MONEY SHOW DIGEST
published weekly by InterShow, 1258 N. Palm Ave., Sarasota, FL 34236.
www.MoneyShowDigest.com.

Stock Picks by Keynote
Speakers at the World Money Show

       Editor Steve Halpern featured a special Highlights Report of keynote speakers at the World Money Show. The following speakers will be featured at the Las Vegas Money Show, May 9-12, 2005, Bally's and Paris Resorts, where you can meet these advisors in person, attend in-depth workshops and panels, and learn directly from the very best. And it's FREE.

Going Global with Standard & Poor's

       Ken Shea, managing director of S&P's Global Equities Research Group, 55 Water Street, 44th Fl., New York, NY 10041, www.investmentoutlook.standardandpoors.com, is responsible for the activities of some 80 equity analysts, covering over 1700 stocks. Here, he covers some of his favorite stocks from Europe, China, and Japan.
       "We like several European stocks right now, including AstraZeneca (AZN NYSE), a major leading pharmaceutical company, based in the UK. It makes products such as Prilosec, and other drugs for hypertension, heart failure, and schizophrenia. We also like Tesco (TESOF Nasdaq), which is basically the Wal-Mart of Europe. It is a rapidly growing grocery retailer. Burberry (BBRYF Other OTC) is a fashion retailer that's capturing a large portion of the brand value chain in the US, Japan, Spain, etc. We think revenues and profits are likely to benefit.
       "We also like Endesa (ELE NYSE). This is the largest electric company in Spain, but also growing outside that region in Western Europe. It operates hydroelectric, nuclear, coal, oil, and gas generating facilities. It's one of the largest suppliers of electricity and gas to deregulated customers. We like it because of its sound fundamentals and established business model. Although unspectacular, its growth is likely to be in the high single digits, and the stock offers a 3.5% dividend and trades at a discount to its peers. We're believers in dividend paying stocks, particularly those with established records of growing earnings, such as Endesa.
       "MMO2 (OOM NYSE) is a fast growing provider of mobile communications services in Europe. The company is getting a lot of attention because of the growth in its Internet services offerings through Europe. Finally, we also like the Royal Bank of Scotland (RBS-M NYSE). This is a company that has been growing aggressively through acquisitions, including the purchase of Natwest, the well-known full-service bank in Europe. It's also expanding its consumer franchise aggressively, both in Europe and the US. The company has been putting up strong profit growth numbers recently.
       "In Asia, we like China Mobile (CHL NYSE), which is the leading global services provider in Mainland China. It's just truly a great play on the rising standards of living in China. It provides a full range of mobile telecom services in 21 service regions in China. Total population residing in this service area exceeds one billion. Their subscriber base is growing at a near 20% annual clip and its market share in its service territory is about 65%. So we see huge upside growth potential in these shares.
       "I'd also like to touch on Japan, as we've had a lot of questions about Japan at this conference. The country still has some key structural issues to deal with, including the repair of its still-fragile banking systems. On the other hand, the long-term attractiveness rests on the country's continued ability to innovate. They have a highly educated workforce. Those who are bearish on Japan continue to underestimate its ability to innovate and stay one step ahead of its neighbors. Despite our general concerns, there are several individual stocks in Japan that we like now.
       "Yankgzo Coal (YZC NYSE) is benefiting from the explosive demand in energy in China. There has already been a well-documented shortage of coal, and this company is the leading underground miner and producer of coal and related materials for China. The stock has benefited as a result, but we think there is still more upside. Canon (CAJ NYSE) is the well-known Japanese-based maker of copy machines, laser and ink jet printers, camera, and other electronic components. This company executes very well. It's well-managed. Hitachi (HIT NYSE) can be thought of as the 'GE' of Japan. It's a producer of a wide mix of products, ranging from industrial and electricity generation systems to consumer products and consumer devices. We believe that this company is likely to benefit from the global economy's thirst for information in telecommunications, digital media, consumer products, and information technology related equipment. Cosco Pacific (CSPKF Other OTC) is a smaller company. It is a Hong Kong-based shipping company that is aggressively investing in container ports in China and throughout Southeast Asia. The company is establishing itself as a leader on that front. We like this stock very much."

Stack's Stocks

       Combining exceptional technical and fundamental skills, market historian Jim Stack, Editor, InvesTech Market Analyst and InvesTech Mutual Fund Advisor, President, InvesTech Research, 2472 Birch Glen, Whitefish, MT 59937, www.investech.com, draws on lessons from the past in his analysis of future market trends. Here, he looks at the state of the market, its likely path, and the top stocks to play these trends.
       "The good news for investors is that it is still a bull market. Intrinsically, we have the ingredients in place for a bull. Historically, interest rates are still low, even after six discount rate hikes. Rates are still in the lowest 10% of short-term interest rates that we have seen over the last 50 years. In other words, short-term rates have been higher than they are today in 90% of the time.
       "The other good news is that both from a breadth and leadership standpoint, this is still a bull market. On most trading days recently, there have been fewer than ten stocks hitting new yearly lows on the NYSE. That is a striking characteristic of a healthy bull market. The bad news is that interest rates are rising. And the ugly news is that once interest rates start rising, if we see any surprises in the year ahead, it will likely be to the upside in inflation. And historically, nothing has killed more bull markets than upside surprises in interest rates.
       "Meanwhile, this economic recovery is now 3.2 years old. Unfortunately, the median recovery length of all economic expansions of the past century is 3.1 years. The longer expansions of the 1980s and 1990s were more an aberration, than the norm. In addition, this bull market started in October of 2002 and is now 2.2 years old. The median life span of all bull markets over the last 75 years is 2.6 years. Now that doesn't mean that the bull market is just going to end in a few months. But it does suggest that we're most likely in the latter portions of this bull market, and investors should adjust their portfolios accordingly.
       "I would not expect energy prices to fall back to the $30s until the next recession. Over the balance of this year, I think you're going to see oil remain in a higher trading range, which offers a good profit opportunity for energy stocks. In our managed accounts, we still have over twice the allocation to energy that you would see in the S&P 500 index. We have about a 15% energy allocation, which is one of the reasons why our accounts were up some 15% last year, even though we increased our cash positions during the year.
       "I would also note that almost all the new power plants that are coming on line in North America are natural gas fired. So it means that the prices on natural gas are going to be less susceptible to the oscillations we will see in the price of oil. For those with a conservative bias, I would look at domestic energy producers such as Devon Energy (DVN NYSE), with its exposure to natural gas. I would also suggest Encana (ECA NYSE), which is the largest independent natural gas producer in North America.
       "I also think the big pharmaceutical companies now offer a contrarian opportunity. Nobody wants to touch them after the Vioxx scares and fears of regulation in drug prices. Yet if you look at many of these companies, they are selling at price to cash flow levels that we haven't seen in two decades. If you want a conservative investment - one that really has potential for good double-digit gains, even in a rising interest rate environment - look at some of the big pharmaceuticals. In particular I like Abbott Labs (ABT NYSE) and Pfizer (PFE NYSE). When you compare the upside potential to the downside risk, I think these stocks provide some of the better trade-offs available in the market today."

"True Wealth" Opportunities

       "Just because the market is weak and stocks might look expensive, there are still great opportunities," says Steve Sjuggerud, Editor of True Wealth, 105 West Monument St., Baltimore, MD 21201, www.investmentuonline.com. Here, he discusses his favorite global investments for those with a multi-year investment horizon.
       "Contrary to most on Wall Street who are bearish on bonds, I like iShares Trust Goldman Sachs (LQD ASE), an exchange traded fund that holds corporate bonds and trades like a stock. I think that everyone has already sold bonds. Everyone is short bonds. Everyone hates bonds. So that bearishness is already priced in. I actually do believe that long-term interest could stay where they are or continue to move down from here. In my view, this ETF is a way to earn income with the additional potential for capital appreciation.
       "There are two timber stocks out there right now that I particularly like - Rayonier (RYN NYSE) and Plum Creek (PCL NYSE). These are pure timber plays. They pay dividends in the 4% range. These are just fantastic companies with fantastic timber managers. Rayonier has some extraordinary lands. It is trading at about $1,000 an acre and much of that land - particularly its holdings in coastal areas of Florida - is worth well above the value that the market is according the stock.
       "Looking globally, I'd note that things have improved dramatically in Argentina in the last few years. I've been to Argentina six times in the last year, and after looking around, I've found the very best way to buy real estate in Argentina is through a stock in the US called Cresud (CRESY Nasdaq). The company has about a billion dollars' worth of real estate and the market value of the stock is about $200 million. Cresud is also Argentina's largest publicly traded commodities company. The firm has an enormous amount of hidden value in its assets. And I expect that Cresud could ultimately become one of China's key lumber suppliers. And it is producing agricultural goods and beef that China (and the rest of the world) wants. I think it's an easy double.
       "If you want a blanket play on commodities, BHP Billiton (BHP NYSE) is the world's largest commodity company. Most of their operations are in Western Australia, which is at China's doorstep. I think it's a fantastic company and a great opportunity. The company is near the top of the heap in aluminum, energy, and metallurgical coal, copper, ferro-alloys, iron ore, and titanium minerals, and it has substantial interests in oil and gas, liquefied natural gas, nickel, diamonds, and silver. The story is simple. China is booming, and it desperately needs raw materials. Importantly, even if China disappeared tomorrow, BHP Billiton would be just fine. BHP Billiton is so huge that China currently makes up less than 10% of sales. So even if the China bubble ends badly, we will still own the world's largest diversified commodities producer, which we feel is a great place to be."

"Directions" from Davis

       Ned Davis, senior strategist at Ned Davis Research, 600 Bird Bay Drive West, Venice, FL 34285, www.ndr.com, is an exceptional analyst; I've been a fan of his work for many years. He uses computer-based models to assess the financial spectrum from global economies and markets to currencies, sectors, and individual stocks.
       "In 2002, the world was on the brink of a deflationary accident and at that point in time, world central banks decided to stimulate very aggressively, and cut interest rates. As you know, the Fed had cut rates 13 times all the way down to 1%. I think that the 1% level was the key to everything else that has gone on since. From there, the Fed was able to stimulate and get things going again. But because there was so much slack in the system, they were able to stimulate without really any increase in inflationary pressures.
       "Now, the Fed has started raising rates, having just gone to 2.5%. We've found that at a Fed funds level of 2.5% or below, the market typically goes up about 15.5% a year. So even though I don't like the direction of short-term interest rates, they are still low enough at this point where they are not yet biting to the market. I would caution, however, that a move in long rates to 4.75% to 5% on T-bonds would be a problem. We got up to that level very briefly last July and the market struggled. There is $36 trillion in credit market debt and if rates rose to that area, it would start to be painful. So that is what I'd watch. But for now, as long as bonds behave, the stock market should be given the benefit of the doubt.
       "I also key in on the markets themselves. We follow 42 international markets and all 42 are above their 40-week moving average. That means they are in uptrends. As long as most markets are in uptrends, we are in a bull market. If that percentage were to drop to 60%-65%, that would suggest enough of loss in momentum that I would get concerned. But again, for right now, the trends are still up and things look pretty good. Another factor to know is that bull markets generally last on average two to two and a half years. The bull market since October of 2002 is already over 2 years, so we are in the late innings.
       "As for particularly investments, I like to buy group sector funds. We currently suggest the iShares MSCI South Africa (EZA ASE). In Europe, I like the prospects for iShares MSCI Austria (EWO ASE) and iShares MSCI Belgium (EWK ASE). Finally, I would look at healthcare, which we consider a growth area. We would suggest the Fidelity Medical Delivery Fund (FSHCX ).
       "Meanwhile, our favorite sectors domestically have been energy and materials. Globalization, including the boom in China and India, has set off important macro events. While those regions have cheap labor, they are not rich in raw materials. This has set off a boom in many emerging markets. As a result, we particularly like Latin America and the emerging markets in the Pacific Basin area. We would suggest Fidelity Latin America (FLATX) and iShares MSCI Brazil (EWZ ASE). We think they are a play on worldwide reflation and the boom in China.
       "I'd also comment on the utility sector, primarily because of their dividends. We recently did a study going back to the 1970s on stocks in the S&P 500. The record is dramatically positive for companies that pay dividends, especially so for those that are increasing their dividends. We then did another study to see what sectors do well in the late phases of a bull market and the early phases of a bear market. We found that in the early phases of a bull market people are speculative and they like growth stocks. But when you get later in a bull market, it switches more towards dividend paying stocks. So right now, we really like the 'back to dividends' theme."

Out-of-Favor Favorites

       "As a contrarian, I prefer holding a minority opinion," says Jamie Dlugosch, Founder and Editor, The Rational Investor, Founder and Owner, Angel Publishing, LLC, 222 South Ninth St., Ste. 2880 Minneapolis, MN 55402, www.therationalinvestor.com. Cynically, he notes, "If Wall Street considers your ideas to be 'bad' ones, then you will likely be right more often than not." Here, he looks at some of his favorite out-of-favor plays.
       "One of my general themes - which is almost heresy on Wall Street - is that I'm not a fan of dividend stocks. I take an old-school approach to the concept of dividends. When I'm buying shares of a corporation, I'm trusting the managers of that business to use all of the capital to generate a significant return. To me, the concept of dividends is a little bit like passing the buck. While dividends may be attractive to a certain segment of the market, I would prefer to seek superior performance through companies that are finding ways to invest that cash.
       "What do I like now? In the last 13 months the market has essentially traded sideways. During that same time, earnings have grown on a double-digit basis. When those on the sidelines discover that the fear of collapse was unjustified, the longs will be rewarded with higher prices. As a result, stocks are now cheap, and I'm going to be really aggressive in my portfolios. To me this is a wonderful opportunity.
       "Sirius Satellite Radio (SIRI Nasdaq) is becoming one of my favorites. Early investors watched the shares peak at $60 per share, only to watch the company have difficulty proving its model. At its nadir, SIRI dropped to nearly $2. At the same time, satellite radio was just starting to take hold. We used the extreme weakness to acquire shares, and we have been rewarded thus far. And I continue to see this as an opportunity. The company now has about $7 billion in market cap. They are losing money. It's not a pretty situation on a fundamental basis. But long-term investors have to look at what can happen in the next three to five years. Estimates on the market for satellite radio range anywhere from 15 million subscribers to 100 million. We've seen what Apple has done with its iPod, and how much momentum that gained. I think the same thing can happen with satellite radio. So I'm really optimistic with Sirius.
       "Meanwhile, the airline sector has really suffered of late, and this is the kind of opportunity where I like to invest. Much of the rise in oil prices, as should be evident by recent trade, was fueled by fear and speculation, but I expect prices to decline in 2005. The airline sector has done a masterful job of converting 'fear of bankruptcy' into wage concessions. As oil prices return to a more 'normal' state, airlines will benefit greatly. The decimation of the sector will end in 2005. I'd note that I'm not talking about the discount carriers. I'm really interested in the hub and spoke airlines - the ones that are experiencing the most difficulties on an operating basis and really feel the pain of higher oil prices. American Airlines (AMR NYSE) is a favorite, as well as Delta (DAL NYSE) and Northwest Airlines (NWAC Nasdaq). Overall, I am quite bullish on the airline sector and these stocks in particular."

A Canadian Yield

       If, five years ago, you put one dollar put in the bond portfolio maintained by Richard Lehmann, President, Income Securities Advisor, Inc., 6175 NW 153 St., Ste. 201, Miami Lakes, FL 33014, www. incomesecurities.com, you would now have $2.29. At the same time, that same dollar invested in the S&P 500 would be worth 76 cents. Here's his latest idea for your income "dollars."
       "It's always risky to pick favorites among income securities, but this year I think the Canadian energy trusts represent a unique opportunity for individual investors. The one specifically I like is Petrofund Energy (PTF AMEX). The fund is paying double-digit, monthly payments. It's like earning interest, but for US tax purposes, it's considered a dividend. So not only are you getting 10% plus rate of return, but you are getting 15% tax treatment on that.
       "The reason I find these shares attractive is not because I can predict what oil prices are going to do, but rather that there have been changes in the Canadian law which now make these trusts eligible for purchase by US pension funds. Until recently, these trusts had unlimited liability, which was a small risk, but nevertheless on the books, and thus made these trusts something that US pension funds wouldn't buy. Now that the issue of liability is gone, I think we will see massive buying by pension funds. By this time next year, I think that Petrofund, as well as other Canadian energy trusts, will all have just single-digit yields. That means that the prices will go up and you will also have capital gains, while locking in a great rate of return. If the price of oil stays above $35, these share should provide fairly stable dividends."
       Aside from his latest income idea, Richard Lehmann shared some intriguing insights during the Forbes Newsletter Editor Roundtable. Despite the enormous amount of commentary in the financial press about the Fed and interest rates, I've rarely heard such a clear and common-sense explanation of the Fed's activities. Says Lehmann, "What we've been seeing in the last year or more is that the Fed has been on a very predictable rate-hike program that has had the effect of leveling the yield curve. I think the strategy there is very simply that there have been trillions of dollars invested in hedging operations whereby people would borrow short-term and buy long-term instruments. And in April of last year, when these funds got nervous about Fed policy, we saw a spike in interest rates that really shook everyone up.
       "Because of that, the Fed took the strategy of broadcasting its rate hikes to avoid the possible panic that could ensue. The amount of money that could suddenly unravel in these holdings could create a panic. So we are on this steady program. Unfortunately, it had the immediate effect of increasing the amount of speculation because now you had a predictable Fed policy. But as we see, the yield curve is flattening, and the effect is that it takes the profit out of those hedging positions. So, in effect, we have an 'organized unraveling' of these hedges. I think it will continue through the end of this year, and if all goes as planned will keep long rates from rising significantly."

Top Performer's Top Picks

       Louis Navellier Editor, Blue Chip Growth Letter, Quantum Growth, and Emerging Growth, Contributing Editor, InvestorPlace.com, President and CIO, Navellier & Associates, Inc., 1 East Liberty, Third Floor, Reno, NV 89501, www.navellier.com, has an uncanny knack for being in the right stocks at the right time. In the latest rating from The Hulbert Financial Digest, he scored at the top of the 20 year performance list. Here, from the InvestorPlace Panel, he discusses his latest favorites.
       "The markets are narrow and they are getting even more narrow and more selective. In the summer of 2003, the top 32% of the stocks in our database looked good. Now it's only the top 15%. Meanwhile, I continue to buy quality. In fact, while the market has gotten progressively more selective, our approach has gotten stronger. Last year, we beat the market by over 14%. The year before, when lower quality stocks were outperforming, we only beat the market by about 7%. And today, the quality stocks are leading. So we love this narrow market environment.
       "What are the best stocks right now? When we run our screens, we find a lot of oil and steel. Our Blue Chip Growth Letter is about 40% in energy, which it has been for a long time. We're overweight in energy because I think it's safe now. They have incredible earnings and p/e ratios are low. In Emerging Growth, we have a lot of oil tanker companies and the yields have been extraordinary. In our most aggressive Quantum Growth, we are swinging for the fence, and we are predominantly in steel stocks.
       "In Blue Chip Growth, which is our most conservative letter, we still like Apple (AAPL Nasdaq). The company set the tone for many stocks on our buy list when it released spectacular earnings. The company reported profits of 70 cents a share on sales of $3.49 billion. This was terrific news. The analyst community was expecting Apple to earn 49 cents a share on sales of $3.19 billion. So this means that the company topped Wall Street's profit forecast by more than 40%, and it beat the sales forecast by 9%. That's not all. Apple also said that it expects next quarter's earnings to come in at 40 cents a share on sales of $2.9 billion, which is also above analysts' expectations. Obviously, consumers won't buy music on albums for much longer. It will all be digitized. Teenagers are leading the way. Find any teenager today, and they will have an iPod. Apple has already become a big winner for us. In just two months, we're up over 27%. This will be a safe tech stock to own in 2005.
       "In Emerging Growth, we have Nordic American Tanker Shipping (NAT NYSE), a great tanker company. It just boosted its dividend yield. The stock has done particularly well recently, as merger mania is alive and well in the oil tanker business. Meanwhile, Nordic and other oil tanker companies have some of the best growth-to-p/e ratios on Wall Street. Since Nordic's primary customer is British Petroleum, I expect that it will continue to have consistent profits, even if the spot charter market for oil tankers cools off. Ipsco (IPS NYSE) is a great steel stock. The stock was very steady over the past month while the stock market was shaky. That is probably because most steel companies have phenomenal growth-to-p/e ratios. In the case of Ipsco, during the past year, its sales have soared by over 91%, while its earnings grew over 7,500%! Yet the stock is trading at barely six times this year's estimated earnings!
       "Interestingly, there are two stocks that have made the recommended buy list of all three of my newsletters. They are America Movil (AMX NYSE), the Mexican cell phone company, and Valero Energy (VLO NYSE), the biggest independent refinery in the US. Valero finished up an outstanding year in 2004. The stock is near another new high, and I expect more great things in 2005. We have a 47% profit in just eight months. Buy below $52. Finally, another stock I like is Cummins (CMI NYSE). They build power diesel plants in China. If you want a safe US stock to play the China boom, Cummins is a great way to go."

Green's Insider Plays

       "One of the ways we maximize returns while minimizing risk is by riding the coattails of knowledgeable insiders," says Alexander Green, Investment Director, The Oxford Club, 105 West Monument St., Baltimore, MD 21201, www.oxfordclub.com. Here, in a fascinating workshop, he explains the "legal" kind of insider trading and some of his favorite insider plays.
       "If you look at all the great investors, they all say they have no clue as to what the market is going to do. All they know how to do is to identify a company that is selling for far less than its intrinsic value and then sell that company when the market recognizes that value. That is the philosophy that we follow. And one of the most successful ways we have found to do that is to analyze what insiders are doing.
       "Insider buying is the ultimate leading indicator. I don't think it's possible to get a more compelling buy signal in the stock market than when you see a significant number of insiders - the executives who run the company - buying lots of the company stock with their own money at current market prices. I just don't think it gets much better than that. Clearly, insiders do have an 'unfair advantage.' These people have access to material and non-public information that they can hardly forget when they go in the market to trade. When I say material, I mean it's very relevant to the future prospects of the business. And non-public is information that those of us on the outside looking in couldn't possibly hope to see. That's what makes their trading so compelling.
       "When I watch what insiders are doing, I score the officers the highest because they know the most. The officers are those who actually run the company and oversee the day-to-day operations. They really know about everything related to the company. Is it legal? Yes. Many years ago, Congress decided that in a capitalist society, you can't prohibit the people who run a business from taking an ownership stake in it. But they also realized that these people had this 'unfair advantage' when they went in the market to trade. So as a compromise, when these insiders buy or sell, they have to report those transactions to the SEC within 48 hours.
       "But you can't simply look at what a few insiders are doing and just jump on board. You have to analyze the type of insider activity. One of the biggest criteria I have is that I look for the size of the transaction. For me, the bigger the transaction, the more the conviction that the insider has. I want to see people buying hundreds of thousands or millions of dollars worth, and under the best of circumstances, millions of shares. That shows a high degree of confidence that the shares are undervalued. The second thing I look at is the trading history of the insiders. I also look for buying clusters. I really don't want to see one insider being the lone ranger. If you see a consensus, where you see lots of insiders buying at the same time with their own money, than that is a very powerful signal. And sometimes when you see the small insiders buying along with big insiders, that's a very positive signal.
       "Here are some companies experiencing some heavy insider buying lately. You might want to look into these a little further to see if they fit in your portfolio.
       "Chesapeake Energy (CHK NYSE) is one of the biggest independent oil and gas producers in the country. They have more than 10,000 wells. They have over 3 trillion cubic feet of natural gas. We all know what's happening to energy prices. The company has had very successful exploration efforts. They are on an acquisition binge, which has increased output. And the chairman and the CEO have not just been buying millions of dollars, they have bought millions of shares. They have been buying the stock steadily for over a year. If you want an interesting oil and gas play, this is one.
       "Another stock we like is Martek Bioscience (MATK Nasdaq). Martek makes nutritional oils that are supplements to baby formula. There have been all sorts of studies that show that infants that drink this formula end up with everything from better health to higher IQ scores later in life. Its supplements are used in 60% of the global infant formula market. This is a $7.8 billion market. In a lot of third world countries, where infant nutrition is low, there's a good possibility that governments will start to subsidize the use of this formula in their poorer regions. This could be a real earnings windfall. Already, for the fiscal year just ended, revenues were up 61% and net income tripled. My estimate is that earnings could triple again this year. Here, we recently saw a small insider buy a few thousand shares. But he bought in unison with big directors and officers who were buying sizable amounts of stock. We take this as a positive sign.
       "American Financial Group (AFG NYSE) may seem kind of boring. But that is okay, as long as the profits are exciting. The chairman of the company just bought 25,000 shares, an investment of $742,000. This is a plan vanilla insurance company. But 96% of their revenues have been coming from the US, and now they are extending into Canada, Asia, and Europe. Recent earnings have been superb, up 220%. The stock is dirt cheap, selling for five times earnings and at 62% of sales. This is just a very solid, $2.2 billion company and the insiders own 39% of all the outstanding shares.
       "Another insider stock I like is William Lyon Homes (WLS NYSE). A great debate is raging over whether real estate is in a bubble. I'm not a real estate expert, but William Lyons is something of an expert because he runs a company that has been very successful at selling homes in California, Arizona, and Nevada. For the most recent nine months, sales totaled $1.1 billion and doubled last year's earnings. You'd think that with that kind of growth, the stock would be expensive. But it's very cheap, selling for six times earnings and half of sales. Mr. Lyon just stepped up a few weeks ago to buy 655,000 shares at a cost of $44 million. That's a high level of conviction.
       "Finally, one last stock is Nvidia (NVDA Nasdaq), which makes graphic accelerators that are used in everything from personal computers to Game Boys and cell phones. They are actually pushing the limits of video processing technology. Computer makers say that Nvidia's software is so advanced, that they can't even take advantage of all of it yet. A few weeks ago, they got a big contract with Sony for its Playstation. There has been $20 million in insider purchases recently and I expect the company will double its earnings this year, so there's plenty of upside ahead."

Trust of Trusts

       Gordon Pape, Publisher, The Income Investor, Gordon Pape Enterprises Ltd., 281 Ibis St., Fort Myers Beach, FL 33931, www.buildingwealth.ca, has written more than 40 books on investing, and publishes four newsletters. A Canadian, Gordon is also a leading expert in the increasingly popular field of Canadian high-income trusts. Here, he looks at a more conservative, "trust of trusts."
       "Income trusts are similar to real estate investment trusts, but with some unique characteristics. They are structured as a trust, not a corporation. The difference is significant, as under Canadian law, a trust must pay out its profits to shareholders at least once a year. Payments are made monthly in most cases, so steady cash flow is an important advantage. It is important to remember that the payments are not guaranteed. These are not bonds and if a trust runs into financial problems it may reduce or even suspend distributions. That's bad news. As a general rule, these trusts offer only modest growth potential. Also as a general rule, the higher the cash yield from the trust, the greater the risk.
       "Although we expect more modest gains from income trusts this year than last (when several of our recommended trusts had total returns above 100%), we still think three factors will help this market. First, Canadian interest rates are not likely to go up for a while, as inflation is not a serious threat. The second factor is that the fear of limited liability to shareholders is now gone and pension plans are now poised to buy more aggressively. Finally, Standard & Poor's has announced that income trusts will be included in the benchmark S&P Toronto composite index by mid-year, which means that index funds would have to buy them in order to track the index properly. So the bottom line is that while I believe the sector is relatively expensive, I don't expect to see a sharp correction.
       "But since the market has become expensive, I suggest that you not try to pick individual trusts. Rather, my advice is to let the pros pick the trusts for you. I suggest the Lawrence Payout Ratio Trust (CA: LPR.UN Toronto), a closed-end fund that invests in a portfolio of 40 equally weighted income trusts with the lowest cash payout ratios from various sectors. The payout ratio is very important when it comes to selecting an income trust. It's the percentage of a trust's cash flow that is distributed in a particular year. The idea behind this trust is that the lower the payout ratio, the greater the chance that a trust will be able to maintain its current distribution levels and increase them down the road.
       "The history of the income trust sector has clearly shown that when a trust is forced to cut distributions, its share price gets clobbered, sometimes disproportionately. So the theory is that the structure behind this fund will greatly reduce that possibility. Some of the other criteria for inclusion in this fund are a market cap of at least $200 million, a listing of at least a year on the Toronto stock exchange, and no reductions or suspension in payments for at least two years.
       "This fund is brand new, so we don't have a history for it. Payments will be made monthly. The first payment of 8.75 cents per unit will be made on February 14. I don't expect that subsequent payments will be that high, because this payment covers a six-week period. However, I think an average monthly payout of 6 cents a unit is quite feasible. Based on the recent price of $10.22 per unit, that would produce a 7% annual cash yield. Since the current yield of the trusts in the portfolio is slight over 8%, that does not seem out of line. Yes, you can get higher yields from selected individual trusts. But this portfolio should provide a reasonable return and offers a lower risk level that I think is appropriate right now."

"Healthy" Potential at Templeton

       Perhaps no organization is better known for its global investment approach than the Templeton Group. Jeffrey Everett, chief investment officer of the Templeton World and Templeton Foreign funds, PO Box N-7759 Lyford Cay, Nassau, Bahamas, 800-239-3894, Fax: 242-362-4308, looks worldwide for opportunity and now sees potential in the global drug sector.
       "I would begin by noting that the G7 meeting in London this week included four countries that have never been there before - Brazil, Russia, India, and China. I think that speaks volumes regarding what the G7 leaders believe about the world economy - that it truly is a global world; investors need the horizon, time-wise and perspective-wise, to look at these opportunities. It should be no surprise then, that when we look at what we like at Templeton - where we have the luxury of being anywhere in the world we want - that we are 75% outside of the US. We see tremendous opportunities for some undervalued markets overseas.
       "Our research network globally is really buzzing with a lot of values around the world. One of the big problems that investors have is that despite the fact that barriers have come down, there are still some markets where there are significant restrictions for foreign investors, such as Korea, India, and Taiwan. Hence, that's where the best opportunities are. These barriers to entry are creating pricing inefficiencies. And that is where we see opportunity. From our perspective, looking for global values, they are out there, and quite a few of them are in emerging Asia.
       "Yes, there has been a lot of euphoria about these markets. In a sense, previously, the world had one business school - the US. And now we are starting to see foreigners take the lessons they have learned here and go back to their home markets: the repatriation of intellectual capital - Chinese and Indians going home to run markets. I don't think people understand the power of what this is doing to really turbo-charge those economies. It doesn't necessarily make them good stock markets yet, but it makes them very interesting economies that we have to pay attention to.
       "Aside from emerging markets, we are seeing opportunity in the global drug sector. We are not scared away from the drug stocks. Indeed, wherever there is controversy, you'll find Templeton. In particular, we would point to Sanofi-Aventis (SNY NYSE) in France; GlaxoSmithKline PLC (GSK NYSE) in the UK; and Bristol-Myers Squibb (BMY NYSE) in the US. In these companies, we are finding very strong balance sheets - in fact, extraordinarily strong balance sheets - in stocks that have potentially been overlooked by investors. People are worried about patent expirations, patent challenges, etc. But when you look behind these concerns at the financials, it is very reminiscent to us of what we saw in 1999 and 2000 in the materials sector, when things such as copper, steel, and cement were out of favor. And that turned out to be the best place for investors to be at that time.
       "Now, people have given up on drug stocks, and you are getting paid extraordinarily well. Bristol-Myers, for example, is like a Treasury bond with upside. You are getting paid 4.6% to wait. The dividend is $1.20, free cash flow is $1.20 per share, and debt on the balance sheet is $1.15 per share. In other words, free cash flow is more per year than the entire net debt position of the company. Again, this is an area where investors really haven't focused. We see great profitability and great margins, while others are focusing on fears such as caps on pricing. But in our view, these fears are already priced into the stocks. Given the financials and the growth potential, we consider these drug stocks very undervalued."

Dividends: "The Sweet Spot"

       "We think dividend-paying stocks are in the 'sweet spot,' and investors should make these the core of their portfolio," says Barbara Marcin, manager of the Gabelli Blue Chip Value fund, One Corporate Center, Rye, NY 10580-1434, 800-422-3554. Here, she provides her market overview and a selection of her favorite dividend payers.
       "Certainly, over the longer term, there are opportunities outside the US, and it makes sense for investors to participate in faster-growing economies with perhaps 10% to 15% of their investment funds. However, for the next year or two I think the growth profile in the US is very good, and there are many sectors and stocks selling at low multiples and offering good dividend yields. So I would say that for now you don't have to look elsewhere for good returns. You can find good value right here at home.
       "We are in a moderate-growth economy, and still, low interest rates are giving impetus to the market. We also have capital spending picking up; and confidence has picked up a lot. In addition, Congress enact a corporate tax law in October that allows corporation repatriate earnings that they have 'parked' overseas. This could result in $100 billion coming back to the US. So there is still impetus to spending that we see ahead. This bodes well for the stock market. The next few years should be marked by 'back to basics' strategy, with the best opportunities in stocks with reasonable p/e multiples and very good cash. Dividends will be the sweet spot in the market, along with good dividend-paying stocks that will outperform over the next few years.
       "Meanwhile, I'd point out that there are a couple of things that are currently out-of-whack on dividend-paying stocks. The dividend yield on the stock market - if you go by the S&P 500 - is about 1.7%. That is way out of line with the long-term dividend yield on the stock market, which has been about 4%. That payout declined dramatically in the 1990s. The other thing that is out-of-whack is the amount of money that corporations pay out of their earnings in the form of dividends. Right now they pay out about 33% of earnings, while the long-term average is 50% of earnings being returned into the pockets of shareholders.
       "In the 1990s, companies found every reason under the sun not to return money to shareholders. Indeed, their stock prices tended to rise when they announced that they had something more interesting to do with their money than pay dividends; and that is why the dividend return has fallen so much. However, there is every reason to think that over the next three, four, and five years or longer that dividend payout ratios will rise and the yield on stocks will rise a lot. Any that will help drive returns on stocks. That's why we think dividend-paying stocks are the 'sweet spot,' and we think investors should hold these stocks as a core portion of their portfolio.
       "Despite the historically low dividends of the general market, you can find good dividend-paying stocks in such areas as financial companies, pharmaceuticals, telecom, etc., all of which yield 3% to 4% with p/e multiples of 11-12. For a diversified package of a dozen stocks, I would suggest Kerr McGee (KMG NYSE), Chevron Texaco (CVX NYSE), Verizon (VZ NYSE), SBC Communications (SBC NYSE), Bank of America (BAC NYSE), Citigroup (C NYSE), Merck (MRK NYSE), Wyeth (WYE NYSE), Ameren (AEE NYSE), Hawaiian Electric (HE NYSE), ConAgra (CAG NYSE), and Du Pont (DD NYSE), for a nice list of issues that offer income and appreciation.
       "Finally, I'd add that in my mutual fund, the Gabelli Blue Chip Value Fund, I also look for returns by trying to invest in undervalued, unloved, and out-of-favor stocks, such as AES (AES NYSE), Sovereign Bank (SOV NYSE), and Microsoft (MSFT Nasdaq). In these cases, I am looking for stock appreciation as a result of higher multiples put on higher earnings as the luster is restored to these companies. I'd also note that pharmaceuticals have been out-of-favor in recent years; no sector has been hit harder. The reasons are that the growth profile has fallen, patents have been expiring, and of course, more recently, there have been problems such as Celebrex and Vioxx, as well as concerns about pricing limits. This group is definitely out-of-favor. But the longer-term earnings growth prospects for these companies are very good. Along with Merck and Wyeth in our list above, I would note that Sanofi-Aventis (SNY NYSE) and Pfizer (PFE NYSE) are good ideas if you have a one- to three-year time frame."

Day's Precious Picks

       Adrian Day, President, Adrian Day Asset Management and Editor, Adrian Day's Global Analyst, 900 Bestgate Rd., Ste. 405, PO Box 6643 Annapolis, MD 21410, is among the advisory world's leading authorities on natural resources. Although he sees near-term weakness for gold, he views any correction as a time to aggressively buy. Here, he highlights a trio of favorite gold plays and his top pick among silver miners.
       "We've had a significant correction in the price of gold, which has been primarily a US dollar move. And if the dollar continues its rally, gold will continue to fall; there's little question about that. In the short term, I think there is a likely possibility of a further rally in the dollar, and therefore a further correction in gold and a further drop in the gold stocks. However, unless gold collapses to $380 or so, which I don't see, I think the downside in gold stocks is pretty modest at this point. Because of the recent declines, many of these stocks are trading at low valuations in terms of price to reserves, price to production, price to cash flow, and even price to earnings.
       "When gold stocks do move up, they have the ability to rise quite sharply. Thus, I would emphasize that any weakness we see in the next few months should be an opportunity to buy gold stocks, and to buy them fairly aggressively. I just don't think there's a lot of downside. We have seen investment demand from Japan, India, and Turkey, which is a conduit for gold buying from the Middle East. We also have the huge potential from China. Legal restrictions on the free trading of gold in China are being liberalized, and as this continues, I think buying will pick up significantly.
       "If you are at all bullish on gold, or simply want some kind of hedge, I think Newmont Mining (NEM NYSE) is the #1 stock to own. It's the largest gold company in the world in terms of production, reserves, and market cap. Newmont also happens to have the highest leverage to the gold price among the senior gold companies. It's got a very strong balance sheet, and it's almost down to being debt-free, which is a phenomenal achievement considering the very high 40% level of debt to equity they had following the merger with Franco Nevada; that's a wonderful achievement. They are very active behind the scenes. The company's merchant banking business, which is involved in acquisitions and buying stakes in other producers is an overlooked and very significant contributor to earnings. One thing they have been doing is taking positions in junior mining companies, in case those companies make discoveries. For many, this is the gold stock of choice, and it's at a good price right now.
       "Vista Gold (VGZ ASE) is an interesting company. It's a mid-tier junior. Its strategy has been to accumulate resources in the ground at low-cost, but deliberately not develop them. They now have ten properties; two of them have full feasibility studies. They have about 13 million ounces in the ground, which represents 0.7% of the value of an ounce of gold to every share. With the stock trading around $3.50, we consider it very undervalued. This stock will be very sensitive to the price of gold. The way to look at Vista is that it is a permanent 'option' on gold prices.
       "Virginia Gold (VIA TSX) is a stock that I've liked for a long time. I like the business model, I like the people, and I like the balance sheet. Virginia has a joint venture model. They typically go out and acquire properties, doing early exploration, and then find a partner to spend the money. That limits their risk but enables them to maintain their balance sheet and have exposure to a lot of projects. Last summer, they had a fantastic discovery that came completely out of the blue. It's a very large, very high-grade discovery. We don't know how big this discovery will get, but even if it was cut off tomorrow, it's still likely to have 1 to 1.5 million ounces of gold. And it could be much bigger than that. Luckily, the high quality of this mine was found prior to developing any partnership, so Virginia still owns 100% of this mine. Even though this stock has gone up a lot - from about C$1 to C$3.50 - I'd argue that it is a better value today than it was back then. This new property is very, very significant, and I think this stock will be very strong over the next 12 months.
       "I'm also favorably inclined toward silver. There are very few silver companies, and there are even fewer good silver companies. So when silver moves, the silver companies tend to have much more leverage than silver prices, than gold stocks do to gold prices. Silver Standard Resources (SSRI Nasdaq) is my favorite silver stock at the moment. Over the years, it has built the company by exploration and development, but not by production. Their concept was to build up resources in the ground until the price of silver moves up. However, they are now moving ahead to bring two properties into production, as these properties are economic at today's silver price. That will give them some cash flow. One problem in the past was that by not producing, the company didn't have any income and had to continually go back to the markets to raise money. That has now changed completely. The firm has $64 million in cash. This is a phenomenally strong balance sheet for a junior company. They could actually, if they want to, fully finance the two mines that they are bringing into production. They are probably not going to, but it's a wonderful position to be in. The way to look at Silver Standard is as a very leveraged call on silver. It tends to be the most sensitive to silver of all the silver stocks. When silver goes down, so does SSRI. But when silver goes up, Silver Standard has tremendous upside leverage."

Eclectic Value in Tech

       It may surprise some that John Buckingham, manager of the value-oriented Al Frank Funds and the top-performing The Prudent Speculator, 32392 Coast Highway, Ste. 260 Laguna Beach, CA 92651, www.alfrank.com, is also a fan of tech stocks. Here, he explains his rationale and some favorite plays in the semiconductor arena.
       "As value investors, we seek cash on the balance sheet, low price to book, and low p/e ratios. But we are also eclectic value investors, and we find that many of our holdings are in the tech sector - as long as they meet our other value criteria. And while it may sound counter-intuitive to our long-term patient approach to investing, what I like about investing in technology is its volatility. You can buy a tech stock at $3, and two years later it can be $30. Other value stocks, such as my homebuilding plays, may only rise 20% or 30%. But if you have a hot tech stock, you can get rich. That's the beauty about technology investing. The greater fools are out there, and they will find your stocks, if and when the earnings start to pick up. But you have to buy them when the balance sheets are strong and the valuations are inexpensive.
       "Within the tech sector, we love semiconductors, precisely because everyone hates them. We like to do the opposite of the consensus. Semiconductors should be a part of your portfolio. If you look at valuations on the chip stocks, you really want to focus on balance sheet strength. Look at a company like Varian Semiconductor (VSEA Nasdaq). The company has $12 a share in cash. The company has been profitable just about every quarter of its existence. I think it has excellent long-term growth potential. Semiconductors are always going to be cyclical; there's no getting around that. But the idea is to not only invest in the businesses that are best-positioned for growth but to buy them when they are inexpensive and when their balance sheets are in good enough shape so that they can spend on R&D, and remain in business in an extended downturn.
       "Believe it or not, from a value perspective, I also have a semiconductor recommendation that is in the nanotechnology sector. It's called Veeco Instruments (VECO Nasdaq). It's a maker of atomic force microscopes that are helping in the design of semiconductors and are used in scientific nanotech research. At present, the stock is trading at about 15 times estimated 2006 earnings and less than two times book value. It is also trading at a price to sales ratio below 2, which is reasonable for the semiconductor sector. And since I'm optimistic about chip stocks in general, and this also has the 'sexiness' of the nanotechnology space, I think Veeco would be a good stock to own."

Wireless Words of Wisdom

       Nikhil Hutheesing, a long-time veteran technology editor at Forbes magazine, and editor of the Forbes Wireless Stock Letter, 28 West 23rd St., 10th Fl., New York, NY 10010, www.forbes.com, saw his stock picks rise more than 100% in 2003 and more than 50% last year. Here, he offers his best bets on the future of wireless.
       "I think the most exciting area of wireless is the deployment of 3G wireless networks. Carriers such as Sprint and Verizon have been spending billions of dollars to deploy this, and now we're finally beginning to see them coming up around the US. WiFi is another wireless technology that also provides high-speed networks. In fact, it operates at higher speeds than 3G. We've seen this technology deployed in places such as Starbucks and McDonald's. They are becoming more and more pervasive. They provide broadband connections if you are within about 300 feet of an access point. Thirdly, WiMax is a new technology that is coming down the road and will provide even faster connectivity at a larger range of 30 miles from each access point. There has been a lot of talk about these competing networks displacing each other. On the contrary, in my opinion, I think they will all be here to stay.
       "There's no question that if you want to play 3G, the best stock to own is Qualcomm (QCOM Nasdaq). The company owns the rights to CDMA, which is the technology behind 3G. It's already very big in the US, Japan, India, and Korea. The company also has a lot more going on. It has the BREW technology, which is an operating system that is increasingly being used by mobile handsets. About a year ago, they were on 14 million handsets using BREW; today, they are on 40 million. A year ago, it was in operation in nine countries; now it is in 24. So BREW is a big benefit to Qualcomm and could generate a lot of revenue.
       "I'd note that another very exciting market for Qualcomm is cell phone television. Qualcomm has recently begun to talk about its new system, which will provide television to cell phones. This technology will come in 2006. Basically, Qualcomm has put together a system that it will then deploy to the carriers, who can in turn personalize it however they want. Customers of these carriers will then be able to get television on their cell phones. This is a very exciting opportunity for Qualcomm.
       "In WiFi, you might want to consider Proxim (PROX Nasdaq). The company is pretty well positioned in the WiFi space, and the stock is at an attractive level. Another player in WiFi is Cisco (CSCO Nasdaq). The company has been increasingly getting into the wireless home networking system area. It bought Linxys not too long ago. It has also acquired a number of companies to help build wireless infrastructures for corporations.
       "In WiMax, which is the technology that we see down the road, a cheap company is Alvarion (ALVR Nasdaq). This is a great company. It's got the equipment for WiMax and just announced that they launched their first nationwide system as a test. Unlike other companies that are purely a play on WiMax, Alvarion also has a stake in infrastructure equipment for 3G and WiFi networks, which is already providing the company with a stable revenue stream.
       "I'd also offer a play that will benefit from all of the various networks. Now that the networks are being deployed, the carriers want to figure out how to make back some of the money they have invested in them - and they do that by keeping us on the network as long as possible, racking up those minutes. Mobile games will be a big business. A good player in this business - which has really aligned itself well with the carriers and with content providers and video game makers - is Jamdat Mobile (JMDT Nasdaq). The stock has declined a bit this year, due to some problems with revenue mix. But the company's earnings should turn the corner, and I expect the stock to go back up and do well over the next year."

The Internet Generation

       Alberto Vilar is founder of Amerindo Investment Advisors, 399 Park Avenue, 22nd Fl., New York, NY 10022, www.amerindo.com, a mutual fund company that focuses on emerging technology. Here, the founder and fund manager offers a trio of his favorite stocks that are poised to benefit from the still-unfolding Internet Generation.
       "Technology investing is in the process of a major change. The first major tech cycle was all about mainframe computing. The next was about desktop computing. Now we're in the third generation, which I think will be much stronger than the first two. That is the Internet generation. And it's still very early in that cycle. The earlier cycles focused on automating corporate America. Now you really have a much larger and addressable market, namely the consumer. It's a new world in which I would argue virtually everything is going to be networked, from businesses to homes. Emerging technology has led the bull market since October 2002, and I continue to see technology leading the market over the balance of this decade. I can't think of another sector that is going to do better.
       "The market for 'Internet search' is probably the fastest growing and most profitable part of the Internet. In less than three years, the sector called 'paid search' has grown from $300 million to about $4 billion. Google (GOOG Nasdaq) has about half of that market, and it's growing very, very rapidly. If you look at the world and what can be indexed to be searched, very little has been done. We're talking about the world of libraries, music, photos, e-mails, etc. There is an extraordinary amount of information that is going to be searched and Google remains the leader in the field. In the end of the 1990s, two companies got to a $500 billion market cap - Microsoft and Cisco. I think we'll see several companies during this decade go through that level, and Google is my candidate to do so.
       "Homestore (HOMS Nasdaq) is a turnaround company. In the late 1990s, it was the leader in applying the Internet to real estate. From looking for a home, buying a home, buying furniture, or renting, Homestore put this information on the Internet. However, the company became over-extended and got into financial difficulties. Now they've turned the company around, some money has been raised, and they've signed some very lucrative deals in the real estate world. I think real estate information on the Internet is a very interesting area. As the #1 player in this market, I believe this stock could be an interesting turnaround.
       "Sonus (SONS Nasdaq) is a sector play. The biggest change in telephony is in Voice over Internet Protocol, or VoIP. Here you have a major, Internet-based technology that is going to be deployed over the whole world. Sonus happens to have a very interesting and essential part of that, which is the switching mechanism for this technology. They are also touted as a potential takeover. And while I don't recommend stocks based on takeover potential, I would note that one of the 'big guys' at some point might find it convenient to acquire them. But even on their own, I think they'll do very well, because they are in the sweet spot of an exploding technology."

Samsung: A Hidden Gem

       One of the great benefits of the Money Shows is the chance for all attendees to meet face-to-face with the advisors, and the opportunity for an impromptu dinner with Mark Skousen Editor-in-Chief, Forecasts & Strategies, Eagle Publishing, Inc., One Massachusetts Ave., NW, Ste. 610, Washington, DC 20001, www.markskousen.com, was a highlight of my week. Here, he talks about his favorite tech stock - Samsung.
       "Our favorite tech stock is Samsung Electronics. We view this as the 'hidden gem' in the tech industry. In fact, it's the most profitable tech stock in the world. They just declared record profits. Sales are growing like crazy. And while the shares are up 40% since we first recommended them, we're predicting a long-term triple, so we still think we're early in the game.
       "Samsung products were everywhere during the holidays. In addition, at the giant consumer-electronics show in Las Vegas this year, Samsung unveiled an array of new products, including a mobile phone that converts speech into text messages, and scans business cards into phone directories. In fact, I believe the mobile phone may well be the key to Samsung's success in the near future. The company has ambitious plans to expand the number of premium telephone products that can attract higher profit margins.
       "What about the future? Chief Executive Yun Jong Yong announced plans to raise capital spending by 34% in 2005, more than double last year's pace and outspending rival Intel. Yong, by the way, again made the Business Week list of one of the 'best managers' of a publicly traded company. One big reason for the firm's success is that Samsung is staying ahead of the competition in terms of investing in its future. The company recently signed an agreement with Intel to provide state of the art chipsets in notebook computers, and is the first to sign a long-term strategic agreement with the most advanced European nanotechnology research firm to build better and smaller communications products.
       "What's the best way to buy this stock? Samsung does not trade on the New York Stock Exchange or the Nasdaq, but on the Korean exchange (#005930). The best strategy is to have your broker buy the stock on the Korean exchange, which is done through their foreign stock desk. Because of the price of the stock, the minimum investment is typically $5,000 to $10,000, and the commission is 2%-3%. All major brokerage firms can buy this stock. Another convenient alternative is to buy the Korea Fund (KF NYSE), because 30% of the fund is invested in Samsung. I'd add that the Korea Fund is also selling at a discount to net asset value.
       "Finally, I believe that Samsung will trade on a US exchange within the next two years. In fact, one of my arguments for buying Samsung is not only that it's profitable and selling at a third of the valuations of its competitors, but that following a US listing, its valuation will probably match the p/e of its rivals."

Jubak's Jewels: A Tech Trio

       Jim Jubak, senior markets editor for CNBC on MSN Money, is always among the most popular Money Show speakers. At a special panel on technology investing, the financial commentator discusses a trio of his favorite long-term technology plays.
       "Avaya (AV NYSE) has been a terribly run company for quite a while, and it's struggled under a lot of debt. However, it now has a management that seems to 'get it'. The company has been expanding outside the US for the first time since it was spun off from Lucent. Meanwhile, its equipment fits a really important niche right now in the transition from our current phone systems to a Voice over Internet Protocol, or VoIP. Rather than rip out your old phone system and start over from scratch, Avaya's products allow companies to salvage some of their old system while shifting to VoIP. So it's a good transitional technology for a time when companies are looking to go a little more slowly into VoIP.
       "EMC (EMC NYSE), a data storage company, is a really interesting stock. EMC had a great fourth quarter, yet the stock went down, when investors noticed that the company was selling a lot of systems designed to be cheaper entry point systems. These days, hardware technology companies face a lot of of competitors that are willing to cut prices to get into your business. To compete, you can develop cheaper versions of your own products or let others cannibalize your margins. EMC chose the former strategy. This was an intentional decision. In my opinion, this is a stock that should do very well when capital spending picks up later in the year.
       "L3 Communications (LLL NYSE) is involved in what is called secured high data rate communications. They are in the business of sending digital signals very, very fast and very securely from one part of the military network to another, as well as inside various corporate networks and for homeland security. The stock has been hammered lately because of worries over the defense budget. But I don't think there's a real worry that defense spending is going to go down. They are a high tech leader with lots and lots of really high profit niches.
       "I also like Yahoo (YHOO Nasdaq), due to Internet advertising. I'd note that I work for Microsoft and we compete against Yahoo. They are tough, resourceful, and fast off the dime. I hate competing with them. But this is a nice stock to own. They, like Microsoft, have been a little slow to discover that search was going to be the biggest driver of Internet advertising. But it is now rolling out its new search engines, adding more and more search capabilities, and closing the gap with Google. Internet advertising is back, and companies that can deliver targeted Internet advertising, such as Yahoo, will benefit."
       Editor's Note: Bull & Bear readers are invited to attend The Las Vegas Money Show, May 9-12th, 2005 at Bally's and Paris Resorts - free of charge. In it's 17th year, The Money Show - Las Vegas will feature over 50 of Wall Street's top analysts, advisors, and money managers who will address the issues of greatest concern to today's sophisticated investors and traders, helping you acquire the knowledge, tools, skills and strategies to prosper and profit. You will also have the opportunity take advantage of the exhibit hall featuring over 200 financial services companies, and get advice and insights during more than 200 free workshops, panel presentations, intensive sessions, and stage presentations - all under one roof!
       For FREE admission to The Las Vegas Money Show call 1-800-970-4355 or register at www.MoneyShow.com.

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Samsung: King of the market

       Neil George: "Buy shares in the world's best and biggest electronics and semiconductor companies. You may groan a bit as we tell you it will take some work on your part, but it's worth it.
       Samsung Electronics (OTC SSNLF; Korea 005930) used to be a strange little company based in Korea that made cheap microwaves and crummy televisions. That was a long time ago.
       Now, take a look around your home and your neighborhood electronics store - Samsung makes some of the best and most-desired goods. From high-quality wireless phones to the brightest, awe-inspiring flat screen televisions, Samsung is the king of the market.
       For the last five years, Samsung has generated a 100 percent return for US investors who made the effort to buy it; meanwhile, the local Korean market and many of the leading US technology stocks (e.g., Intel) lost money. Yet, we've balked at putting it into the portfolio.
       Our reasoning: It's a pain for individual investors to buy Samsung shares. So, to provide you an opportunity to buy the stock, we tracked down the best surrogate investment that gives you some Samsung holding - with much less effort.
       Samsung is Long Hauler Korea Fund's (NYSE: KF) biggest single holding, which according to recent filings represents more than 14 percent of the fund. This, along with other key holdings we've recommended (i.e., Posco, the world's biggest iron and steel maker), has allowed the fund to soar above the Korean and US stock market indexes.
       We now have two motivations for adding Samsung directly to the Growth Portfolio. First, the company is worth buying on its own.
       Sales continue to climb at remarkable rates for a large electronics and components company. And with these great technologies, other industry leaders - like Sony - are after Samsung, buying its products to include in their own offerings.
       It's also a relative bargain - the shares trade at last year's sales value, which is a fraction at which its other peer's shares are valued by the markets.
       ince Samsung is so well positioned, an American Depository Receipt (ADR) is expectantly in the works. That will make it easier for the company to tap an eager US investment market.
       Second, Korea Fund is being reduced in size through a massive share buy back instigated by a few institutional investors and led by Harvard University.
       The result: Over the coming months, Korea Fund will be reduced in size, despite its continued great performance. We may have to take our profits and sell it from the Portfolio in the future.
       But for now, keep owning and buying Korea Fund. And if you want to own Samsung by itself, there are numerous brokers that will buy it for you, including Charles Schwab.
       This leading discounter has a global investment desk that can execute Samsung trades, as well as most other companies. To reach it directly, call 800-992-4685.
       There are a few restrictions to owning Samsung, such as a 30 share initial minimum purchase and 10 share increments thereafter. It will cost you slightly more, but it's a valuable investment for the long haul. Buy Samsung Electronics.
       If it's not viable for you, stick with Korea Fund and we'll continue researching other alternatives. Likewise, we'll let you know if the ADR comes to the US market. The ADR will give a good boost for Samsung shares."

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THE SPEAR REPORT
45 Wintonbury Ave., Ste. 301, Bloomfield, CT 06002.
1 year, 50 issues, $279.
www.Spearreport.com.

Healthy living with Whole Foods Market

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WALL STREET STOCK FORECASTER
250 Liston Rd., Ste. 700, Buffalo, NY 14223.
Monthly, 1 year, $99.

New products cut reliance on Windows

       Patrick McKeough: "Microsoft Corp. (Nasdaq MSFT $26; WSSF Rating: Above average) is the world's largest software company. Its Windows operating system runs 90% of the world's computers, and its Office suite of programs is the top selling business software package.
       The company has settled most of its anti-trust suits. Consequently, it's now distributing some of its $64.4 billion in cash (about $6.00 a share at September 30, 2004) to stockholders.
       In December 2004, it paid a special dividend of $3.00 a share. That's in addition to the regular quarterly dividend of $0.08 a share; the annual rate of $0.32 yields 1.2%. Microsoft also plans to buy back $30 billion worth of its stock in the next four years.
       The company is also diversifying its product line. Although its Xbox video game machine business is still losing money, strong sales during the holiday buying season should help cut its losses. New home theater equipment and a music download service should also help cut Microsoft's reliance on Windows and Office.
       Microsoft still spends about 18% of its revenue on research, which helps it maintain its market share, despite competition from free software, like the Linux operating system.
       It also buys smaller software firms to bolster its products. For example, Microsoft recently launched an anti-spyware program based on technology developed by a European company it acquired over a year ago. (Spyware is software that secretly tracks a user's Internet history and other information.)
       However, the company could have a tough time convincing consumers and businesses to give up their current security software, even if the Microsoft program is cheaper.
The stock peaked at $60 in 1999, but has stayed between $24 and $30 for the last 12 months. It trades at 20.6 times the $1.26 a share it should earn in the fiscal year ended June 30, 2005. It's also expensive at 7.5 times its sales of $3.48 a share.
       Microsoft is a hold."
       Editor's Note: The Wall Street Stock Forecaster is a 3-part investment advisory. It encompasses the monthly bulletin, weekly Hotline and the monthly supplement, The Wall Street Stock Portfolios. For subscription information call 1-888-292-0296 or e-mail mckeough@idirect.com.

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NATE'S NOTES
P.O. Box 667, Healdsburg, CA 95448.
Monthly, 1 year, $150.

Apple Computer on its way to being
one of the "great success stories"

       Nate Pile: "Apple Computer's (AAPL) stock represents another piece of "bullish evidence" that contradicts the generally bearish mood being set by most of the other stocks in the newsletter (and the market in general) these days. Thanks to a number of positive earnings revisions and analyst upgrades, Apple's stock appears to be breaking out for another run into record-high territory. The next possible clue will be whether or not the stock is able to hold the price point that it broke out from (or "barely violate it for just a brief period of time," i.e. experience just enough of a dip to shake out everyone who planned to bail out if the stock broke through that exact price point), or if it crashes through that price point dramatically and does not recover within a day or two... which would suggest that the current move has run out of steam and that the stock is likely to cease hitting new highs for awhile as momentum investors lock in their profits. With the stock price approaching triple digits, it is not surprising that the company has announced a 2-for-1 stock split that will take place on February 28th. Given how large our position in Apple has become (and how quickly it has happened!), I am selling a portion of our holdings in each Portfolio this month; however, I continue to believe that this company has turned the corner and is well on its way to being one of the "great success stories" of the next wave of the personal computing revolution (plus, if the company is able to coax some its very satisfied iPod customers to convert to the Mac OS, do not underestimate what the re-capturing of a mere percentage point or two of the current PC market could look like on Apple's earnings statement!). I am taking a few chips off the table this month, but also encourage you to jump at any opportunities that may present themselves in the weeks ahead to buy the stock under the buy limits. AAPL is a strong buy under $70 and a buy under $80 (pre-split)."

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Louis Navellier's BLUE CHIP INVESTOR
9420 Key West Ave., Rockville, MD 20850.
Monthly, 1 year, $299.

Secrets for Success in 2005

       Louis Navellier: "The stock market will become narrower as earnings growth slows down. I suspect that this will start in February as the fourth-quarter earnings season winds down. Please don't be alarmed by a more selective market. Anytime the market rallies, it eventually becomes more selective. The key is for our stocks to emerge as market leaders.
       This year, earnings stability will be more important than earnings momentum. I suspect that those stocks that have the most predictable earnings growth will fare the best. Strong cash flow is also very important because rising cash allows companies to boost their dividends and buy back outstanding stock. In fact, stock buybacks are now running at a 20-year high, which is a good sign for the overall market, and especially the strong cash flow stocks that we favor.
       High-yielding stocks like ChevronTexaco, Conoco Phillips, National Grid Transco, Occidental Petroleum and Procter & Gamble will naturally represent an oasis for conservative investors because their big dividends help reduce volatility. Companies that are boosting their dividends, like TXU Corporation, should also do well. Since dividends are only taxed at 15% on the federal level, I expect that dividend yields will continue to climb and that those companies with generous dividends will fare the best.
       Companies with high operating margin will also do well. A company usually has high operating margins because it dominates its business and has little competition. Some of the most monopolistic companies on our Buy List are America Movil, Apple Computer, eBay, Qualcomm, Research In Motion and Symantec, because they dominate their markets. These companies should have steady earnings growth this year."

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John Dessauer's INVESTOR'S WORLD
9420 Key West Ave., Rockville, MD 20850.
Monthly, 1 year, $249.

Top 10 Stocks for 2005

       John Dessauer sees a Dow Jones Industrial Average of 12,000 by the end of 2005. His Top 10 Stocks for 2005 are as follows:
       (1) Cendant (CD) is a stock for which Wall Street has low expectations. But management has a clear business plan to raise the earnings growth rate. In 2003, Cendant's stock doubled. Last year, the stock was essentially flat. A dividend was added to ease our patience. This year, there will be some earnings turbulence as the company sells off some division and replaces them with businesses with greater potential.
       I can't be sure of the timing, but I see potential for another double in Cendant in 24 months, maybe less. Earnings were up 14% over 2003. This year will be a different story. Earnings are going down (current guidance is from $1.35 to $1.45 a share) because Cendant is selling or spinning out profitable businesses. Fleet financing and mortgage operations will be spun out to us in a few weeks. Wright Express will be sold in an IPO for $1 billion. These are all solid, profitable businesses but with growth potential of under 10% a year.
       Cendant has announced the purchase of Orbitz, Ebookers and Gullivers. These three acquisitions fill out Cendant's travel booking business. Management says the proceeds from marketing services will be used for debt reduction, share buy-backs, dividends and some much smaller fill-in acquisitions. The Gullivers deal ($1 billion) is the last big acquisition. Management has offered guidance of $1.62 to $1.72 a share for 2006. In their conference calls on the acquisitions, management made it clear their guidance is "vanilla" (conservative). Any surprises are likely to be on the upside.
       The key to this story is Cendant' earnings growth rate. Earnings rose 14% in 2004, and Wall Street was projecting a further 13% increase for 2005, a year of transition. Going forward, the earnings growth rate will be more like 18% to 20%. We are buying Cendant at 14.3 times 2004 actual results and 14.2 times 2006 low-end guidance. That is a bargain, based on new growth potential, compared to other travel stocks, especially hotels. Hilton and Starwood trade at 33 times 2005 estimates! I think Wall Street is correct on travel but has pushed the hotel stocks too high. Travel in the U.S. is doing very well and will do better as the economy grows and more foreign travelers take advantage of the cheap dollar. Cendant is a major travel company. Both travel and real estate will do well in 2005 and beyond.
       (2) Citigroup (C) is an old friend to this newsletter, and my personal employer in the 1970s. We owned the stock from 1980 to 2000, multiplying our money many times over. Since then, this giant global financial services company has evolved into a cash machine. Citi earns roughly $20 billion a year. The stock finished 2003 at $48.62, rose to more than $50 a few times early last year and then languished in a very narrow trading range. But earnings per share are up 18%, to $4.05 in 2004.
       Wall Street has modest expectations for Citigroup. Estimates for this year are a gain of 11% to $4.50 a share. Why are expectations lower than last year's 18% gains? The first reason is size. Wall Street analysts say that it will be tough to keep double-digit growth going when you start at the $20 billion level. If Citigroup were a purely domestic U.S. company, then I would agree. But Citigroup serves the global economy, where there still are enormous opportunities. Then there is China. In 2007, when China's banking system opens to full competition, Citigroup will be ready!
       Citi already has a presence in China and is becoming a familiar name to Chinese, and to companies doing business in China. I believe that China alone is a huge long-term opportunity for Citigroup. Now is the time you can buy Citigroup cheap. With Citigroup, we have "P/E compression." In 2001, the average P/E was 17.7; in 2002, the P/E fell to 13:3; in 2003, to 12:3; now, the stock is trading at a tiny 11 P/E, Citi's lowest P/E in many years. Its earnings have been growing nicely, but the stock has not followed. At some point, this will change, and the stock will catch up with earnings.
       If earnings just meet current 2005 expectations and the stock trades at 12 times this year's earnings, we will enjoy a 15% capital gain plus the 3.4% dividend yield for a total return of more than 18%. I suspect that an 18% total return will be better than average this year.
       The risk is low because of Wall Street's modest expectations. Size is not Wall Street's only concern. Higher short-term interest rates raise Citigroup's cost of funds. But the prime rate has also been raised and will go up with short-term rates. That insulates Citi from pressure on the interest-rate spread. Citigroup has always had one of the most disciplined loan-deposit pricing structures in the industry. Citigroup will make more money as the U.S. economy grows, as there is more opportunity in a strong, growing economy.
       Citigroup is arguably the best financial services organization in the world, trading at a depressed P/E. I see that as an irresistible opportunity for 2005 and the next several years. If you want to fund this purchase from our stock list, trim any holdings that have grown to 10% to 15% or more of your portfolio. One example is SEI Investments (SEIC). SEI trades at a P/E that is double that of Citigroup. The stock is up nicely and can be trimmed some, both to raise cash and to diversify.
       (3) Endesa (ELE) is another old friend - owned here for most of the 1990s. Once only a Spanish electricity company, Endesa has expanded into Latin America and now into the Mediterranean region of Europe. Endesa owns 85% of an Italian electricity company and 65% of an electricity company in France. Earnings this year are estimated at $1.76, up 13% from 2003. For 2005, earnings estimates by some firms have been raised to $2.15, 22% better than in 2004. The most explosive growth in earnings comes from Italy and Latin America, notably Argentina and Venezuela.
       Third-quarter results were much better than expected, so 2004 final results are likely to be above current expectations. That may reduce the percent gain in 2005 unless growth is stronger than now expected. Endesa has a sound business plan to continue earnings growth over the next several years. Generating capacity is rising. Demand is rising. Higher fuel costs can be passed on to customers. The generating base is widely diversified, both geographically and by types of generating facilities. The stock is attractively priced, due to concerns about costs of pollution regulation.
       The discount looks excessive, and the stock trades at a valuation below its peer group. The 4.1% current dividend adds to the stock's attraction. Plus the dividend is likely to be increased again in 2005. (Note: I am SELLING Lucent and Cable & Wireless this month. That will provide the cash to buy Endesa).
       (4) H&R Block (HRB) is another story of low Wall Street expectations and pleasant surprises. But now Wall Street is discouraged since the mortgage business is throwing off smaller profits, the client count growth rate in the tax business is declining and there is talk in Washington to simplify the tax code. Block's management is addressing the first two aggressively. As for tax simplification, we can only hope...but I've heard that before. As it stands, millions of Americans cannot fill out their personal tax returns without skilled help. The complex alternative minimum tax (AMT) alone is snaring many more Americans every year.
       As the economy grows, we will create more jobs and more taxpayers. That is the basic driver of Block's tax business. Management is expanding the company's "points of presence" to 11,000 for the coming tax season, including in 960 Wal-Mart stores. In mortgage, H&R Block is moving up to a more aggressive Internet-based plan. Still, Block disappointed Wall Street with a $0.32 per share loss in the second fiscal quarter (ending October 31. Their next report will come in February, and estimates are for $0.50 a share in profits.)
       For this fiscal year ending April 30, 2005, Wall Street has cut estimates to $3.73, indicating a down year from the $3.90 earned in fiscal 2004. Last year, Block beat expectations in the third and fourth quarters. Given the additional "points of presence" this year, that could happen again. There is an aggressive stock buyback program and a 1.8% dividend. Wall Street doesn't expect any pleasant surprises, so the stock trades at just 13 times their depressed expectations. Block is bargain.
       (5) IndyMac (NDE). Standard & Poor's has a $44 12-month target, even though they have far more modest expectations for earnings than management does. S&P sees $3.40 a share this year and $3.90 in 2005. Management's guidance for 2005 is $3.98. Beyond '05, management is targeting an aggressive $8 a share in 2008. S&P's projected 13% growth rate would only get Indymac's earnings to $5.63 in 2008.
       But where management, S&P and I all agree is that their basic strategy is working. IndyMac will continue to gain market share in the mortgage industry. The hybrid (thrift/mortgage) banking business model works well in most markets, but it work best in a home purchase market - where we are now, and likely will remain for several years. I have followed IndyMac and CEO Michael Perry for many years. His 2008 targets are aggressive, but he has delivered on similarly aggressive targets in the past. If he comes even close, we will have a major winner. The 4% dividend is generous, and S&P's $44 annual target is attractive.
       (6) Nokia (NOK) disappointed Wall Street by missing the recently awarded Cingular 3-G network buildout. Nokia will stay as a 2-G service provider, and management says Nokia has won 44 WCDMA network deals. That is better than Siemens, or even Erisson. I find it remarkable that Nokia does so well in networks, which is Ericcson's prime business. At Nokia, networks are a second priority to hand-held phones.
       Wall Street is still skeptical about Nokia's market share in hand-held phones. I see Nokia as energized by the earlier slippage in market share. I expect to see Nokia produce 2005 results above current expectations. Current estimates are for 0.64 euros ($0.86) per share in 2004, rising 20% to 0.77 euros this year. Wall Street's long-term view is that Nokia will grow earnings only 10% a year. Management has a different view, based on software and new hand-held phone developments. If the euro exchange rate stays at 1.35, Nokia's earnings will rise to $1.04 this year. If Nokia beats this year's estimate, as I expect, then the stock will rise to $20 or $25. The risk is low, thanks to the superb, cash-rich balance sheet, dividend and a relatively low P/E.
       (7) Pfizer (PFE) was hammered after a trial using high doses of Celebrex to treat certain killer cancers was halted. There was data suggesting that there were significantly more cardiac events with those using Celebrex than in those taking a placebo. The data from this trial contradict data from other similar trials and has caused confusion among medical researchers. But in smaller doses, Celebrex has been used successfully for years among millions of patients without serious side effects. That is the biggest and best test of the efficiency of Celebrex. Calmer heads will eventually prevail. But after Merck's Vioxx disaster, there is a certain amount of hysteria about Pfizer and Celebrex.
       I expect that the hysteria will mean slower sales of Celebrex. Likewise, withdrawing Celebrex advertising will reduce sales. But it is unlikely that Pfizer will face an avalanche of lawsuits, as is the case with Merck. Wall Street has trimmed estimates for this year and reduced forecasted long-term growth rates to 11% a year. This year's new lower estimate is $2.34, meaning that the stock trades at 11 times 2005 estimates, low for Pfizer and below the peer-group valuation. Pfizer has a strong product line and full pipeline. I expect the stock to rise back above $30 as hysteria gives way to facts.
       (8) Rite Aid (RAD) lost a penny a share in the third fiscal quarter, compared with a profit of $0.12 in 2003. This came on top of a report showing a decrease of 1.3% in December same-store sales. One major Wall Street firm sold Rite Aid following the news. Another down-graded the stock to a hold. Unlike the Wall Street crowd, I waited to listen to the earnings conference call before jumping to any conclusion. I was impressed by the call, and especially by the CFO, John Standley. He showed a grasp of the entire business and was forthright and candid in answering all the analysts' questions.
       The loss of the UAW contract has hurt Rite Aid. It will take time, perhaps another six months, to recover and get sales growing again. But Rite Aid is not the disaster the stock price implies. The company has plenty of liquidity and several options when it comes to long-term debt maturing this year. Rite Aid is in far better financial shape than it was a few years ago.
       CEO Mary Sammons articulated a credible broad based strategy to get sales growing again, including more prescription file buys, new technology in the photo shops, a new prototype store layout and rollout of the new pharmacy system. Investor expectations are so low that it will be hard for Rite Aid to disappoint and very likely that we will see pleasant surprises in 2005.
       (9) Scientific Atlanta (SFA) has traded in a $25 to $35 range over the last two years, while their earnings have grown from $0.65 a share in fiscal 2003 to $1.41 in 2004. For 2005 (ending June 30), estimates have been raised to $1.60 a share. Sales are expected to rise at least 16%. In other words, even after the increase, current earnings estimates reflect low expectations for the stock. Wall Street sees cable companies spending more than expected to keep up with the competition and earn more money from new services. Wall Street still does not see the TV revolution, with digital sweeping analog away and new services from digital video recorders and broadband to HDTV moving in quickly. Foreign sales are increasing. Earnings could end up at $1.90 a share. In addition, Scientific Atlanta has over $8 a share in cash. Combine cash and earnings growth, and the stock should reach $40 or better this year.
       (10) South Financial Group (TSFG) is a small regional bank, operating in North Carolina and Florida - part of baby-boomer heaven. Tourists and retirees are flocking to these regions, fueling a surge of foreign and domestic buying of second homes. This flood of people brings money and growth to the area. South Trusts's operating ratios are above its peers'. Its 2005 earnings estimates are for $2.30, a gain of 18%.
       South Financial looks to be at the beginning of a new earnings growth trend. At barely 14 times this year's estimate, the stock is undervalued. Over the last three years, the stock has traded in a range of 10.7 to 18.8 times forward earnings estimates. With a significantly better economy, particularly in North Carolina and Florida, the stock is not likely to gravitate to the low end of that range. More likely, we will see a P/E of 16 or better this year. That indicates a stock price of $37 in the short run and above $40 towards year-end.

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THE KONLIN LETTER
5 Water Rd., Rocky Point, NY 11778.
Monthly, 1 year, $95.

Efoodsafety.com , Inc.
#1 Stock Pick for 2005

       "Efoodsafety.com, Inc. (EFSF) is a small technological pioneering company with a breakthrough system that virtually eliminates all pathogens from produce, beef, poultry, seafood, and dairy. "The Investors Business Daily" reported that food safety is the next big technology and there are no other companies in the forefront of the food industry with the ability to de-contaminate food products tainted with deadly pathogens and institute an audit trail.
       EFSF (Nov. '04 SOM) is the only company with a revolutionary patent pending "Food Safe" chemical-free inspection process, with an entire system dedicated to protecting, certifying, and delivering safe food products that far exceed current FDA requirements. Its patent-pending ozone-based process kills all pathogens, leaving produce and consumers unharmed. EFSF expects to provide the marketplace with an entire audit trail from the growing, harvesting, packaging, storage, and delivery stages of food safe products literally from "ground to grocer."
       Most assuring, EFSF's wholly-owned subsidiary, Knock-Out Technologies (KOT), which develops superior, non-toxic cutting-edge solutions, reported that its Anthrax Sporocidal formula has meet EPA protocol on hard and porus surfaces. The sporocidal formula, which can be introduced into closed environments and which kills the world's deadliest biological agent - Anthrax - within 60 minutes, while remaining safe for humans, has generated recent government interest.
       Also, KOTs breakthrough germicidal formula departs from the norm in that it is 100% effective in killing the Big 6. Based entirely on natural and synthetic food grade products, including natural oils and potent phytochemicals, KOT's blockbuster Big Six germicidal spray product has met and exceeded EPA germicidal protocal, and has demonstrated 100% effectiveness in killing the six major bacteria (e-Coli, Salmonella, Listeria, Pseudomonas, Streptococcus, and Staphyloccous.)
       Outgoing Health and Human Services Secretary Tommy Thompson warned of a potential outbreak of the flu and health-related terrorist attacks.
"For the life of me, I cannot understand why the terrorists have not attacked our food supply because it is so easy to do" he said.
       EFSF's state-of-the-art method to sanitize produce appeals to both the traditional and organic markets; this will also extend shelf life and reduce rot significantly. Studies show that ozone is 51% more powerful on bacteria than chlorine, the kill rate is 3,125 times faster, and it leaves no residue. A huge potential market!
       The stock's upside potential is unlimited since EFSF can eradicate the global Anthrax threat and, combined with its patented food sanitization technology, could make it a billion-dollar company in less than five years. Of the 94,455,000 shares outstanding, approx. 62% are held by insiders. 1st target of $2.00. The stock remains a speculative buy, but as revenues come on line there is more future upside potential in this emerging growth company than any other low-priced stock I have even seen. EFSF is a ground floor opportunity standing on the global threshold for an acceleration in sales growth in early '05, which could see the stock have an explosive upsurge ultimately to 5-6.

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       Joseph Shaefer: "I'm thinking overdone. It takes a great deal of courage to step up and buy when all the news is bad. And, heaven knows, it's not just bad, it's awful, atrocious, unspeakable, appalling, horrendous, and abysmal right now. If you believe the popular press, Pfizer (PFE) and Merck (MRK) have zero miracle drugs in their pipelines, will lose the patent protection on all the ones they currently have, and will be sued by every trial lawyer in America (well, that part's probably true) and that every case against them will result in a victory for the other side (unlikely.) The truth is, these two giants have had big setbacks. They are down but they are not out. If you don't own either of them, buy them now. You won't get better growth companies at lower Ps or with better dividends. PFE now sells at a PE of 20 and yields 3%; MRK at a PE of 11 - and it yields 5%. The bell is ringing."

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Russ Kaplan's HEARTLAND ADVISER
5002 Dodge St., Ste. 302, Omaha, NE 68132.
Monthly, 1 year, $150.

If Ben Graham were alive he
would jump on McRae Industries

       Russ Kaplan's recommendation for this month is McRae Industries (MRI.A). McRae Industries is in several areas including printing and boots. "It is a value investors dream with a price per share barely about net working assets (the short term stuff) rather than the total value of the company. If Ben Graham were alive he would jump on this company.
       Other characteristics we like about McRae are low debt and an above average dividend while you wait for the stock to appreciate.
       Another bonus point is the President of the company, D. Gary McRae, owns a large block of the company's stock. Why is this important? Because McRae owns so much of the stock he must be interested in the long-term value of his company (just like us) as opposed to an employee who is trying to impress Wall Street with the latest quarterly earnings.
       McRae Industries may be a dull company, but most of the areas it is in are just as good today as they were in 1905."

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Roger Conrad's UTILITY FORECASTER
1750 Old Meadow Rd., Ste. 301, McLean VA 22102.
Monthly, 1 year, $129.

Five Bets for 2005

       Roger Conrad: "Improving sector conditions, more industry mergers, rising energy prices, regulatory victories for big telecoms and a drop in the US dollar: Those were Utility Forecaster's five forecasts for 2004 and all played out to profitable effects.
       Here in early 2005, utilities are a bit more expensive. But there are still powerful trends that should produce big time profits for those who shop selectively.
       Below, I look at the surest patterns: continued sector recovery, the boosting of dividends at the expense of empire building, a rising wave of industry mergers, a return to rising energy prices, the Bush administration's promotion of nuclear and coal power and a further dip in the US dollar.
       The keys to taking advantage of each is to diversify and to not overpay for any investment.

Day of the Dividend

       "The broad financial and credit recovery will continue for the US power and gas industry in 2005." That's the conclusion of credit rater Fitch, which has shifted its near-term outlook for the group to positive. Last month, Fitch also boosted debt ratings on portfolio comeback bonds of CMS Energy and Williams Companies and hiked the outlook on TECO Energy, citing lower debt and higher, more stable cash flows.
       More than a third of utilities tracked in How They Rate cut their interest expense by at least 10 percent in the last 12 months. Earnings are picking up, with utilities expected to boost profits 13.3 percent and telecoms 5 percent in the fourth quarter. And even the sector's strongest companies are cutting business risk; Entergy, for example, has completely exited the volatile business of energy trading.

The New Wave

       More than 100 utility mergers worth nearly $1 trillion were inked in the late 1990s. Now, after several fallow years, volume is rebounding, with some $112 billion in deals announced in 2004. And conditions are building for another wave.
       At their core, energy, communications and water are scale industries. The bigger the company, the better it can spread out costs and the more cheaply it can finance. Mergers between regulated utilities always create stronger, more durable companies - not one such union has broken apart in the past century.
       With utility markets becoming increasingly national, the question has never been whether we'd see more sector mergers, but when and who would be involved. Given the Bush administration's pro-business focus, it's never been easier to secure approvals for even the most complex unions, such as the AT&T Wireless/Cingular deal.
       Sprint's $35 billion offer for Nextel is likely to pass muster by mid-year. When the deal was initially announced, Verizon was rumored as a rival bidder for Sprint.
       After that, it may turn its attention to Alltel and TDS, which serve some 13.2 million customers between them and use Verizon's CDMA technology. Both are solid companies with low customer turnover (or churn) and strong historic growth rates. Merger offers would likely be at generous premiums. Alltel is a buy up to 60, TDS to 80.
       Several fast-growing, mid-sized companies made acquisitions in 2004, including AGL Resources (acquired NUI) and Atmos Energy (TXU Gas). With Exelon buying Public Service Enterprise Group for $12 billion stock (in part for its nuclear assets), a new wave of deals between large utilities is shaping up.
       Such a trend would accelerate if Congress passes an energy bill repealing the Public Utility Holding Company Act, enlarging the range of potential bidders to include the likes of Warren Buffett.
       Even if legislation remains bottled up, however, we'll see deals for leading transmission and distribution companies like EnergyEast, NiSource (buy up to 21) and NSTAR (50). With their ownership of pipelines, gathering and processing facilities and related assets, limited partnerships are also fair game as Valero's takeover of Kaneb Pipelines showed in late 2004. Portfolio candidates include Energy Transfer Partners, Enterprise Products (buy up to 25), Northern Border Partners (46), Suburban Propane (34) and TEPPCO (38).
       A likely takeover candidate among energy producers is Canadian energy trust ARC Energy, one of the lowest-cost producers in its sector with generous cash flows and a strong reserve base. Buy ARC Energy up to US$14.

Big Tel on Top

       As expected, the FCC has eliminated unbundled network elements platform (UNE-P) pricing rules. Those relying on leased local phone network lines have a year to build their own networks or else agree to lease at market rates.
       The big surprise in 2005 will be the positive impact this has on big telecom's sales growth, particularly in combination with a rise in wireless earnings. The latter will be helped by the ongoing consolidation of the sector and penetration of advanced products.
       Wireline, meanwhile, will be aided by the diminishing of former competitors like AT&T and MCI, as well as big tel's ability to dominate the growth of Voice over Internet Protocol (VoIP) communications.
       The sector's best buys are those combining wireline and wireless, including Alltel, Bellsouth (buy up to 28), SBC Communications, TDS and Verizon (42). The avoid list includes AT&T, Covad, Level 3, MCI, Qwest and RCN's post-bankruptcy shares.
       The other segment of communications headed for a strong 2005 is cable television. The best play is the biggest: Comcast continues to generate a mountain of cash by leveraging its network into an increasing array of communications, data and entertainment services. The only flaw is that Comcast pays no dividend.
       But Comcast is a strong buy for long-term investors up to 30. Time Warner (buy up to 20) is also a solid bet, having settled AOL's regulatory problems with the SEC.

The Dollar and Energy

       With the US dollar down sharply against most major currencies in the past few years, some kind of rebound is to be expected. But with the US trade and federal budget deficits worsening, it will likely be short-lived and followed by further declines.
       That means additional gains for selected foreign-based utilities, including all previously recommended: Boralex Power (buy up to 9), CLP (6), Consolidated Water (24), Encana (50), ENEL (50), Kelda (11), Royal Dutch (58), Singapore Telecom (15) and Vodafone.
       Energy prices should follow an opposite down-then-up path in 2005. To date, oil prices have held the $35 to $40 per barrel range. Unless there's a decisive break below that, odds are energy will make a run to new highs in 2005. Therefore, any slide now in producer stocks is a buy opportunity.
       For now, the best bets are still the big oils, which have huge cash reserves and continue to invest sparingly in anticipation of a big drop in oil. Despite recently increasing capital spending by 18 percent for 2005, ChevronTexaco is anticipating a slide to $30 per barrel oil.
       ConocoPhillips expects a drop to the mid-20s, RoyalDutch to 25 and Total to 30. But, even if prices fall that far, all four will remain hugely profitable. And when prices rebound, each will score huge gains. All four are solid buys.
       A near-term dip in energy prices won't slow the massive growth of liquid natural gas (LNG) infrastructure. Dominion Resources will nearly triple the capacity of its Cove Point, Maryland, LNG storage facility by 2008, one of four major import facilities in the US. Sempra Energy is building a smaller LNG facility in Mexico for importing gas into California.
       Other potential LNG infrastructure players include FPL, which has forged an alliance with EL Paso Corp and Suez in Florida, and Southern Union. Buy at or below these prices: Dominion (70), El Paso (10), Sempra (38), Southern Union (24) and Suez (24).
       Nuclear and coal power plants are also set to be profit centers for years to come, thanks to consolidation of ownership, lofty natural gas prices and President Bush's soft-pedaling of environmental concerns.
       Constellation Energy (buy up to 40), Dominion Resources, Entergy, Exelon, FPL Group, Sempra Energy and Southern Company are all major players; all are long-term foundation stocks for any portfolio."

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THE MONEYPAPER
555 Theodore Fremd Ave., Ste. B-105, Rye, NY 10580.
Monthly, 1 year, $99.

Alltel: Significant wireless prescence

       Robert Briechle: "Alltel Corp. (AT) is a diversified telecommunications provider with wireline (i.e., conventional copper wire telephone lines to the customer) and wireless operations, primarily in the rural areas of the Southeast, to mostly second-tier and rural markets - areas with relatively little competition. The company is one of the largest independent wireline operators in the United States and provides local telephone, competitive local exchange carrier (CLEC), Internet access, and other services to about 3.2 million access lines. It is the seventh largest wireless carrier (and the largest independent regional provider) in the country, with 8.4 million subscribers. The company also provides long-distance services to more than 3.1 million retail and business customers. Through its own network, the firm serves 48 million people.
       ALLTEL enjoyed a 6% growth in wireless revenues during the last 12 months, to $1.24 billion. The firm has been adding some 150,000 new subscribers each quarter, with very modest turnover. Wireless data-access revenues grew over 170% in that period, and operating margins for the wireless segment increased by 3.2%. With the telecommunications industry moving toward a wireless world and larger players, with the Sprint/Nextel merger in the offing, it is worthwhile to note that ALLTEL has a significant wireless presence. More than 60% of revenues and over half of earnings come from its wireless business.
       ALLTEL generated $323 million of free cash flow in the just-reported third quarter. The company had $648 million in cash and short-term investments and $5.6 billion in total debt as of the end of September. The quarterly dividend was recently increased from 37 cents to 38 cents. As well, ALLTEL purchased 4.8 million of its shares in the third quarter for $264 million, with the total shares repurchased year to date now 9.7 million. The company has completed a little over two-thirds of its $750 million share-repurchase program, which terminates at the end of 2005."
       Editor's Note: Mr. Briechle is Senior Vice President, AFA Financial, Inc., North Royalton, OH.

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LOOKING FORWARD
published for clients and Brandywine Funds shareholders by Friess Associates
115 E Snow King Ave., Jackson, WY 83001.

Jarden: Raking in the winnings

       "Retail chains from Albertson's to Wal-Mart bet that "Official World Poker Tour" items would be hot sellers. They were right, and now Jarden is raking in the winnings.
       Jarden Corp. (NYSE JAH) is a leader in the market for poker-chip sets through its U.S. Playing Card Company division, known best for its Bee, Bicycle and Hoyle playing cards. Poker sets are currently among the fastest selling home entertainment products, and Jarden benefits from being the exclusive maker of sets branded by the catalyst behind the surge in demand, the televised World Poker Tour.
       But Jarden's playing card division is only part of the story. Jarden makes a wide range of niche consumer products used in and around the home, including Ball canning jars and Diamond plastic cutlery. With more than $800 million in 2004 revenue, the company is the North American market leader in home canning, plastic cutlery, playing cards, kitchen matches, rope, cord, twine and toothpicks. The breadth of its offerings appeals to many retailers that would rather deal with a large, accommodating supplier than juggle many small vendor relationships.
       The Friess Associates team spoke with president James Lillie about opportunities created by Jarden's announced acquisition of American Household. The acquisition, to be completed in early 2005, gives Jarden the Coleman and Sunbeam brand names, which Jarden can use to expand the reach of its existing products. For example, rope made by its Lehigh division could incorporate the Coleman name to appeal to campers or a lower-priced Sunbeam food-preserving system could complement its higher-end FoodSaver products.
       Jarden's 15 percent September-quarter earnings growth brought the company's string of exceeding estimates to 11 consecutive quarters. The Friess Associates team bought Jarden at just 13 times current 2005 earnings estimates. Wall Street expects the company to grow earnings 25 percent in 2005.

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INVEST...CAROLINA!
100 Brantmere Ct., Jamestown, NC 27282.
1 year, 10 issues, $69.

Accumulate Insteel Industries
but don't load the boat

       Jeffrey Brommer: "Mt. Airy based Insteel Industries, Inc. (Nasdaq IIIN) is a manufacturer of wire products. It is the parent holding company for a wholly owned operating subsidiary, Insteel Wire Products Company which manufacturers and markets concrete reinforcing products such as welded wire fabric (WWF) and prestressed strand (PC Strand) and industrial wire products, such as tire bead and other industrial wire products for a range of construction and industrial applications. The Company sells to a broad range of customers including other manufacturers, distributors and wholesalers. The Company employs well over 600 workers in Mt. Airy.
       The Company announced record earnings on January 24th for the first quarter of fiscal '05 beginning October 2004 - December 31, 2004. Net earnings for the first quarter increased to $5.6 million, or $0.59 diluted share, compared with $0.7 million, or $0.08 per diluted share for the same period last year. Sales for the first quarter increased a respectable 33% to $74.7 million from $56.1 million in the prior year quarter. Average selling prices for the first quarter rose a whopping 74% while shipments decreased 24% from prior year levels.
       Other good news that came from first quarter financials was that debt was reduced by $11.4 million on its senior secured credit facility. Commenting on the outlook for fiscal 2005, President and CEO, H.O. Woltz III stated "In spite of the weak shipments that we experienced during the quarter, our customers remain bullish about business prospects for 2005. The anticipated recovery in the non-residential construction sector together with resolution of the federal highway funding successor to TEA-21 should favorably impact the demand for concrete reinforcing products."
       The stock looks to be a good buy right now based upon recent earnings and its extremely low Price to earnings (P/E) multiple. Industry P/E is typically around 18 and we must reiterate that IIIN has a PE of just over 3. The chart pattern has also indicated a "buy" at those levels with an upswing expected after a modest sell off of the recent highs in November. The float is extremely tight, so be aware that a little buying and conversely selling, can have a Big impact on price movement. Start to accumulate shares but don't load the boat until the price recovers from the most recent earnings announcement."

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GROWTH STOCK OUTLOOK
P.O. Box 15381, Chevy Chase, MD 20825.
1 year, 24 issues, $235.

Disney Posts Record Revenues and Profits,
Sees More Growth Ahead

       Charles Allmon: "As the premier entertainment company in the U.S., perhaps the world, Walt Disney (NYSE DIS $28.50) hardly needs introduction to readers of GSO. Disney came to GSO via their acquisition of Capital Cities, the fast growing TV and radio network, first recommended in 1965.
       Here is what CEO Michael Eisner had to say on November 24: "It does seem like yesterday, in 1984, that I wrote my first letter to you at the same kitchen table in my parents' home in Saxton's River, but it also seems like many movies ago. In some ways, the decision to retire from being the Walt Disney CEO by September 2006 was made easier by the strong management team that is now in place and the strong rebound it has delivered, since I am determined to depart this job with Disney firing on all cylinders, poised to continue with strong performance over the years long after I have become just another ex-CEO, but still a long-term Disney shareholder."
       "The fiscal year started off with a demonstration that while the movie business is still very volatile, the revenue stream from films is now much larger and stretches over a longer period as a result of the growth of the international and, especially, home video markets. This growth really helps successful films. That continues to be the secret. Make good films at the right price. For this reason, in the first and second quarters of fiscal 2004, we had huge success from the international and home video releases of such blockbuster 2003 films as Pirates of the Caribbean, Finding Nemo, and Freaky Friday."
       "As the year continued, we saw strong growth in our other two primary business units as well - Media Networks and Consumer Products. Consumer Products showed what can be achieved by the shrewd combination of creativity and great business sense, as the Disney Princess line grew to an amazing $2 billion at retail. As for Media Network, the domestic Disney Channel was the number one cable network in 'tweens (kids 9-14) in primetime for the fifth year in a row, our international Disney Channels expanded to 22 with the addition of Japan, SOAPnet grew to nearly 40 million subscribers and ESPN continued to prove itself as one of the greatest assets in all of television."
       "We expect double-digit earnings growth in the new fiscal year and, equally important, we anticipate growth across all four of our business segments. And although our 2004 results surpassed even our own aggressive expectations, we continue to target double digit average compound earnings growth off this strong 2004 base through at least 2007.
       "An important driver of growth should be our global celebration of Disneyland's 50th anniversary. This is a monumental occasion and it will be commemorated in an appropriately monumental way. For the first time ever, we will be celebrating an anniversary at every one of our theme park locations."
       "If you've been reading these annual letters for long, you've heard me extol the significance of Hong Kong Disneyland year after year. Well, it's now almost here. Main Street is taking shape, Space Mountain has risen on the horizon and Sleeping Beauty Castle already has golden spires. The interest level among Hong Kong and Southern China residents is phenomenal."
       "Leading the way for international growth is our Disney Channel business. As I mentioned, earlier in 2004 we inaugurated our 22nd Disney Channel in Japan. On December 17, 2004, our next Disney Channel is launching in India. These businesses are strong in themselves, with all but one of the channels that were launched prior to 2003 already profitable."
       "At Disney, we now have a superb team at al levels that knows how to develop content, market it, distribute it and explore new methods to deliver it. Of course, every piece of content cannot be a home run. Creativity requires risk and risk can be, well, risky. But, by managing our costs and making sure we have some of the best creative minds in the industry, we find we can minimize risk and maximize returns."
       "The Walt Disney Studios has an array of great live-action films underway. In order to maximize shareholder value in the often volatile live-action business, we are aggressively managing our investment levels, developing some eagerly anticipated sequels and, most significantly, increasing the proportion of Disney-branded films."
       "One key acquisition we made in 2004 was the Muppets. Not only is this property a perfect fit for Disney, it also demonstrates how we believe in making acquisitions at the right price, not at any price. This was exemplified by our purchase of Baby Einstein and was certainly the case with the Muppets. A few years ago, the Muppets were available at a price several times what we ended up paying."
       "The net result over time is growth for you, the owners of this Company. Of course, every year won't feature 72% earnings growth, but I feel confident that your Company is on the right tack, and, more importantly, I feel confident that the Cast and employees of your Company will keep it on the right track for years to come."
       On 9-30-04 total assets were $53,902,000,000, current assets $9,369,000,000, current liabilities $11,059,000,000, cash and equivalents $2,042,000,000, long term debt $9,395,000,000, deferred income taxes $2,950,000,000, shares outstanding 1,998,400,000, shareholder equity $26,081,000,000 ($13.05 per share), return on shareholder equity 9.0% negative cash flow. Company address: 500 South Buena Vista Street, Burbank, California 91521. (818) 560-1000."
       Charles Allmon's Comments: "As you know, Mr. Eisner will be leaving Disney in September 2006. It would appear that Disney will be in excellent shape when he departs next year. When Comcast made an unfriendly low-ball offer for Disney. I thought they were nuts, trying to steal Disney at an absurd price. It didn't work, I'm glad to say. Mr. Eisner, in my opinion, was unfairly maligned for telling the Comcast robbers to get lost. What's more, some Disney directors who have been feuding with Eisner cannot carry his lunch pail. Hard-driving managers still are hard to find in corporate America.
       In fiscal 2005, Disney revenues could approach or exceed $32 billion, throwing off earnings in the $1.25 - $1.32 range. Meanwhile, we wish Mr. Eisner good luck in his next adventure. He is not finished yet, in all likelihood.

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WALL STREET WINNERS
1750 Old Meadow Rd., McLean, VA 22102.
Monthly, 1 year, $149.

Bullish on Japan

       Elliot Gue: "We remain long-term bullish on Japan. Our chart of the Japanese real estate market during the past 20 years shows that after a nice run-up in the late 1980s, Japanese real estate prices didn't see as single positive half-year return from 1990 until 2003.
       Our chart captures only prices for the most expensive sites in Tokyo, which saw the largest price increases in the '80s and some of the most dramatic falls in the '90s.
       The most recent data, from September, shows a 5 percent jump in prices, suggesting that the Japanese real estate recovery is rapidly accelerating. Even better, less expensive sites are also starting to show price increases, a sign that the recovery is broadening.
Japan's improving real estate market is partly a symptom of a healthier banking system. Now that the largest banks in Japan have cleaned up the bad loans that plagued them in the '90s, there's potential for more lending.
       Banks are boosting their consumer lending, in such products as home mortgages and credit cards.
       Even better, and unlike the US, consumer lending is backed by a pool of excess savings. The Japanese consumer isn't as over-leveraged as their US counterparts and their savings rate is higher.
       There's scope for considerable lending growth over the next few years without stressing consumer finances.
       This is the stuff of which bull markets are made. A favorable credit cycle, real estate recovery and government reform are all underpinning strength in Japanese equities.
       While we've recommended booking some nice gains on our play on Japan, Mitsubishi Tokyo Financial Group (NYSE MTF), our longer-term outlook for Japanese equities continues.
       Interested traders should focus on the sectors most leveraged to banks, real estate and insurance. Favored names include Millea Holdings (Nasdaq MLEA) and Sekisui House (OTC SKHSY)."

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COMMON CENTS
P.O. Box 126354, Benbrook, TX 76126.
1 year, 6 issues, $48.

4 appealing Buys

       Roland Carter's buy recommendations for this month are: Anheuser-Busch, W.W. Grainger, Procter & Gamble, and Avery Dennison.
       Anheuser-Busch (BUD) is the world's largest brewer with their Budweiser, Michelob, Busch brands, and others. They're also a large U.S. theme park operator. In addition BUD is the world's largest aluminum beverage can recycler and the second-largest U.S. aluminum beverage can maker. Talk about consistent - they have had only one down earnings years in the past 27 (1995, -2%!). Past 10-year earnings growth has averaged 10%, which should continue. BUD has laid significant groundwork to enter China, to include the recent purchase of China's 4th largest brewer and an alliance with Tsingtao, the leading brewer. China is currently the world's largest beer market by volume. If you're a fan of brew and don't need instant investment gratification, you probably should own some BUD shares as a buy-and-hold, roughly 12% total return vehicle. Their debt appears high @ 73% of capital, but it's actually modest.
       W.W. Grainger (GWW) is the leading U.S. distributor of industrial maintenance and repair parts. Their recent quarter was even better than recently touted with sales +12.6% and EPS +46%. EPS were 44% above 2002's record 4th quarter. We have owned GWW as a seasonal trader in the past, fall to spring. However, everything is falling into place for GWW. It appears they're about to have their day in the sun, as they now look for a number of years of 10%++growth. This should keep the shares in the upper part of their historic, mid-teens to high 20's P/E. They earned $3.10 for 2004. We think $3.40-$3.50 should come in 2005, and, again, they believe earning growth will accelerate in the years beyond 2005! We made a lot of money trading Autozone several years ago, 20's to 30's, but left a lot on the table when earnings growth accelerated and the shares ended up @ 100+. GWW is too good of a company with too good of news to not own some again. GWW recently pulled back from a record high of 67. Big support @ 57-59. I paid 60+ for some today. We can't promise the mid-70's by July, but it wouldn't surprise us.
       Procter & Gamble (PG) is arguably the world's leading maker/marketer of soaps, detergents, toiletries, and other "grocery cart" items. Their powerful brands include Tide, Cascade, Dash, Cheer, Bounce, Olay, Head & Shoulders, Secret, Sure, Tampax, Pampers, LUV's, Chairman, Crest, Pringles, Folgers, etc., etc. The Gillette purchase will give them razors, shaving cream, Right Guard, Oral-B, and Duracell. These are all everyday products consumers will buy and use through good times and bad. If someone asked me for the best buy-and hold, conservative stock out there, this would be it. The stock is not cheap, but it's not extended, technically nor fundamentally. The shares dropped 3 points on the Gillette news today, then recovered 2. Target a buy @ 50-55 if you own none. It seems so many of the conservative, blue-chips we follow trade @ P/E's near 20. Here's PG @ 21, so for the long term it's probably a better value than 98% of the others. They've had one down year in the last 30 (1985, -26%).
       Avery Dennison (AVY) is the maker of a broad range of self-adhesive base materials, labels, tapes, and various office products. Annual sales are $5.2 billion, of which 52% are foreign. Here's another P/E of 20 on a consistent, blue-chip, 9%-10% grower (Buy PG first!). AVY has a probable fine hanging over them from European regulators which could be sizeable - perhaps several hundred million dollars, but their finances are strong. Their recent quarter was outstanding, with sales +16% and EPS +27%. About half those gains were foreign exchange based and from unusual order patterns from several large customers. The shares jumped up 5 points on the news but have now settled back. AVY peaked @ 78 in early 2000, a P/E of 30. 2004 earnings were $3.00/share; 2005's should be +10%.

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       Richard Moroney: "By diversifying across industries, you can limit overall risk. The four new recommendations below, from four different industries, have carved out attractive niches. All four have solid fundamentals, attractive valuations, and impressive Quadrix scores.
       Founded in 1947, The Andersons (Nasdaq: ANDE $26) is built around four businesses. The agricultural division (69% of nine-month sales ended September) operates grain elevators, fertilizer distribution terminals, and farm centers in Ohio, Michigan, Indiana, and Illinois. The Rail division (5%) repairs, sells, and leases railcars and locomotives, and operates a steel-fabrication business. Retail operations (14% consist of six home-center stores in Ohio. The processing business (12% makes fertilizer for retailers and lawn-care companies. Record-setting corn and soy-bean harvests in the Midwest have bolstered grain volumes, and Andersons raised its 2004 profit guidance in December and again in January. Full-year earnings per share are expected to range from $2.50 to $2.60, implying at least 57% to 64% growth. The stock, with a Quadrix Overall Score of 95, is being initiated as a Buy.
       Selective Insurance (Nasdaq: SIGI $45) sells property and casualty insurance through roughly 800 insurance agents in 20 Eastern and Midwestern states. The company also offers medical-claims management, human-resources services, and risk-management services. Selective should benefit from improving underwriting results in its core commercial business. In addition, a diversified revenue stream and market-share gains bode well for near-term results. December-quarter earnings per share rose 79%. For 2005, operating per-share earnings are expected to climb 5% to $3.77. Trading at 12 times that estimate, the stock is attractively valued. Selective scores a 94 for Quadrix Overall, with a 99 Value score. The stock, yielding 1.8%, is being initiated as a Buy.
       Sonic Solutions (Nasdaq: SNIC $18), a leading provider of DVD authoring systems, is positioned to deliver robust growth. Hollywood studios use the company's gear to create DVDs, while it consumer products allow users to convert home movies, photos, and music into DVDs. Sonic's products are sold through retailers and are bundled with computers and electronic devices. Clients include Microsoft, Scientific-Atlanta, and Sony. For fiscal 2005 ending March, per-share profits are expected to jump 61% to $0.74. For fiscal 2006, estimates range from $1.25 to $1.47, with an average of $1.36. Sonic is an aggressive holding given its fairly narrow product line in a fiercely competitive sector. Still, strong sales and cash-flow momentum should support the stock, and the shares seem cheap on a cash-adjusted basis. The P/E is 18 based on expected year-ahead earnings. Subtracting Sonic's nearly $3 per share in cash from the stock price, the adjusted forward P/E is 15. Sonic is being initiated with a Buy rating.
       United Industrial's (NYSE: UIC $34) core products include unmanned military aircraft and aviation test and simulation systems. The company also makes energy systems. The defense unit generates more than 90% of sales and pretax profits. United Industrial should benefit from the military's increased use of unmanned planes for battlefield information. In January, the company was awarded a $72 million contract to supply the Army with remote-controlled planes. Per-share earnings for 2004 should approach $2.16, up 58%. For 2005, the lone profit estimate is $2.26 per share. At 15 times expected 2005 earnings, the shares seem reasonably valued given the firm's attractive market position and operating momentum. United Industrial, which is considering selling its energy unit, is being initiated as a Buy."

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PEARSON INVESTMENT LETTER
6431 Rubia Cir., Apollo Beach, FL 33572.
Monthly, 1 year,

Jos A Bank Clothiers and
Mobile Telesystems rated Buy

       Walter Pearson's recent recommended stocks include: Mobile Telesystems OJSC (MBT) is a provider of mobile cellular communications services in the Russian Federation and Ukraine, employing technology based primarily on Global System for Mobile Communications (GSM). In addition to standard voice services, the Company offers its subscribers value-added services, including voice mail, short message service (SMS), general packet radio service (GPRS), various SMS- and GPRS-based information and entertainment services (including multimedia messaging service), and data and fax transmission. It also offers its subscribers the ability to roam automatically throughout Europe and in much of the rest of the world. At year-end 2003, the Company's subscriber base was 16.7 million. For the nine months ended 9/30/04, revenues rose 58% to $2.81 billion. Net income totaled $813.6 million, up from $364.5 million.
       Jos. A Bank Clothiers, Inc (JOSB) is a designer, retailer and direct marketer, through stores, catalog and the Internet, of men's tailored and casual clothing and accessories. The Company sells substantially all of its products exclusively under the Jos. A Bank label through its 214 retail stores, including seven outlet stores and 10 franchise stores, located throughout 35 states and the District of Columbia in the United States, as well as through the Company's nationwide catalog and Internet operations, www.josbank.com. Jos. A. Bank's products are targeted at the male career professional. The Company's products are offered at three Levels of Luxury, which include the opening Jos. A. Bank Collection, as well as the more luxurious Signature and Signature Gold Collections. For the nine months ended 10/30/04, net sales increased 23% to $244.6 million."

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THE CONTRARY INVESTOR
309 South Willard St., Burlington, VT 05401.
Monthly, 1 year, $125.

Cuno: Significant growth opportunity

       "Cuno, Inc (Nasdaq CUNO $57.43, www.cuno.com) designs and manufactures filtration products that are used in the separation, clarification, and purification of liquids and gases. This technology is used to service three market segments: potable (drinkable) water, healthcare and fluid processing.

What makes Cuno Timely?

       Demand for water is not affected by inflation, recession, interest rates or even changing tastes. The need for a cleaner, more abundant supply of water will provide Cuno with significant growth opportunities. Their technology will be the key in helping to supply market, and with a pipeline of over $1 billion in market potential we expect Cuno to sustain their high rate of growth.

Relevant Statistics

• Approximately 80% of the world's population lives in the Eastern Hemisphere, while about 80% of the earth's fresh water reserves are found in the Western Hemisphere.
• Cuno is ranked NO. 152 on Forbes' list of the 200 Best Small Companies.
• The average daily requirement for fresh water in the United States is about 40 billion gallons per day.

Target

       A price of $87.00 in three years (equivalent to a 15% annualized return).

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Standard & Poor's THE OUTLOOK
55 Water St., New York, NY 10041.
1 year, 48 issues, $298.

Three Plays on the Nesting Trend

       Joseph Lisanti: "We expect the recent boom in home remodeling and redecorating to last, and believe these stocks stand to benefit.
       Bed Bath & Beyond Inc. (Nasdaq, BBBY) This home furnishings retailer has been opening 85 to 90 stores a year in an expansion that has generated steady increases in revenues and earnings. We think Bed Bath & Beyond's store openings, along with a modest increase in same-store sales, will contribute to an 11% to 13% increase in revenues to $5.7 billion in fiscal 2006 (ending February). As we see it, the company's promotion of its stores as one-stop shops for all housewares should continue to hold appeal for consumers. The shares trade at 21 times our fiscal 2006 earnings estimate of $1.90 per share, above the multiples of peers and the S&P 500 but below their historical average P/E. For fiscal 2005, we estimate that the company will earn $1.61 a share vs. $1.31 in fiscal 2004. We think the high P/E is warranted, and likely to increase slightly, because we see the company continuing to gain market share in home furnishings. In our view, Bed Bath & Beyond has better merchandising and store-level performance than its peers. Our 12-month target price is $44, derived from discounted cash flow analysis, and we advise purchase of the shares.
       Jo-Ann Stores Inc. (NYSE, JAS) We like the shares of this fabric and crafts retailer largely because of the company's aggressive rollout of superstores. Through the first nine months of fiscal 2005 (ended January), Jo-Ann Stores launched 29 superstores and closed 65 traditional outlets, giving it 114 superstores out of 850 locations overall. The superstores are 35,000 square feet, about 50% larger than the traditional sites, and average $141 in annual revenue per square foot vs. $107 for the traditional stores. In our view, the larger sites are more appealing to consumers because they offer more products and services than the smaller stores, including custom framing, floral arrangement, and classes. We expect revenue to rise about 5% to $1.9 billion in fiscal 2006. The shares trades at 11 times our fiscal 2006 earnings estimate of $2.35 per share, well below the P/E of the S&P SmallCap 600. For fiscal 2005, we estimate that the company will earn $2.11 per share. Based on discounted cash flow analysis, we have a 12-month target price of $32 and advise purchase of the shares for potentially above-average capital appreciation.
       Lowe's COs. (NYSE, LOW) This home improvement retailer is in a good position to profit from the nesting phenomenon, in our view. We estimate that Lowe's opened 140 stores in fiscal 2005 (ended January), and we expect it to launch a similar number in fiscal 2006, continuing its pace of expansion of the past several years. In our view, the company's expansion is improving economies of scale, and this should offset higher compensation and advertising costs. Lowe's recent move to place stores in major metropolitan areas has helped its growth, in our opinion. In addition, we think home centers should benefit from a rebound in employment and continued strength in the housing market that we foresee. We believe Lowe's earned $2.87 per share in fiscal 2005 on revenues of $36.4 billion vs. $2.32 a share on sales of $30.8 billion in fiscal 2004. The stock trades at about 17 times our fiscal 2006 estimate of $3.36 per share, in line with the S&P 500. But we believe the stock merits a modest premium because of the company's above-average growth rate. Lowe's also offers and annual dividend of $0.16, which it has doubled since 2002. We recommend the shares, for which we have a 12-month target price of $65."

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BI RESEARCH
P.O. Box 133, Redding, CT 06875.
1 year, Every 6 weeks, $110.

Mixed signals, 80% invested

       "Technically the stock market is off to a pretty shaky start in 2005. So far the market has failed the Santa Claus Rally, the First Five Days of the Year and the Month of January tests with decidedly negative performances. Another bearish signal was closing below the December low during January. Also, the Presidential cycle normally indicates the first two years of a President's term are historically the weakest of the 4-year cycle. We have also passed the 27-month average duration for a bull market. However, on the bright side we are in the seasonally strongest 6-months of the year, and the economic reports are still pretty good. Rising interest rates may actually help most of our companies as many of them have big cash positions and little variable rate debt. But higher energy prices and interest rates will generally be a damper on the economy. In the end we may have entered a phase where how goes China will determine how goes the US economy. So far so good on that front. All things considered I am advising an 80% invested position. Currently most attractive for purchase are Envoy Communications (ECGID), Infocrossing (IFOX), Taseko (TGB), Ventiv (VTIV), SFBC Int'l (SFCC), eResearch (ERES), Continental Minerals (KMKCF), Eon Labs (ELAB), Matria (MATR) and Able Laboratories (ABRX).

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THE BOWSER REPORT
P.O Box 6278, Newport News, VA 23606.
Monthly, 1 year, $54.

Giga-tronics: 3 big positives

       The company is divided into three segments:
       Instrument Division: Produces signal sources, generators and sweepers, plus power measurement instruments for use in the microwave and RF frequency range. And, within each product line are a number of different models and options, allowing customers to select frequency range and specialized capabilities, features and functions. This is the largest unit, with sales last year of $8,573,000.
       Microsource makes a broad line of YIG-tuned oscillators, filters and microwave synthesizers, which are used in manufacturing a wide variety of microwave instruments or devices. Sales last year of $5,394,000.
       Ascor Inc. produces switch modules and interface adapters that operate with a bandwidth from direct current. Used in electronic warfare, although these items can be adapted for telecommunications. (The smallest, with 2004 sales of $3,524,000.)

New Product

       Management has released a family of microwave frequency synthesizers that are not only of new design, but embody a totally different concept of "instrument management." Computer software is used instead of an ever-increasing number of knobs and buttons on a front panel as new functions are added.
       This provides easier operation, faster instrument response and ready access to a broader array of functions. (This new concept received an award from Frost & Sullivan for product differentiation innovation.)

Finances

       Much of the red ink that appears in our statistical chart can be traced to the Dymatix division, which was sold in the fourth quarter of fiscal 2004. Last year, for example, it was responsible for a net loss of $2,392,000. Plus, it was a distraction for management.
       From the sale, it received $300,000 - of which $200,000 is being paid in quarterly installments.
       As of Dec. 25, GIGA had $2.7 million in cash and cash equivalents. Its ratio of current assets to current liabilities was a strong 3.5 to 1.
       For the nine months ending Dec. 25, sales had risen $2 million over the same period last year. The fourth quarter of fiscal 2004 was a loss.

Management

       George H. Bruns, Jr., 85, has been chairman and CEO since 1995. He is also general partner of the Bruns Company - a private venture investment and management consulting firm. Bruns provided seed financing for Giga-tronics in 1980.
       The officers are modestly paid. Chairman Bruns, who received $140,000 last year, is the largest stockholder - owning 11.1% of the shares.
       The selling of Dymatix has unleashed more concentration of the firm's core business. And, as an example of this new emphasis, Mr. Bruns told shareholders:
       "For instance, Microsource and the Instrument division are now working together on a specific new product development program. ASCOR and Microsource have partnered in a joint bidding effort, involving the technology of both divisions."
       As for marketing, commercial business accounted for 62% of 2004 sales. The balance of the revenue came from U.S. Government defense-related agencies.
       Office: 4650 Norris Canyon Rd, San Ramon, CA 94583, 925-328-4650, Fax: 925/328-4700, www.gigatronics.com."

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Keith Fitz-Gerald's THE SKEPTICAL INVESTOR
9420 Key West Ave., 4th Flr, Rockville, MD 20850.
Monthly, 1 year, $199.

Gateway is a dog

       Keith Fitz-Gerald: "Gateway (GTW) This company is a dog. I know that their mascot is a cow, but the end result is they just can't seem to get it together. There have been massive cost cutting and layoffs recently that seem to be improving the bottom line, but I just don't see them making real headway - particularly since Lenova just got into the game in December with their purchase of IBM's PC division. This is significant if you remember one of the key rules of capitalism: Fat margins serve as an invitation for additional competition. You can bet that the Chinese (who own Lenova) decided to come to dinner to squeeze margins from Gateway's already meager table. I think GTW might bounce because of holiday sales, so short GTW at $7 or better. Put a protective stop at $9 if filled."

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OTC GROWTH STOCK WATCH
300 Chestnut St., Ste. 200, Needham, MA 02492.
Monthly, 1 year, $299.

IntegraMed America, Inc.
Stock Pick of the Year

       IntegraMed is a market leader that integrates the niche fertility market in a way unlike any other-bringing patients, physicians and clinics together. Its comprehensive systems are based on significant research and development and combined with extensive penetration in the marketplace, position the Company for continued growth. As management continues to expand its programs in key U.S. markets, progress continues in the fertility markets and brand awareness grows for IntegraMed, look for INMD to produce long-term shareholder appreciation."

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DOW THEORY FORECASTS
7412 Calumet Ave., Hammond, IN 46324.
1 year, 52 issues, $259.

Disney bounces back

       Richard Moroney: "After a year that included a hostile takeover bid from Comcast (Nasdaq CMCSA $32) and a shareholder revolt that led chief executive Michael Eisner to step down as chairman, Disney is regaining its operating momentum with improvement in television ratings, advertising revenues, and theme-park spending. With the company targeting expansion into new growth areas, Disney's long-term goal of double-digit annual profit growth seems achievable. The stock has risen 42% from August lows and trades at 23 times projected earnings of $1.28 per share in fiscal 2005. The forward P/E ratio is up from a two-year average of around 20 yet well off its five-year highs. Disney is a Long-Term Buy.

Corporate profile

       Disney operates four divisions:
       Media networks (37% of fiscal 2004 revenue, 49% of operating income) owns and operates the ABC network as well as 10 television stations and 72 radio stations. The company also has ownership interests in ESPN and other cable networks.
       Parks and resorts (27%, 24%) operates or licenses 10 theme parks - including Walt Disney World and Disneyland - in California, Florida, France, and Japan, along with 35 resort hotels and two cruise ships.
       Studio entertainment (28%, 15%) produces and distributes movies, television shows, and home videos.
       Consumer products (8%, 12%) includes global merchandise licensing. The company sold its North American retail stores in October but receives royalties from the new owner.
Programming costs have risen at ABC and ESPN, but Disney will benefit from greater ad revenues at both networks in coming quarters. Prime-time ratings at ABC have improved significantly - up 11% in the December quarter - thanks to several new hit shows. For fiscal 2005, the company expects ABC to turn profitable and the cable networks to deliver double-digit profit growth, with ESPN as the primary contributor. Theme-park results are improving, with December-quarter attendance up by mid-single-digit percentages at Walt Disney World and flat at Disney land, probably because of rainy weather. Hotel occupancy and per-capita spending were up at both parks.
       In February, Disney announced plans for expansion abroad, including television networks in China and India. International business represented 22% of revenue in fiscal 2004. The company eventually wants to generate 50% of revenue from outside North America, although management has not set a deadline. In September, Disney plans to open its 11th theme park - in Hong Kong.

Conclusion

       In March 2004, the board of directors removed Eisner as chairman because of shareholder protest over his leadership. Eisner plans to step down as CEO in September 2006, when his contract expires. The board says it will choose a successor by June 2005.
Excluding an income-tax benefit and restructuring charges, December-quarter earnings per share increased 3% to $0.34 while revenue rose 1%. With lower DVD sales compared to a year ago, the studio-entertainment segment posted a 20% decline in revenue and a 27% decline in profits. But improving fundamentals in other businesses suggest near-term earnings will show healthy growth.
       Consensus estimates project profit growth of 17% for fiscal 2005 ending September and 15% for fiscal 2006. An annual report for The Walt Disney Co. (NYSE DIS). Is available at 500 S. Buena Vista St., Burbank, CA 91521; (818) 560-1000."

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