily be a pressurized stimulant extractor for the study of alertness enhancement.) The result is that research spending shrinks earnings right away, which can turn investors away from research-intensive companies just when such companies futures are turning brighter. That s a shopping opportunity for informed investors.

The three companies below each spent plenty on research over the past year -- at least 5% of their sales and asset values -- and more than they spent the year before. Also, price/research-spending ratios for each are low. Both signs bode well. A 2001 study published in the Journal of Finance found that from 1975 to 1995, stocks with low price/research ratios beat the broad market by about six percentage points a year. A similar study published three years later showed that from 1951 to 2001, increased research spending predicted higher profit margins and handsome stock returns.

Broadcom

Broadcom designs chips used in cable boxes, networking gear, handheld electronics and more. An aggressive researcher, the company holds more than 5,000 patents and has more than 7,000 applications pending. Three-quarters of its employees are engineers. On Feb. 3 the company reported a 19% increase in fourth-quarter sales versus a year earlier and its strongest cash flow ever. Management says companies that had been skimping on purchases of networking products are returning to normal order patterns. Broadcom is debt-free with more than $2 billion in cash, and last quarter it generated $331 million in cash from operations, while boosting research spending by 4%. The company recently initiated a small dividend (yield: about 1%). Its shares trade at 16 times 2010 earnings, about a 14% premium to the S&P 500 index, but Broadcom has surpassed earnings forecasts in each of its past four quarters by double digit percentages in three of them.

Cubist Pharmaceuticals

While most drug companies strive to develop treatments for chronic diseases like high blood pressure and diabetes, Cubist Pharmaceuticals makes drugs to fight acute conditions: nasty infections, excessive blood loss during cardiac procedures, respiratory and intestinal maladies and more. It has only a single product on the market (Cubicin, for complicated skin infections) but has several more in various stages of clinical trials. Analysts expect sales for the company to increase 17% this year and 13% next year. Cubist spent $127 million on research in 2008 and $170 million last year, and is forecast to spend $180 million this year and $215 million next year. Shares are 13 times estimated 2010 earnings.

Smith Micro Software

Smith Micro Software makes programs for wireless devices, and as such is something of a direct investment in the continued uptake of data-streaming smart phones. The company has gradually increased its research spending from 16% of sales in 2007 to nearly twice that last year. Some analysts think that could pay off with handsome sales growth beginning in the second half of 2010, as cellular carriers in the U.S. begin in earnest to upgrade to faster fourth-generation, or 4G, services. Smith Micro shares trade at 12 times forecast 2010 earnings. Last quarter, the company surpassed analysts earnings projections by more than 60%.