NEW YORK (CNN/Money) - Wall Street lore holds that the stock market's action during the first few days of January foreshadows share price behavior for the rest of the year. And it's a truism that contains a little real truth.

By December, investors have evaluated all the forecasts for the coming year. As January approaches, they focus on buying shares of companies with the best prospects for the year to come. And more often than not they size up the new year correctly.

What have we seen so far?

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A rally kicked in as of late-November and continued through year-end. The first trading day of the New Year, Jan. 2, was a Friday, and there was a minor selloff as investors cashed in some of their profits. Monday the 5th and Tuesday the 6th were mostly positive, with some mixed results.

This suggests that on balance 2004 should be a good year. The broad market will continue to advance, although at a slower rate than in 2003.

Investors remain very skittish, however, and seem inclined to take profits after any periods of strength. This would certainly fit with the usual presidential election cycle, where the biggest gains come the year before election year, followed by solid but more measured gains in the election year itself.

The stocks most likely to prosper in this environment are those that led the market coming off the bottom, but are still not high enough to provoke profit taking.

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We screened a list of top-quality companies looking for shares that have gained more than 40 percent in 2003 (the Dow gained about 29 percent). And we focused on those that had below-average valuations relative to their growth rates and that also had strong support from the analysts that follow them.

Here are four stocks that look like they still have room to run:

Boston Scientific (BSX: Research, Estimates) produces a variety of specialized medical devices. Cardiovascular products include catheters and stents to help open clogged arteries. Gastroesophageal products include devices to remove colon polyps and treat reflux disease.

This niche health-care market has great growth potential. The company has a 20 percent projected earnings growth rate for the next five years. At $36, the stock trades at 22 times estimated 2004 earnings.

One potential risk: Boston Scientific has a very successful new stent product. Should their be any unexpected medical problem or patent dispute, the stock price would suffer short term.

Fortune Brands (FO: Research, Estimates) is a holding company with a mix of top consumer brands.

Among them: Moen faucets, Master Lock padlocks, Titleist golf balls, Swingline office products and Jim Beam bourbon.

At $70, the stock, which has a 12 percent core growth rate and a 1.7 percent yield, trades at 16.3 times next year's earnings.

Home Depot (HD: Research, Estimates) remains the top retailer for do-it-yourselfers with more than 1,500 stores selling nearly 50,000 different home-improvement, lighting and gardening supplies.

The share price has been rebounding from a drop a year ago caused by sluggish sales. With a 13 percent projected growth rate and a 0.8 percent yield, the stock still looks undervalued. At $35, it trades at just over 17 times estimated 2004 earnings.

Merrill Lynch (MER: Research, Estimates) is a premier financial services company that provides investment banking and wealth management worldwide. The stock is a direct play on a market recovery that would boost not only share prices but also mergers and underwriting activity.

Longer term, the company stands to benefit from a growing need for asset management, as the baby boomers age and Americans in their prime working years have larger retirement accounts to manage.

At $58, Merrill Lynch stock, which has a 12 percent growth rate and a 1.1 percent yield, trades at less than 15 times 2004 earnings.

Michael Sivy is an editor-at-large for Money magazine. Sign up for free e-mail delivery of Sivy on Stocks every Tuesday and Thursday.