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Taking Lewis's Advice to "Elevate the Technologist"

Author Michael Lewis joined us on Surveillance this morning to discuss his latest best seller, "Flash Boys: A Wall Street Revolt." While the recent 60 Minutes interview focused on his assertion that "the stock market is rigged," we elected to discuss the differentiating technology generating out-sized profits among high-frequency traders. Here's what he told us:

"Elevate the technologist." This phrase is new to us, and we like it. Mr. Lewis captures the zeitgeist of the moment and provides us with an ideal investment theme: Innovation.

So using research and development spending as our proxy for innovation, we sorted the components of the S&P 500 Index. We considered both gross amount spent and rate of growth.

Twenty-four companies met our criteria, 10 of which we shared on-air. We include the full list below.

Allergan, Inc. (AGN), Amgen Inc (AMGN), Applied Materials Inc (AMAT), Biogen Idec Inc. (BIIB), Cerner Corporation (CERN), Expedia, Inc. (EXPE), F5 Networks, Inc. (FFIV), Facebook Inc. (FB), Garmin Ltd. (GRMN), Gilead Sciences, Inc. (GILD), International Game Technology (IGT), Intuit Inc. (INTU), KLA-Tencor Corporation (KLAC), Micron Technology, Inc. (MU), Monsanto Company (MON), QUALCOMM, Inc. (QCOM), Red Hat, Inc. (RHT), Regeneron Pharmaceuticals, Inc. (RGEN), Salesforce.com, Inc. (CRM), St. Jude Medical, Inc. (STJ), TripAdvisor Inc. (TRIP), Vertex Pharmaceuticals Incorporated (VRTX), Western Digital Corporation (WDC) and Yahoo! Inc. (YHOO).

Six Flags Entertainment Corporation (SIX) Chief Executive Officer Jim Reid-Anderson, and Corning Inc. (GLW) Chief Executive Officer Wendell Weeks have both emphasized the importance of R&D investment during recent interviews. (They set the bar at 9 percent of sales, slightly below our very restrictive threshold.) These two CEOs tell me re-investment is the key to growth.

R&D may also be the key to returns. The stocks of these 24 companies have rallied an average of 6.9 percent year-to-date, nearly three times the return of the S&P 500. To quote Mr. Lewis, "Elevate the technologist."

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