(FORTUNE Magazine) – OPEN WIDE!

BUY DENTSPLY

Here's a big figure to chew on: 150 billion. That's roughly the number of teeth in people's mouths worldwide--the target market for Dentsply (XRAY, Nasdaq), the world's largest supplier of dental equipment from X-ray systems to artificial teeth. Dentsply has been moving into foreign markets like India and China; here at home, cosmetic dentistry--whitening and straightening of teeth--is becoming big business. Cash flow from operations is running around $100 million a year, and management has been shrewdly reinvesting these funds by buying up competitors.

At first blush, the stock may seem pricey: Analyst Eugene Rothman of Legg Mason predicts 15% annual profit growth, yet shares are already selling at 18 times this year's projected earnings. But with a return on equity of 20%--compared with an average of 16.7% for the S&P 500--Dentsply has proved itself adept at enhancing shareholder value. And Dentsply's business is almost perfectly insulated from the vagaries of an economic downturn. After all, as your mother said, you always need to take care of your teeth.

ONE WORD: PLASTICS

BUY SPARTECH

How does a company squeeze consistent growth out of a sleepy industry? For Spartech (SEH, NYSE), the dominant player in a key segment of the plastics business, the answers have been simple enough. First, consolidate: More than 75% of Spartech's $3-billion-a-year primary market is controlled by companies with annual revenues of $50 million or less. Spartech--whose 1996 revenues were $391 million--has been picking off competitors. Second, Spartech has been able to find an unending array of new uses for plastic--items like trailer roofs and running boards that have traditionally been made of other materials but are cheaper and more durable in plastic.

Spartech has turned in 21 consecutive quarters of earnings growth, with future growth projected at 15% a year, according to First Analysis Securities' Allan Cohen. Yet shares are selling at just 13 times projected 1997 earnings. No trouble extruding value out of that.

THIS TELEPHONE IS STILL RINGING

CHECK IT OUT TELEPORT

Teleport Communications Group (TCGI, Nasdaq), which operates state-of-the-art local phone networks in 65 metropolitan markets, has seen its stock knocked down some 20% recently. Why? When the 1996 Telecom Act passed--opening local markets formerly monopolized by the Baby Bells--stocks like Teleport shot up. Then, as investors began to understand that the high cost of building network infrastructure precludes profitability for some time to come, the group's share values sank again.

But Teleport should be distinguished from the competition. Not only is it the only national player; it is also the only one making money on an operating cash-flow basis--a key measure for the industry. One other reason to keep an eye on Teleport: the possibility of a takeover. Long-distance carriers are aching for access to local markets, and it's likely cheaper for them to buy it than build it. Last fall WorldCom, the No. 4 long-distance company, bought Teleport competitor MFS for 20 times revenues. A similar deal would roughly double Teleport's stock price.