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No. of Recommendations: 27
I've been using a screening approach to identify rulemaker candidates, and thought the board would be interested in the current list. If there's sufficient interest, I'll post the list quarterly (given the rate at which financials are updated, anything more frequent seems unnecessary).

The criteria I use are that the company must:
<sum> have gross margins >40% (Rulemaker is 50, but going to 40% adds only 10 companies to a very short list)
<sum> have latest year on last year sales growth >10%
<sum> have net profit margin >7%
<sum> have cash to total debt ratio >1.5
<sum> have a flowie of <1.25

Cash to debt ratio and flowie are defined as we do on the board.

Using the criteria as stated, 52 companies are potential rulemaker candidates today. If one restricts the criteria to 50% margins, 41 companies make the cut; and if one toughens up the sales growth requirement to a 5 year average exceeding 10% (a sensible choice for a rulemaker, as it should be an established company), only 32 companies meet the selection criteria out of about 1740 in one current commercial database. Roughly two companies in a hundred are eligible for consideration, in other words- now that's a set of standards!

Note that these are candidates, not qualified rulemakers: some are already rulemakers, some are wanna-be's, and some wouldn't ever make it for a variety of reasons. It's a place to start if you're looking for a possible candidate for evaluation, with some guarantee that the quantitative part of the evaluation ought to be first (or at worst, second) tier.

One point for clarification- a blank in 'cash to debt' indicates a lack of any short and long term debt- not a lack of cash! And, obviously, companies are alphabetized.

Company Ticker Flowie Cash to Debt
Abercrombie & Fitch ANF 0.77
Adaptec Inc. ADPT 1.02 2.88
Adobe Systems ADBE 0.46
Altera Corp. ALTR 0.81
Amdocs Ltd. DOX 0.83 3.37
Amer. Eagle Outfitte AEOS 1.06
Amgen AMGN 1.00 4.13
AOL Time Warner AOL 0.42 2.10
Apollo Group `A' APOL 0.71
Applied Biosystems ABI 1.03 7.62
Automatic Data Proc. ADP 0.97 11.88
BARRA Inc. BARZ 0.55
Bristol-Myers Squibb BMY 1.24 1.67
BroadVision Inc. BVSN 0.83 56.86
Cisco Systems CSCO 1.07
Cognizant Technology CTSH 1.02
Comverse Technology CMVT 1.22 2.58
Cree Inc. CREE 1.17
DeVry Inc. DV 0.41
Eaton Vance Corp. EV 0.31 2.17
Extreme Networks EXTR 1.23
Fiserv Inc. FISV 0.72 1.95
Immunex Corp. IMNX 0.61 1.57
Integrated Device IDTI 1.16 2.28
Intel Corp. INTC 0.93 9.62
Intuit Inc. INTU 0.56 48.61
ITT Educational ESI 0.31
Knight Trading Group NITE 0.84
Learning Tree Int'l LTRE 0.38
Linear Technology LLTC 0.80
Macromedia Inc. MACR 0.93
Mercury Interactive MERQ 0.65
Microchip Technology MCHP 1.11 20.90
Microsoft Corp. MSFT 0.67
Moody's Corp. MCO 0.45
Nokia Corp. ADR NOK 1.19 3.92
Novell Inc. NOVL 1.00
Oracle Corp. ORCL 0.53 25.58
Paychex Inc. PAYX 1.23
PMC-Sierra PMCS 0.72 78.49
Price (T. Rowe) Grou TROW 0.81 33.43
Rambus Inc. RMBS 0.31
Schering-Plough SGP 1.22 2.58
Schwab (Charles) SCH 0.96 4.75
SEI Investments SEIC 0.54 2.36
Strayer Education STRA 0.95
Symantec Corp. SYMC 0.50 278.42
Topps Co. TOPP 0.95
Total System Svcs. TSS 1.21 274.50
Transaction Sys. 'A' TSAI 1.11 52.98
VERITAS Software VRTS 0.73 1.54
Yahoo! Inc. YHOO 0.38

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