PEARSON INVESTMENT LETTER
P.O. Box 3739, Apollo Beach, FL 33572.
Monthly, 1 year, $150. www.pearsoncapital.com.

Recommended Stocks: Johnson Controls,
Abercrombie & Fitch, W.R. Berkley

        Walter Pearson's recommended stocks for April are Johnson Controls, Inc., Abercrombie & Fitch Co., and W.R. Berkley Corp.
        "Johnson Controls, (NYSE JCI $75.93) provides installed building control systems and technical and facility management services for the nonresidential buildings market worldwide. It operates through three segments: Building Efficiency, Interior Experience, and Power Solutions. The Building Efficiency segment provides control systems that monitor, automate, and integrate building operating equipment and conditions. The Interior Experience segment designs and manufactures systems and products, including seating systems and components; cockpit systems, including instrument clusters, information displays, and body controllers. The Power Solutions segment manufactures automotive batteries for automotive original equipment manufacturers and the battery aftermarket. Johnson Controls has a joint venture with Saft to supply batteries for hybrid-electric vehicles and electric vehicles.
        Abercrombie & Fitch Co. (NYSE ANF $58.30) operates as a specialty retailer of casual apparel in the U.S. it operates stores that sell casual apparel for men, women, and kids under the Abercrombie & Fitch, Abercrombie, Hollister, and RUEHL brands. The company offers polos, humor tees, logo tees, athletic tees, sleeveless tees, shirts, shorts, surf or active shorts, pants, woven shirts, denim, outerwear, belts, jewelry, flip flops, and cologne for men. Abercrombie & Fitch also provides sleepwear, intimates, swimwear, totes/bags, belts and personal care for women. As of 5/05/05, the company operated 351 Abercrombie & Fitch stores, 167 Abercrombie stores, 260 Hollister Co. stores, and 5 RUEHL stores in 49 states and the District of Columbia. It also operates e-commerce Web sites, through which it sells its products. ANF was established in 1892 and is headquartered in New Albany, Ohio.
        W.R. Berkley Corp. (NYSE BER $38.70) operates as an insurance holding company that offers property casualty insurance business in the U.S. and internationally, BER operates through five segments: Specialty Insurance, Regional, Reinsurance, Alternative Markets, and International. The Specialty Insurance segment underwrites third-party liability risks, principally within excess and surplus lines, which include premises operations, professional liability, commercial automobile, products liability, and property lines. The Regional segment provides commercial insurance products to small-to-mid-sized businesses, and state and local governmental entities. The Reinsurance segment offers underwriting property casualty reinsurance services on a treaty and a facultative basis. Its Alternative Markets segment engages in developing, insuring, reinsuring, and administering self-insurance programs."

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DOW THEORY FORECASTS
7412 Calumet Ave., Hammond, IN 46324.
1 year, 52 issues, $279.

Long-term buys

        Richard Moroney's Long-Term Buys are top choices for 24-48 month gains. In general, Long-Term Buys are investment-grade stocks with solid finances. Here are follow ups on stocks from the Long-term Buy List:
       "The Federal Reserve lifted a year-long ban that restricted Citigroup (NYSE C $48) from making any large acquisitions. The ban was imposed in March 2005 following a series of scandals, including its role in the failures of Enron and WorldCom, the forced closure of its private bank in Japan by regulators there, and European regulatory action over bond trading. At the time, the Fed told the company to address its various regulatory problems. But in an April letter to Citigroup, the Federal Reserve said the company has made "significant progress" in tightening internal controls and is free to again pursue large deals. At 11 times estimated 2006 earnings of $4.26 per share, the stock trades at discount to its five-year forward average P/E of 13. Consensus estimates project per-share-profit growth of 8% in 2006 and 9% in 2007. Citigroup is a Long-Term Buy.
        Shares of Freeport-McMoRan Copper & Gold (NYSE FCX $61) and other metal producers have surged since last spring on higher prices for copper and gold. At the end of March, gold prices hit a 25-year high and copper prices hit an all-time high. Freeport, one of the world's largest copper and gold producers, owns a large mine in Indonesia. The mine has long been a source of conflict, escalating to violent protests in recent weeks, because of its impact on the environment, the legality of payments to Indonesian security forces that guard the site, and questions about how much of the profits are shared with locals. The government of Indonesia is evaluating its contract with Freeport, but said it has no plans to shut down the mine. Freeport-McMoRan, which earns the maximum Overall Quadrix(r) score of 100, is a Focus List Buy.
        ConocoPhillips (NYSE COP $64) said daily production in the March quarter was 6% higher than that of the year-earlier quarter and roughly flat with December-quarter production. U.S. refining and marketing margins are up from year-earlier levels but down from December-quarter levels. In other news, the company completed its $33.9 billion acquisition of natural-gas producer Burlington Resources on March 31. Also, management confirmed that the company plans to increase its 17% stake in Lukoil, Russia's largest oil producer, to 20% by the end of 2006. Conoco is a Focus List Buy and a Long-Term Buy.
       Merrill Lynch (NYSE MER $80) said it will take a $1.2 billion charge in the March quarter because of new accounting rules for employee stock compensation and retirement eligibility requirements for stock awards. The company had previously estimated a charge of $350 million. The noncash charge will wipe out most of the profits Merrill Lynch is expected to earn in the quarter. But many companies have taken similar charges to deal with the new accounting rules, with little impact on stock prices. Merrill is a Focus List Buy and a Long-Term Buy.
        Altria Group's (NYSE MO $71) Philip Morris USA division made a $3.4 billion payment owed as part of a 1998 legal settlement between several leading tobacco manufacturers and 46 states, even though the company is working to get the amount lowered. The settlement allows participating companies to reduce payments if they lose market share as a group to firms that weren't included in the settlement. The companies must also prove the states didn't adequately enforce statutes requiring those firms to place funds in escrow in case of future state litigation. Altria believes the payment should be reduced, but opted not to play hardball with the states. Altria is a Buy and a Long-Term Buy.
       According to news reports, Biomet (Nasdaq BMET $38) has hired investment bank Morgan Stanley (NYSE MS $64) to advise the medical-device maker on the possible sale of the company. Both firms declined to comment. Biomet's co-founder and chief executive, who led the company for 30 years, resigned in March, Biomet is a Long-Term Buy."

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THE MAJOR TRENDS
Published for clients of Sadoff Investment Management
250 W Coventry Ct., Ste. 109, Milwaukee, WI 53217.
www.sadoffinvestments.com.

Bullish on footwear industry

        Ronald Sadoff: "Formed in 1878, Brown Shoe (BWS) is one of the nation's largest shoe retailers and wholesalers. Their brand names include Buster Brown and Via Spiga to go along with their retail outlets Famous Footwear and Naturalizer. Brown Shoe also has several licenses to design or market footwear under names such as Disney, Bass and Dr. Scholl's. Brown Shoe had just under $2 billion in sales last year with Famous Footwear accounting for about half of total sales. The company's shoe sales are 60% women's, 28% men's and 12% children's.
        Brown Shoe is second behind Nine-West in women's fashion footwear sales in department stores in the United States. Their recent acquisition of the Bennett Footwear groups will help bolster their worldwide business.
        The company has over 1,200 retail stores along with three online stores: shoes.com, famousfootwear.com and naturalizer.com. Their wholesale division provides customers with approximately 75 million pairs of shoes per year. Retail sales comprise about two-thirds of total sales.
        The stock recently broke out of a major 22-year downtrend. In early 2006, the stock hit an all-time high, exceeding it's previous high from back in 1987. The $900 million small cap company will have its first ever stock split, a 3-2 split on April 4. The company also increased its dividend by 20%.
       We continue to be bullish on the footwear industry."

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WALL STREET STOCK FORECASTER
250 Liston Rd., Ste. 700, Buffalo, NY 14223.
Monthly, 1 year, $99, 888-292-0296.
E-mail: mckeough@idirect.com.

Odds favor Wendy's & Tim Horton's Inc.

        Patrick McKeough: "Here are two general rules that have paid off again and again over the years: First new stock issues tend to produce below-average results for investors; second, spin-offs tend to produce above-average results.
        This is due to human nature. New issues come to market when it's a good time for the company or its insiders to sell. That's not likely to be a good time for you to buy, regardless of any mitigating factors.
        The reverse is true spin-offs (when a company sets up a division as a separate entity and hands out stock in it to its own investors). Companies create spin-offs when they are likely to pay off for their own investors.
        Of course, some spin-offs drop when they first hit the market. Some investors don't want to add a new stock to their portfolios, especially if they only receive a small holding. Meanwhile, brokers are slow to add spin-offs to their research coverage.
        Wendy's one of our long-time favorites, recently sold about 17% of its Tim Hortons subsidiary to the public. But this is different from most new issues. Wendy's simply wanted to establish a liquid market and brokerage interest in Tim Horton's. That way, the stock will get a better market reception when Wendy's hands out the remaining 83% of Tim Hortons to its own investors by the end of 2006.
        Wendy's International, Inc. (NYSE $62 WEN; WSSF Rating: Above average) is the third-largest hamburger chain in the world, behind McDonald's and Burger King. In 1995, it acquired coffee and donut chain Tim Horton's Inc. (NYSE THI $27; WSSF Rating: Extra risk).
        Tim Horton's is Canada's largest fast-food chain, with 2,597 outlets. This includes 681 smaller restaurants in non-traditional locations such as gas station convenience stores, universities, hospitals and office buildings.
        Tim Hortons now has about 23% of the Canadian fast-food market (compared to 18% for McDonald's). It also has 76% of the coffee and baked goods segment. It plans to expand by at least 1,000 new locations in the next few years.
        The company also operates 288 restaurants in the United States, mostly in urban areas near the Canadian border, particularly Buffalo and Detroit.
        In 2004, it acquired 42 donut outlets in New England. However, these stores failed to live up to expectations due to strong competition from more established stores. Consequently, Tim Hortons wrote down the value of this investment in 2005 by $22.3 million (the company reports in Canadian dollars; $1 Cdn. = $0.85 U.S.) Tim Hortons still plans to expand its U.S. operations to 500 stores by the end of 2008.
        The writedown helped cut Tim Hortons' 2005 profit to $1.19 a share (total $191.1 million) from $1.28 a share ($205.1 million) in 2004. Revenue grew 10.4%, to $1.48 billion from $1.34 billion. Same-store sales rose 5.2% in Canada, and 7% in the U.S.

Healthier foods help drive Tim's sales

        Like its parent Wendy's, Tim Hortons has spurred its sales with healthier foods, such as fresh sandwiches and home-style soups. That helped it attract customers who might otherwise avoid its traditional donuts and cakes. Tim Hortons now plans to capture a larger share of the fast-growing breakfast market with new egg-based menu items. Innovative customer contests have also helped drive its growth.
        The recent share issue raised around $726.1 million U.S. for Tim Hortons. The company will use most of that to pay back loans from Wendy's. Its long-term debt now stands at $588 million (Canadian), or a high 95% of stockholders' equity.
        Tim Hortons stock gained 30% on its first day of trading. Much of that came from heavy demand from Canadian investors, who consider Tim Hortons a national icon.
        The stock now trades for 26.7 times its 2005 earnings, and 3.4 times its revenue of $9.27 a share (Canadian). It also trades at a high 15.4 times its 2005 cash flow of $2.06 a share (Canadian). Tim Hortons aims to pay out 20% of its net income in dividends, starting in the third quarter of 2006. That implies an annual rate of about $0.25 (Canadian) a share, and a yield of 0.8%.

Remaining operations still appealing

        We've long recommended Wendy's for the hidden value of Tim Hortons. Right now, the market capitalization (current share price times the number of shares outstanding) is $5.1 billion for Tim Hortons, and $7.2 billion for Wendy's. If you factor out Wendy's 83% stake in Tim Hortons, that implies the remaining hamburger and other businesses (often called "the stub") are worth about $3.0 billion, or $26 per Wendy's share.
        Wendy's earned $1.92 a share including unusual items) in 2005, but the stub supplied just 29% or $0.56 of that. That implies a P/E of 46.4. The stub also supplied 69% of Wendy's total sales of $32.38 a share, or $22.25. That implies the stub trades at 1.2 times sales. The stub also accounted for 55% of Wendy's 2005 cash flow of $3.80 a share. So, the stub trades at 12.4 times its implied cash flow of $2.09 a share.
        Tim Hortons' stock could fall once the initial euphoria fades. It could also come under pressure after Wendy's completes its spin-off, and more shares come onto the market. However, its strong brand and high market share enhance its long-term prospects.

Spin-off part of large plan

        As for Wendy's, the spin-off will let it focus on its hamburger business, which has lost ground to other chains that have copied many of its successful concepts. Its smaller size could also turn it into an attractive takeover target for one of its main rivals. The company will also continue to enhance its value by selling or closing its struggling casual dining restaurants, and selling more company-owned outlets to franchisees.
        Wendy's is a buy. Tim Hortons is also a buy, but only for aggressive investors."

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

Genuine Parts boosts cash
dividend 50 consecutive years

        Charles Allmon: "Founded in 1928, Genuine Parts (NYSE GPC $44.96) reported a profit every year beginning in 1929. GPC's businesses fall in three principal segments: Automotive Parts (51%), Industrial Parts (29%), and Office Products (17%). GPC is a service business with millions of customers served from more than 1,900 operations.
        On March 3, management recounted the highlights of 2005: "During the year, we used our cash to purchase 2.8 million shares of our Company stock. We continue to view this as a good use of cash and, as of December 31, 2005, we have 3.2 million shares remaining in our current authorization. We will continue to make opportunistic share purchases in 2006. We also invested $86 million in capital expenditures in our businesses and we returned $216 million to shareholders through dividends paid in 2005.
        "The Company has paid a cash dividend to shareholders every year since going public in 1948 and in 2005 we increased our dividend to $1.25 per share, representing our 49th consecutive year of increases. The board of Directors, at its meeting on February 20, 2006, raised the cash dividend payable April 1, 2006 by 8% to an annual rate of $1.35 per share, or 54% of our 2005 earnings. 2006 will be our 50th consecutive year of dividend increases.
        "We are pleased to report that each of our four business segments contributed to the progress made in 2005. Our strongest results came from Motion Industries, our Industrial distribution company. Their sales increased 11% in the year, which follows an 11% increase in 2004, so business has been good for the Industrial operations for the past two years. And, importantly, the outlook for Motion is positive for 2006 as well. Motion Industries serves the manufacturing sector of the economy and the current Industrial Production and Manufacturer Capacity Utilization indices point to continued strength for this sector in the year ahead. EIS, our Electrical/Electronic segment, also serves the manufacturing segment and they reported a sales increase of 2% for the year. EIS sold their Circuit Supply Division in April of 2005, which impacted their overall growth rate. The ongoing EIS operations were up 9% for the year, following a 13% increase in 2004 and EIS will also benefit from the strength in the manufacturing sector in 2006.
        "S.P. Richards, our Office Products Company, improved sales by 8% for the year. This is a solid increase for this Group and it reflects the success of their product and customer expansion strategy. These efforts will continue into 2006 and, combined with favorable external factors such as ongoing healthy GDP growth rates, growth in white-collar employment and improved office occupancy rates, we are optimistic about continued solid growth in the Office Products Group.
        "Finally, Automotive, our largest business group, increased sales 6% in 2005, following a 6% increase in 2004. Good progress was made within our core NAPA operations but this was offset somewhat by the sale of eight of the twelve Johnson Industries operations that occurred over the course of the year. Ongoing Automotive operations were +7% and we are encouraged by the continued effectiveness of our growth initiatives in this Group. Additionally, the increase in total vehicles on the road, the age and mix of the vehicles, the number of licensed drivers and miles driven are all positive indicators for our Automotive growth plans in 2006."
        "... we would like to comment on the impact of the hurricanes that occurred in the Southeastern part of the country in the latter part of the year. In the cases of hurricanes Rita and Wilma, we consider ourselves fortunate, as we came through these storms reasonably well. In the case of hurricane Katrina, we experienced varying degrees of disruption and damage in all four of our businesses and although we are not quite back to normal operating conditions in certain areas, our employees have done a remarkable job in keeping our operations running and providing essential services. The majority of the employees working in this part of the country were affected personally by the storm and through a relief effort funded by fellow GPC team members and matched by the Company, we are providing financial, as well as personal assistance, to those in need as they continue to rebuild their lives. Hundreds of GPC team members throughout our entire organization have played an important role in helping our people, our customers and our operations through this unfortunate situation. We are deeply grateful to each of them and we are extremely proud of all of them."
        "We enter 2006 with optimism and enthusiasm and with a commitment throughout our organization to strive for further improvement in the year ahead. Our focus, across all of our business segments, is to maintain our level of revenue growth, further improve our operating margins, and continue to enhance our asset management and working capital efficiencies."
       On 12-31-05 total assets were $4,771,538,000, current assets $3,806,882,000, current liabilities $1,249,104,000, cash and equivalents $188,911,000, long term debt $500,000,000, deferred income taxes $156,807,000, other long term liabilities $114,623,000, shares outstanding 173,033,000, shareholder equity $2,693,957,000 ($15.57 per share), return on shareholder equity 16.2%, positive cash flow, LIFO accounting. [Company address: 2999 Circle-75 Parkway, Atlanta, GA 30339. (770) 953-1700.]"
        Allmon's Comments: 2006 should see GPC top $10 billion revenues for the first time. Earnings in the $2.80 range may be a reasonable expectation. You cannot quibble with the fine record of this company. GPC could grow for years.
        The cash dividend yields 2.8%. At one time, when the yield was over 4%, GPC was one of the largest positions in our managed accounts. The share price has not done much since our sale of GPC. Whenever the yield is 4% or higher, I urge you to load up on GPC, then hold tight to your shares.
        Balance sheet is excellent, with a 3 to 1 current ratio and $190 million in cash. Long term debt is a reasonable 19% of shareholder equity. What's more, return on shareholder equity is a highly respectable 16% +. No matter how you slice it, Genuine Parts is an extraordinary company. I dare say that this company probably will be around longer than most of you reading this report. Thank you, GPC, for making us a bundle of money without worry."

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Forbes/Lehmann INCOME SECURITIES INVESTOR
6175 NW 153 St., Ste. 201, Miami Lakes, FL 33014.
Monthly, 1 year, $195.

Safe income for low-risk portfolios

        Richard Lehmann: "I have held off recommending a floating rate security since long term rates have been flat and the inflation outlook benign. It seems, however, that in this new world of free trade, international currency flows can now affect long term interest rates. Conservative investors may want to consider the three floating rate issues by Goldman Sachs recommended this month (GYB, GS A and GS C). They are A rated and yield better than 5% and are adjustable quarterly based on LIBOR. I believe they are a better choice than TIPS which yield only 2.34% plus an inflation premium.
        The following three-investment grade Floating Rate securities are all related to The Goldman Sachs Group Inc (GS), one of the oldest and largest investment banking firms in the world. The dividends on these preferreds are adjusted quarterly to the 3 Month LIBOR (London Interbank Offered Rate) plus a fixed number of basis points. (Example: 4.8397% + 75 BP = 5.5897%).
        The major difference between the issues is that GYB has a slightly higher dividend but it does not pay "Qualified Dividend Income" (QDI. This issue should be used in IRA's or other tax deferred accounts. Both GS A and GS B are perpetual preferreds paying QDI dividends, thus are best used in taxable accounts.
        Goldman Sachs Capital I; 0.00%; Floating Rate, (current dividend rate 5.59%); Series GS; Par $25.00; Price $23.40; Current Yield 5.98%; Exchange NY; Rated A1/A-; Call 05/09 at $25.00; Yield to Call 7.96%; Pay Cycle 2m; CUSIP 12679N203; Family Third Party Trust Preferreds; Acronym Floater CABCO; Symbol GYB (no preferred designation).
        This hybrid issued by CABCO Series 2001-101 Trust is a Corporate Asset Backed Corporation (CABCO). The underlying security is a 6.345% Capital Security issued by Goldman Sachs Capital I and guaranteed by GS. The dividend is adjusted to the 3-Month LIBOR +85 basis points, but cannot go below 3.25%. Buy at or below $24.50.
        Goldman Sachs Group Inc; 0.00%; Floating Rate, (current dividend rate 5.47%); Series A; Par $25.00; Price $25.90; Current Yield 5.28%; Exchange NY; Rated A2/A-; Call 04/10 at $25.00; Yield to Call 5.00%; Pay Cycle 2m; CUSIP 38143Y665; Family Perpetual; Acronym Floater; Symbol GS A (need preferred designation).
        The dividend is adjusted to the 3-month LIBOR + 75 basis points, but cannot go below 3.25%. Buy at or below $26.25.
        Goldman Sachs Group Inc; 0.00%; Floating Rate, (current dividend rate 5.74%); Series C; Par $25.00; Price $26.25; Current Yield 5.21%; Exchange NY; Rated A2/A-; Call 10/10 at $25.00; Yield to Call 4.62%; Pay Cycle 2m; CUSIP 38144X609; Family Perpetual; Acronym Floater; Symbol GS C (need preferred designation).
        The dividend is adjusted to the 3-month LIBOR + 75 basis points, but cannot go below 4.00%. Buy at or below $26.50.
        Goldman Sachs provides a wide range of services to corporations, financial institutions, governments and high net worth individuals. Their business falls into three segments, investment banking, trading, and capital investment and asset management. For their first quarter (ended February 24, 2006), GS reported net revenues of $10.34 billion substantially higher than the $6.52 billion reported for the same periods in 2005. Net income was $2.48 billion compared to first quarter 2005's $1.51 billion. These issues provide safe income for low-risk portfolios without giving up a significant yield difference from fixed rate issues of comparable quality. Note that a call on these securities in unlikely."

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INVESTMENT QUALITY TRENDS
6450 Lusk Blvd., Ste. E-104, San Diego, CA 92121.
1 year, 24 issues, $310.

Bristol Myers Squibb offers
generous yield backed by new
line of emerging products

        Joseph McKittrick: "In the period following the Civil War, William Bristol and John Myers purchased a failing pharmaceutical company. The new company soon saw profits boom with the introduction of a mineral salt laxative - Sal Hepatica and the first commercially available toothpaste to include a disinfectant. The company's current business segments include Pharmaceuticals, Nutritionals, and Other Health Care.
        BMY's Pharmaceuticals segment represents 79% of the company's net sales and is the major force of operation worldwide. Over the past several years patent expirations have very notably plagued earnings in this segment. The company now appears to be nearing the end of a transition period with several new products ready for markets and set for strong growth. Among these are Plavix, used to treat high cholesterol; Avapro, used to treat high blood pressure; Abilify, used to treat schizophrenia and related disorders; Reyataz, an HIV medication; Erbitux, a cancer medication; Baraclude, a hepatitis B medication; and Orencia, an arthritis medication. Other products such as Glucophage, Taxol, and Pravachol will continue to be manufactured by the company but are expected to see declining revenue streams from generic competition.
        Nutritionals operations are run by a BMY subsidiary known as Mead Johnson. During 2005, Mead Johnson's activities represented 12% of total net sales. Mead's products include a line of baby formula known as Enfamil. Nearly half of the company's formula sales are eligible for WIC rebates, a government program to provide nutrition to infants and children of low income families. According to WIC, it serves 45% of all infants born in the United States. During February of 2004, the company sold its Adult Nutritional business to Novartis. This had primarily consisted of an adult nutritional beverage line called Boost.
        The Other Healthcare segment accounts for the remaining 9% of 2005 company sales. Within this segment, BMY operates ConvaTec, a manufacturer of wound and skin care products. Convatec also makes ostomy (as in colostomy) care and related products. BMY's Medical Imaging operations were acquired through the purchase of DuPont pharmaceuticals in 2001. During the third quarter of 2005, the company sold its consumer medicines business in the United States and Canada. This division had previously marketed Excedrin, Bufferin, Comtrex, and Keri among other brands.
        The month of March has been notable for followers of BMY. The company has settled a lawsuit which focused on the patent Plavix. This had placed a large cloud of uncertainty over the company as Plavix remains the company's best-selling medication. Sales during the fourth quarter declined slightly, by 3% from the same period last year. Earnings comparisons are skewed by a one-time charge the company recorded in 2004. Because of sales losses from the Pravachol patent expiration, BMY expects earnings to fall in the range of $1.15 to $1.25 a share for 2006.
        Interesting Qualities to Note: BMY has a market capitalization of $49 billion. BMY has approximately $6 billion in cash. The company has committed $115 million to support women and children affected by HIV in Africa. 68% of shares are held by institutions.
        At a recent price of $25, Bristol Myers is priced only a few tenths of a percentage point into a Rising Trend. At these levels, the company offers a generous 4.5% yield backed by a new line of emerging products. Shares recently benefited from the settlement of the Plavix lawsuit, and it appears that the worst of BMY's trouble may now finally be behind it. Those with a particular taste for speculation may also be interested to know that rumors abound that BMY may be an acquisition target or merge with another smaller competitor."

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SUPERSTOCK INVESTOR
925 S Federal Hwy., Ste. 500, Boca Raton, Fl 33432.
Monthly, 1 year, $395.

Shares of Vodafone are attractive
and poised to head higher

       Jeff Manera: "A recent addition to the Master List is Vodafone Group (VOD) a British telecom giant and the world's biggest mobile telecommunications company, with over 179 million customers. In the U.S. the company has a 45% stake in Verizon Wireless, the business formed in 2000 by combining Vodafone AirTouch's and Bell Atlantic's US cellular and paging assets.
        In 2001, Vodafone took control of J-Phone, Japan's third-largest mobile phone operator. But the company's plans to grab a large share of the Japanese market didn't pan out and this unit of Vodafone ran into trouble as customers left for rivals NTT DoCoMo and KDDI.
        Last month, Japanese Internet conglomerate Softbank announced it was in talks to buy Vodafone's Japan unit. Then investment firms Providence Equity Partners and Cerebus Partners were rumored to be preparing a bid as well. Shares of Vodafone jumped on the news. In the end, Vodafone agreed to sell its flagging Japanese unit to Softbank for $15.6 billion.
        Meanwhile, Vodafone could be considering an offer by Verizon Communications to take over the remaining 45% stake in Verizon Wireless, for anywhere from $40 to $50 billion. What does that leave? Mainly Vodafone's European business.
        Selling off its Japanese unit - and if it happens, its joint venture in the U.S. - is a signal that Vodafone intends to focus on Europe. That's fine, as it may be able to exploit its size in that market. But shedding this extra baggage could also make Vodafone a ripe target for a company that wants to expand its presence in Europe.
        The recent merger of AT&T and BellSouth could motivate other big telecoms to beef up their size through acquisitions, so they don't get left too far behind or become takeover targets themselves. And the interest shown by private investment firms for Vodafone's Japanese units indicates that phone companies aren't the only ones shopping in this market.
        All this points to the conclusion that Vodafone is probably at the top of the shopping list of more than one interested buyer, with Verizon the number one suspect.
        Even without a takeover, shares of Vodafone are attractive and poised to head higher. The company has free cash flow of $3.54 per share, a relatively low forward P/E of 11.4, and year-over-year quarterly revenue growth of 9%.
        Buy Vodafone Group shares up to $23."

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THE TURNAROUND LETTER
225 Friend St., Ste. 801, Boston, MA 02114.
Monthly, 1 year, $195.

Sara Lee: Solid cash flow

        George Putnam, III: "Sara Lee (NYSE SLE $26) has grown by acquisition over the years, creating a stable of well-known brands in foods (such as Sara Lee bakery goods and frozen deserts, Ball Park franks and Jimmy Dean sausages), apparel (Bali and Playtex intimate wear, Champion athletic wear and Hanes knitwear) and other household products (Kiwi show polish and Sanex bodycare products). The stock rose steadily through most of the 1990's, peaking around 32 in 1998.
        With its focus on acquisitions, Sara Lee did not devote enough attention to building its existing brands and developing synergies among them. As a result, revenues and profit leveled off in the late 1990's, and the stock price has been drifting sideways or downwards ever since.
        Analysis: While having well-known brands is usually positive, Sara Lee may be proof that you can have too much of a good thing. Its many product lines have operated for years as mini-fiefdoms. And while the brands are well-known, many of them do not have strong positions in their markets.
        A new management team took over in 2004, led by Brenda Barnes, who had previously had a successful career at Pepsico. She brought in several other new managers with extensive consumer products experience.
        Barnes is in the process of jettisoning marginal product lines to concentrate on brands where Sara Lee has, or can achieve, a dominant market position. The company plans to sell off lines that previously generated about 40% of its total revenues, including most of the apparel business.
        Management is also working to eliminate the mini-fiefdoms and create a strong, centralized organization that can take full advantage of the company's size and resources. This reorganization should lead to both cost savings in areas like purchasing and synergies in other areas such as advertising and sales.
        In addition, Sara Lee is working to revitalize its marketing and product development efforts. It plans to increase spending on marketing and research and development by $250 million over the next five years.
        Management acknowledges that it may take several years for these changes to boost the bottom line in a meaningful way. In the meantime, they are directing some of the company's solid cash flow to the benefit of shareholders through a generous dividend and a healthy stock repurchase program.
        We believe that Sara Lee will be able to extract more value from its strong brand names to benefit patient investors. We recommend buying the stock up to 26."

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

Doral Financial represents
a unique buying opportunity

        Ashley Bryan & Brent Sisco: "Doral Financial Corp (NYSE DRL $11.18, www.doralfinancial.com) is a diversified financial services company offering its clients mortgage banking, insurance, and institutional securities investing while operating in New York City and Puerto Rico. DRL is the largest residential mortgage lender in Puerto Rico. The company offers a variety of mortgage loans to both businesses and consumers. The firm also offers institutional banking, financial advisory services, investment banking, and also insurance products through its agents with policies from unaffiliated insurance companies.

Background

        The Hispanic population in the U.S. continues to grow at a rapid pace. According to the U.S. Census Bureau the number of Hispanic-owned businesses grew at three times the national rate from 1997 to 2002. The Census Bureau also reported that Hispanics continue to be the fastest growing minority in the U.S. The report stated that Hispanic growth accounts for nearly half of the nation's population growth since 2000. DRL is well positioned to take advantages of this trend as a great deal of its operations is centered on catering to the Hispanic market. Financial industry consolidation also remains an important topic for many investors. Many firms are finding it harder to grow organically and companies are looking for acquisition targets to obtain desired growth in new areas or markets. In 2004, U.S. merger and acquisition volume was $886 billion, which is almost double the volume of 2001. CNN reported that 2005 may be the fourth year in history to have merger and acquisition activity valued over $1 trillion and activity was up 50 percent over 2004. The financial industry has become crowded with many firms specializing in specific areas or markets. Consolidation is occurring as the strongest of these companies acquire competitors to expand operations. DRL is an attractive target for many companies trying to grow through acquisitions as it has the Hispanic niche in the market and currently is trading at a discount to its peers.
        In February 2005, DRL announced that a formal SEC probe was launched because of its accounting for mortgage loans. The probe is a result of restatements involving the firm's financial statements from 2000-2004 to correct accounting issues involving mortgage loan sale transactions and the valuation of the firm's interest-only strips. The accounting error resulted in a profit reduction of $694 million for the past five years. Previous to the company's earnings restatements, DRL's stock price was trading around $45. Subsequently it bottomed out at $8 and currently has stabilized around $11. The discount in the stock price represents a great buying opportunity to capitalize on the growing investment themes of U.S. Hispanic population growth and financial industry consolidation.

Is it timely?

        Even though DRL has had accounting problems it is still able to meet its regulatory capital requirements and thus should be able to continue operating without large restrictions. The firm also holds a comfortable amount of equity, which should help it to avoid liquidity issues. It remains attractive with its current activities as the largest mortgage company in Puerto Rico. DRL has become a leading real estate lender in Puerto Rico where a housing shortage has fueled lending. DRL also gains from Hispanic growth through its banking activities in the New York City metropolitan area where the company operates several branches. Hispanic population is booming in many markets and such growth will require loans to gather funding as many Hispanics start new businesses or purchase new homes. A Census Bureau report stated that Hispanic-owned businesses grew the fastest in New York State increasing by 57 percent in 2005. This remains an underserved market that DRL expects to capitalize upon. DRL has placed bilingual employees in its New York branches and has set hours to meet customers' needs.

Outlook

        At its current price DRL represents a unique buying opportunity that has been under-appreciated by the crowd this past year. The firm reached highs around $45 during January of 2005 and has declined until the start of this year. DRL is rebounding as the firm is focusing on improving operations. Following the company's accounting problems there was a management change, since then current management has been doing a commendable job of focusing on strengthening the bank's operations. The company is still developing its 2005 annual report, but announced that internal loan origination increased by four percent and the servicing portfolio grew around 10 percent for the year. The bank is focused on creating and maintaining loans, building the fee income, and diversifying the loan operations. DRL's discounted stock price and Hispanic market leadership make it a desirable acquisition target as well as an attractive investment."

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The Peter Dag PORTFOLIO STRATEGY & MANAGEMENT
65 Lakefront Dr., Akron, OH 44319.
1 year, 24 issues, $389.

Invest in sectors that benefit
from a strong economy

        George Dagnino: "The market is going to suffer an important setback when the increase in short-term interest rates and commodities hurts profits. This is not in the cards anytime soon. We recommend an investment strategy taking advantage of those sectors that benefit from a strong economy.
        The strongest sectors remain those related to a strong economy and rising commodities: farm & construction machinery, energy, railroads, investment brokerage, oil services, industrial materials & minerals (including precious metals). Foreign stocks are also very strong.
        On the weak side: health care and REITs.
        We are recommending an international banking stock UBS (NYSE: UBS). UBS is in a position of taking advantage of strengthening European and global economy.
        UBS AG provides financial services worldwide. It conducts wealth management, asset management, and investment banking and securities businesses. The company's wealth management business includes estate planning, corporate finance advice, and banking services. Its asst management business consists of traditional and alternative investment solutions to financial intermediaries and institutional investors. The company's investment banking and securities business offers equity, equity-linked, and equity derivative products to primary and secondary markets. The company was founded in 1862 and is based in Zurich, Switzerland."

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PINNACLE
Published for clients of Pinnacle Investment Management Inc.
Greystone Court West, 573 Hopmeadow St., Simsbury, CT 06070.

Remain cautious

        John Eckel: "High quality stocks are selling at a small premium compared to lower quality companies. Stocks such as Microsoft, Wal-Mart, and Coca-Cola, 3M, Johnson & Johnson, JP Morgan Chase, and Compass Minerals should be able to maintain their profit margins even in the face of rising inflation. Mutual funds which are in a position to take advantage of undervalued large cap stocks include Oakmark, Oakmark Select, Leuthold Select Industries, Selected American Shares, and Tweedy Browne American Value.
        Investors should remain cautious in the face of continued Fed rate hikes. Defensive stocks, "value" mutual funds, and stocks that could benefit from rising inflation continue to be good choices. Energy, basic materials, commodities and natural resource stocks such as Caterpillar, Nucor, Phelps Dodge, Sunoco, Amerada Hess and mutual funds such as RS Natural Resources, Pimco Commodity Real Return, and Pimco All Asset, are sound choices, although their advantages should moderate from the strong returns posted last year.
        Foreign stocks and funds such as First Eagle Sogen Global and Overseas, Longleaf International, Tweedy Browne Global, Third Avenue International Value, Harbor International and Franklin Mutual Discovery should perform well with limited volatility, and could benefit if the US dollar declines."

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