With the stock market dead in the water last quarter, Washington investors had to hunt far and wide for good investments.

They found them in some unlikely places: Appalachian coal mines, a new city being created in Charles County, a company in Columbia forced into bankruptcy by asbestos lawsuits and a Fairfax County company most people have never heard of -- which suits the company just fine.

The second quarter was a stock-picker's market. Local lodging stocks outpaced the pack and defense contractors had a decent quarter, but no other industry gave investors much of a trend to trade on.

The Washington Post Bloomberg regional stock index of companies based in the District, Maryland and Virginia gained just 0.23 percent, even less than the anemic 0.75 percent increase in the Dow Jones industrial average.

Takeovers produced a trio of top-20 performances. One of the 10 best-performing stocks, Group 1 Software of Lanham, is about to be sold. Another top 10 stock, Sensytech Inc. of Newington, is making a major acquisition. And Riggs National Corp. of Washington is looking to be acquired.

The quarter's top performer was Sutron Corp., a small Sterling company whose shares broke out of penny-stock territory for the first time, ending the quarter up 137 percent at $3.20 a share. Sutron makes equipment for monitoring water quality remotely, automatically checking samples and relaying the results via telephone, Internet or even satellite.

Sutron picked up some relatively large contracts during the quarter, produced a 65-percent increase in revenue to $3.7 million and swung from a loss of $283,189 to a profit of $365,279.

W.R. Grace & Co. of Columbia was the quarter's second-best performing stock. It gained 99 percent to $6.20 a share as investors bet Congress would eventually pass legislation to create a nationwide asbestos compensation fund to pay victims' medical and other claims and limit the liability of Grace and other companies. The legislative deal is not quite done, but recent developments have been encouraging enough to lift all the stocks of companies facing asbestos lawsuits.

Grace is a real rarity -- a company caught up in bankruptcy whose stock has proved a winner for gutsy speculators. Long out of businesses having anything to do with asbestos, Grace now is into specialty chemicals, building materials and packaging.

Sensytech is a stealth stock, a defense contractor catering to the Pentagon and intelligence agencies and that describes its business with an acronym recognized by few people without a security clearance. They're in the C4ISR business, which stands for Command, Control, Communications, Computers ("the 4 C's") plus Intelligence, Surveillance and Reconnaissance.

A spokesman who was asked how much of the company's revenue comes from the Pentagon replied simply, "most of our business is for the government." That includes producing anti-torpedo defense systems for navy ships, high security communications systems and spy-in-the-sky satellite work.

Chief financial officer Don Fultz said Sensytech is being even more tight-lipped than usual because of its pending merger with Argon Engineering Associates Inc., a larger, privately-owned Fairfax company that is in the same business. The two companies have agreed not to provide any details of the transaction until after they file documents with the Securities and Exchange Commission later this month, Fultz said.

No purchase price has been revealed for the acquisition, which is to be paid for with Sensytech stock. But the companies said Argon's owners will hold about two-thirds of the total shares after the merger is completed in September.

Surprisingly -- given the dearth of details -- Sensytech's stock has continued to rise since the merger was announced June 7. The stock was under $16 a share when the quarter began, had climbed past $20 by the time of the announcement and ended the period at $23.22, up almost 50 percent.

Investors familiar with the field like the idea of combining Sensytech's hardware expertise with the software specialization of Argon, which will create a company with $250 million a year in revenue, a well-regarded management team and a unique niche in the defense business, says analyst Patrick McCarthy of Freidman Billings Ramsey. FBR has done investment banking work for Sensytech and is a market maker in the stock.

It is detailed industry knowledge that also attracted savvy investors to Massey Energy Co., a Richmond company that mines high-quality coal mostly used in steel-making. It's been a while since coal was a hot investment, but Massey shares gained 28 percent last quarter, to $28.21, because coal prices are way up and the company's exports are expected to grow by 50 percent this year, said Katharine Kenny, Massey's director of investor relations.

Kenny telephoned from Canada, where she was meeting with institutional investors who know Massey as a coal supplier to that country's steel producers and a big power company.

All too often Washington investors fail to look beyond the beltway when they think about investing in District, Maryland and Virginia companies.

Other Virginia stocks that turned in top performances last quarter included Overnight Corp. and Brinks Co., both based in Richmond, and railroad Norfolk Southern Corp. of Norfolk. All three benefited from rising demand for shipping as the result of the recovering economy.

Down in southern Maryland, investors profited on the stock of American Community Properties Trust, which is building the 14-square mile St. Charles community. The stock closed the quarter at $13.20, up 28 percent. President Ed Kelley said that during the quarter the firm closed a deal with U.S. Home that will result in construction of 2,000 houses over the next decade; started major infrastructure and road-building projects; and launched new apartment projects and an "active adult" community. Beside its huge new town in booming Charles County, ACP has two smaller developments underway in Puerto Rico.

Closer to the Beltway in Maryland, investors earned healthy returns on a pair of health care companies. Coventry HealthCare of Bethesda, a full-service managed-care firm, rose 15.5 percent to $48.90 and the stock of HealthExtras Inc. of Rockville jumped 44.3 percent to $16.57.

HealthExtras, which runs prescription drug benefit plans, won the biggest contract it has ever landed, to serve employees of the state of Louisiana and continued to make acquisitions. Chief financial officer Michael Donovan said that as HealthExtras has successfully integrated acquisitions and signed up bigger clients, it has increased its visibility and analyst coverage. For almost 18 months, no analysts were following the company, he said. Now there are five. The rising stock price also reflect a shift in the shareholder based toward bigger, better-known institutional investors, the largest of them Principal Financial Group, the big Iowa insurance company.

Professional investors also helped drive up the stock of Group 1 Software of Lanham, whose shares gained 38 percent after Pitney-Bowes agreed to buy the company for $380 million. Pitney-Bowes is the first name in postage machines and Group 1 makes the software that is used by companies like American Express that mail out massive numbers of bills every month. The stock was trading around $16.50 when the $23 a share bid was announced in April and quickly jumped to $22 and change as takeover traders grabbed the stock. The stock closed for the quarter at $22.95, just waiting for the deal to be completed in a few weeks.

Waiting too are the people who've been buying Riggs National Corp. stock in anticipation the District's last big bank will finally be sold. It's been a long wait for Washington investors who've been holding the stock for years, hoping that one day Joe L. Allbritton would finally decide to sell. After the recent run-in with federal regulators, Riggs announced it was hiring investment bankers to explore a possible sale. Riggs stock was up 23 percent for the quarter to $21.12, which is still far short of what the bank might have brought if it had been sold several years ago, when regional bank stocks were bringing top dollar.

A tide station by Sutron, which makes equipment for remotely monitoring water quality.