US equity markets recorded positive gains in January due to improved consumer sentiment, strong manufacturing data and the Fed’s announcement that it will maintain exceptionally low rates through late 2014. In addition, China reported better-than-expected fourth-quarter growth, which climbed 8.9%. As such, the Dow Jones Industrial Average, S&P 500 and NASDAQ climbed 3.4%, 4.4% and 8.0% for the month. The bulls clearly dominated the markets; however, a number of warning signs remain. Fourth-quarter US GDP growth, while sturdy at 2.8%, missed estimates and was primarily driven by inventory investment. In addition, the World Bank lowered its 2012 forecast for global growth to 3.3% from 4% (see IBO 1/15/12) and warned of potential slowing in emerging markets.

Three of the four IBO Stock Indexes experienced double-digit gains. The Diversified Instrumentation Stock Index recorded the largest increase, climbing 14.0%. The Laboratory Instrumentation, Lab Consumables/Equipment and Process/Metrology/Motion Instrumentation Stock Indexes improved 11.3%, 10.3% and 9.6%, respectively.

Laboratory Instrumentation Stock Index

For January, the Laboratory Instrumentation Stock Index advanced 11.3% to close at 628.98. Fourteen companies increased in value, including 11 in double digits, and five declined. Illumina led the Index, jumping 70%, while Transgenomic fell 8%. Helicos BioSciences was removed from the Index due to its low trading price.

Waters reported strong fourth-quarter results on January 24 (see page 12) but projected a cautious outlook. The company predicted first-quarter EPS of $1.05–$1.10, which was below analysts’ consensus of $1.14. Full-year EPS are expected to be $5.15–$5.30, just shy of analysts’ estimates of $5.31. Yet shares soared 8.0%. On January 26, Cepheid projected full-year 2012 EPS above market expectations at $0.23–$0.29, including stock compensation expenses. Shares soared 25.6% the next day.

The biggest lift to the Index this month was Roche’s bid for Illumina on January 25 (see page 2). Illumina jumped 46.3% to $55.15 that day. Competitors, such as Cepheid and Pacific Biosciences, climbed 4.9% and 16.2%, respectively.

In other news, on January 6, Transgenomic secured a $3 million convertible note purchase agreement with private equity firm Third Security. Sequenom priced a new public offering on January 20 of 13 million shares at $4.15 per share. Shares fell 5.4%.

Improved ratings this month included Piper Jaffray’s upgrade of Sequenom on January 3 to “Overweight” from “Neutral.” Cepheid was upgraded by RBC Capital Markets on January 6 to “Outperform” from “Sector Perform” and by Raymond James on January 27 to “Outperform” from “Market Perform.” Citigroup upgraded Waters on January 23 to “Overweight” from “Neutral.”

On the downside, on January 3, Morgan Stanley lowered its rating on Becton Dickinson from “Equal Weight” to “Underweight.” Luminex was downgraded by Leerink Swann on January 6 to “Market Perform” from “Outperform” and by Cowen on January 18 to “Neutral” from “Outperform.” Also on January 18, Cowen downgraded Waters to “Neutral” from “Outperform.”

Process/Metrology/Motion Instrumentation Stock Index

The Process/Metrology/Motion Instrumentation Stock Index grew 9.6% for the month to 536.22, with all seven companies in positive territory. Veeco Instruments increased the most, rising 17%. However, the firm was downgraded by Kaufman Brothers on January 24 to “Hold” from “Buy.” MKS Instruments, which provides gas measurement, control and analysis instruments, was added to the Index this month.

Lab Consumables/Equipment Stock Index

In January, the Laboratory Consumables/Equipment Stock Index improved 10.3% to 628.43. Six companies traded higher, led by Life Technologies, which climbed 24%. Techne was unchanged.

QIAGEN was upgraded by JPMorgan Chase on January 4 to “Overweight” from “Neutral.” On January 6, Leerink Swann downgraded Sigma-Aldrich to “Market Perform” from “Outperform. “ Life Technologies was upgraded by Credit Agricole on January 13 to “Outperform” from “Underperform” and by Leerink on January 26 to “Outperform” from “Market Perform.”

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index jumped 14.0% to 144.38, with all seven companies in positive territory. Agilent Technologies climbed 22%.

On January 26 AMETEK projected full-year 2012 EPS of $2.65–$2.70, which was ahead of analysts’ consensus of $2.64. First-quarter EPS are expected to grow 13%–16% to $0.63–$0.65. Shares rose 0.5%. On the same day, Teledyne Technologies projected first-quarter and full-year 2012 EPS to each grow 3% to $0.88–$0.91 and $3.90–$3.96, respectively. Full-year estimates were in line with analysts’ expectations, yet shares fell 2.1%. Danaher reaffirmed its full-year 2012 EPS on January 31 of $3.20–$3.35 for 16% growth. First-quarter EPS are expected to grow 12% to $0.66–$0.71. Shares were marginally higher. On the same day, Illinois Tool Works (ITW) projected first-quarter EPS of $0.89–$0.97, which was below analysts’ estimates of $0.98. The company’s full-year EPS outlook of $4.02–$4.26 was in line with consensus. Shares were slightly lower.

ITW reached a deal with activist shareholder Relational Investors on January 13, allowing the firm to nominate a Board member. Relational Investors owns roughly 2.1% of ITW’s stock. Shares rose 3.2% the next business day. Agilent approved its first cash quarterly dividend on January 17 of $0.10 per share. Shares rose 3.2% the next day.

Morgan Stanley initiated coverage of ITW on January 5 with an “Equal Weight” rating. ITW was downgraded by Credit Suisse on January 6 to “Neutral” from “Outperform” and by Standpoint Research on January 17 to “Hold” from “Buy.” It was upgraded by Bank of America on January 26 to “Buy” from “Underperform.” Robert W. Baird upgraded AMETEK on January 12 to “Outperform” from “Neutral.”

International

In January, four Pacific Region companies traded higher, led by JEOL, which gained 10%. Techcomp declined 4%. Precision System Science, a Japanese developer of automated systems and physicochemical instruments, was added to the list of Pacific Region companies.

Hitachi High-Technologies reported on January 24 fiscal third-quarter EPS growth of 60% to ¥41.10 ($0.53) (see page 12). However, the company lowered its full-year EPS by 28% to ¥94.52 ($1.15) due primarily to delayed orders for the Fine Technology Systems segment. Shares slipped 0.7%. On January 26, HORIBA increased its full-year 2011 net income by 1.2% to ¥8,600 ($26.2 million) for growth of 8.5%.

This month, nine European companies recorded positive returns, three contracted and one traded flat. Renishaw advanced 39%, while Abcam, a UK supplier of antibodies and reagents that was added to the table, contracted 8%. Cybio was removed due to its plans to delist (see page 9).

On January 13, Spectris projected full-year adjusted operating profit to grow 40% to £200 million ($323 million). Shares climbed 5.1%. Oxford Instruments stated on January 19 that fiscal third-quarter sales and profits were in line with its expectations. Renishaw reported higher revenue growth on January 25 but an 11% decline in EPS to £0.35 ($0.55) due to increased distribution costs. Shares rose 11.1%.

 Line Graph: IBO Instrument Industry Stock Index

        Lab Instrument Stock Index    S&P 500

 Jan-10           546.93              257.47

 Feb-10           566.22              264.81

 Mar-10           585.87              280.38

 Apr-10           596.47              284.51

 May-10           557.61              261.19

 Jun-10           531.11              247.12

 Jul-10           513.20              264.12

 Aug-10           499.94              251.58

 Sep-10           556.95              273.61

 Oct-10           579.40              283.69

 Nov-10           589.00              283.04

 Dec-10           565.27              301.52

 Jan-11           657.02              308.36

 Feb-11           661.02              317.14

 Mar-11           661.90              317.88

 Apr-11           703.32              326.93

 May-11           721.22              322.52

 Jun-11           712.55              316.63

 Jul-11           676.63              309.83

 Aug-11           635.47              292.24

 Sep-11           577.75              271.27

 Oct-11           602.13              300.49

 Nov-11           569.85              298.97

 Dec-11           565.27              301.52

 Jan-12           628.98              314.66

 2011                               2010

 Cos.          Date Rept. FQ    Adj.EPS   Consensus Vs.Est.  Grw.  Adj.EPS

 Laboratory Instrumentation   

 CPHD           26-Feb    4Q     $0.05      $0.01    $0.04  150%   $0.02 

 WAT            24-Jan    4Q     $1.56      $1.50    $0.06   13%   $1.38 

 Lab Consumables/Equipment   

 TECH           31-Jan    2Q     $0.76      $0.79   -$0.03    7%   $0.71 

 QGEN           31-Jan    4Q     $0.31      $0.28    $0.03   29%   $0.24 

 Diversified Instrumentation   

 AME            26-Jan    4Q     $0.63      $0.61    $0.02   26%   $0.50 

 DHR            31-Jan    4Q     $0.81      $0.78    $0.03   21%   $0.67 

 ITW            31-Jan    4Q     $0.88      $0.88    $0.00   11%   $0.79 

 TDY            26-Jan    4Q     $0.99      $0.86    $0.13    0%   $0.99

                                 Market Value     52 Week       Price  Change Change       EPS    EPS    LTD/    FY     R&D/

 Company:  Exchange                (US $000s)    Low    High 1/31/2012 1Month  YTD   P/E 12Month  FY   Equity   ROE    Sales

 Laboratory Instrumentation            

 Accelrys: o                         $414,744   5.68    8.90    $7.49    11%   11%   NM  -0.46  -0.44     5%    NM      28%

 Affymetrix: o                       $335,348   3.68    8.16    $4.81    18%   18%   NM  -0.13  -0.15    39%    NM      22%

 Becton, Dickinson and Company:n  $17,317,554  69.59   89.75   $78.41     5%    5%   14   5.59   5.59    78%   26%       6%

 Bio-Rad Laboratories: n           $2,889,991  84.02  126.98  $101.56     6%    6%   15   6.59   6.59    51%   12%       9%

 Bruker: o                         $2,371,649  11.48   21.65   $14.21    14%   14%   28   0.50   0.58    25%   23%      11%

 Cepheid: o                        $2,824,819  23.50   43.47   $44.06    28%   28% 1102   0.04   0.04     2%    1%      21%

 Fluidigm: o                         $298,619  11.64   20.20   $14.87    13%   13%   NM  -3.27  -8.94     6%    NM      39%

 Harvard Bioscience: o               $121,378   3.80    6.26    $4.06     5%    5%   23   0.18   0.65    22%   21%       4%

 Illumina: o                       $7,051,197  25.57   79.40   $51.86    70%   70%   66   0.78   0.87    78%   10%      20%

 Luminex: o                          $839,437  16.98   24.70   $19.70    -7%   -7%   60   0.33   0.12     4%    2%      17%

 MOCON: o                             $89,550  11.97   17.67   $15.91    -1%   -1%   16   1.00   0.84     1%   16%       7%

 Pacific Biosciences: o              $243,189   2.25   16.85    $4.48    60%   60%   NM -13.78 -14.10     3%    NM    6680%

 PerkinElmer: n                    $2,719,932  17.45   28.75   $23.98    20%   20%   22   1.11   1.15    30%    7%       6%

 Pressure BioSciences: o               $4,502   0.50    1.53    $0.72    20%   20%   NM  -0.84  -1.35     6%    NM      92%

 Sequenom: o                         $427,638   3.57    8.71    $4.31    -3%   -3%   NM  -0.77  -1.69    13%    NM      92%

 Thermo Fisher Scientific: n      $20,244,830  43.06   65.86   $52.90    18%   18%   15   3.42   2.53    59%    7%       3%

 Transgenomic: o                      $58,700   0.66    1.85    $1.19    -8%   -8%   NM  -0.21  -0.04 -1301%    NM      11%

 Waters: n                         $7,840,299  70.88  100.00   $86.57    17%   17%   18   4.69   4.69    73%   35%       5%

 X-Rite: o                           $394,590   3.26    5.08    $4.55    -2%   -2%   51   0.09   0.04    72%    2%      11%

 Process/Metrology/Motion Instrumentation           

 FEI Company: o                    $1,851,842  26.61   45.85   $44.06     8%    8%   19   2.32   1.34    20%    8%      10%

 MKS Instruments: o                $1,597,709  20.01   33.85   $30.15     8%    8%   11   2.70   2.61     3%   17%       7%

 MTS Systems: o                      $724,522  28.00   48.72   $45.85    13%   13%   14   3.24   3.24    10%   24%       3%

 Nanometrics: o                      $476,402  13.49   21.56   $20.25    10%   10%    9   2.37   2.43     9%   33%      10%

 SDIX: o                              $39,297   1.51    2.78    $1.92     4%    4%   NM  -0.12  -0.05     NM    NM      11%

 Veeco Instruments: o                $978,084  20.35   57.67   $24.41    17%   17%    4   5.99   6.13     0%   34%       1%

 Zygo: o                             $324,665   9.40   18.65   $17.69     0%    0%   14   1.25   1.05     3%   15%      10%

 Lab Consumables/Equipment            

 Enzo Biochem: n                      $98,422   1.98    5.20    $2.55    14%   14%   NM  -0.43  -0.34     0%    NM       8%

 Kewaunee Scientific: o              $267,223   7.90   14.25    $9.35    15%   15%  104   0.09   0.72    29%    6%       NM

 Life Technologies: o              $9,047,305  35.30   56.71   $48.43    24%   24%   25   1.91   1.99    67%    9%      10%

 Pall: n                           $6,995,928  39.81   60.75   $59.68     4%    4%   23   2.65   2.67    63%   21%       3%

 QIAGEN: o                         $3,829,304  12.47   22.20   $16.18    17%   17%   40   0.40   0.40    28%    4%      11%

 Sigma-Aldrich: o                  $8,368,920  56.18   76.16   $68.04     9%    9%   19   3.60   3.12    23%   19%       3%

 Techne: o                         $2,527,161  62.04   86.43   $68.25     0%    0%   22   3.04   3.02     2%   19%       9%

 Diversified Instrumentation            

 Agilent Technologies: n          $14,906,970  28.67   55.33   $42.47    22%   22%   15   2.85   2.85    67%   23%      10%

 AMETEK: n                         $7,591,252  30.87   47.75   $47.00    12%   12%   20   2.37   2.37    79%   19%       2%

 Danaher: n                       $37,357,452  39.34   56.09   $52.51    12%   12%   20   2.64   2.64    52%   11%       6%

 Illinois Tool Works: n           $25,919,791  39.12   59.27   $53.03    14%   14%   13   4.19   4.19    50%   21%       1%

 Mettler-Toledo Int'l: n           $5,732,617 126.10  193.56  $175.50    19%   19%   23   7.70   6.80   105%   30%       5%

 Roper Industries: n               $9,180,984  64.90   96.00   $93.39     8%    8%   22   4.22   3.34    54%   12%       4%

 Teledyne Technologies: n          $2,117,148  43.82   60.91   $56.76     3%    3%   15   3.81   3.81    52%   15%       3%

 Laboratory Instrumentation Stock Index                        628.98  11.3% 11.3%   22                  56%   11%       7%

 Process/Metrology/Motion Instrumentation                      536.22   9.6%  9.6%   10                   7%   21%       6%

 Lab Consumables/Equipment Stock Index                         628.43  10.3% 10.3%   23                  48%   11%       7%

 Diversified Instrumentation Stock Index                       144.38  14.0% 14.0%   19                  56%   16%       4%

 Dow Jones Industrial Average                               12,632.91   3.4%  3.4%      

 S&P 500                                                     1,312.41   4.4%  4.4%      

 NASDAQ Composite                                            2,813.84   8.0%  8.0%      

                                                               Price         

 Region                           Market Value Market Value   1/31/2012 Change Change        EPS        EPS    LTD/ FY   R&D/

 Company                            (US$000s)   (Local000s)    (Local)  1Month  YTD  P/E   12Month      FY   Equity ROE Sales

 Pacific Shares             

 Hitachi High-Technologies: t      $3,010,014  ¥229,885,940    ¥1,669     0%     0%   13   ¥130.80   ¥129.07   11%   7%   3%

 HORIBA: t                         $1,347,308  ¥102,898,910    ¥2,433     5%     5%   12   ¥207.95   ¥187.11   17%   9%   8%

 JEOL: t                             $221,344   ¥16,904,873      ¥213    10%    10%  318     ¥0.67     ¥0.67  100%   0%   6%

 Precision System Science: os         $34,903    ¥2,665,705   ¥29,210     1%     1%   NM   -¥4,698   -¥4,018   43%   NM  14%

 Shimadzu: t                       $2,571,287  ¥196,378,664      ¥664     2%     2%   20    ¥33.81    ¥36.00   25%   6%   3%

 Techcomp: si                         $72,465    SGD 90,675  SGD 0.39    -4%    -4%   10     $0.04     $0.04    9%  18%   0%

 European Shares             

 Abcam: I                            $969,405      £614,413     £3.35    -8%    -8%   26     £0.13     £0.13    1%  32%   4%

 Halma: l                          $2,102,948    £1,332,857     £3.54     7%     7%   18     £0.19     £0.19   46%  20%   5%

 Oxford Instruments: l               $792,548      £502,320     £9.10    -4%    -4%   16     £0.58     £0.64   39%  34%   7%

 Renishaw: l                       $1,600,924    £1,014,672    £13.94    39%    39%   16     £0.87     £0.91   37%  30%  10%

 Scientific Digital Imaging: l         $2,798        £1,774     £0.10     0%     0%    8     £0.01     £0.01    0%   NM   5%

 Spectris: l                          $28,083    £1,779,941    £15.31    19%    19%   15     £0.99     £0.82   32%  19%   8%

 Alpha MOS: c                         $12,709       € 9,646    € 2.47    10%    10%   NM   -€ 0.05   -€ 0.14   16%   NM  13%

 Analytik Jena: g                     $81,865      € 62,132   € 11.95    12%    12%   NM   -€ 0.03   -€ 0.03   55%   NM  15%

 Sartorius: g                        $875,624     € 664,560   € 35.50    17%    17%   12    € 2.95    € 2.29   85%  12%   6%

 Tecan: s                            $838,730   CHF 766,926  CHF 67.2     6%     6%   13  CHF 5.10  CHF 4.43    5%   7%  10%

 Datacolor: s                         $62,853    CHF 57,472 CHF 380.0    -4%    -4%   18 CHF 21.48 CHF 21.48    8%   0%  12%

 Biotage: st                             $631     SEK 4,261   SEK 5.4     3%     3%   NM -SEK 4.82 -SEK 4.91    6%   NM   9%

 Exiqon:  no                          $64,880   DKK 366,087  DKK 10.8    13%    13%   NM -DKK 0.93 -DKK 1.28    3%   NM  32%