The market is in good shape right now. The intermediate decline of weeks past is over. The first quarter this year was shabby at
best. Then April came along and the showers caused an oversold condition that has been completed. The market made a bottom at (SPX) 1138 in April.
Today all three major averages trade above there 50-, 150-, and 200-day moving averages. The bull market that began in March of 2003 is getting extended once again. The possibility of a top being formed at this point cannot be ignored; and that is a reason to be flexible and ready to turn when market action calls for it. We are having a rally. That is what is happening right now, so a bottom
could get a test and that bottom would be SPX 1138. That happening right now is unlikely. The market is building up some momentum right now and the momentum is coming from the pitifully neglected and under-owned technology sector. That is where the best action is
right now. It's technology across the board right now, because those stocks have failed to show very much energy over the last year. Techs recovered nicely, led by semi conductors in 2003 and brutally declined in 2004. Failing after a false start last November and December the tech group is rising with gusto. Stocks like Seagate Technologies. Look at the solid long-term advance displayed by Seagate Tech. I mention that stock because it has managed to stay on the focus list for about a year. It
had a brutal decline last year and is currently in a mature advance. That is just one stock that is alive, among many other robust companies. There are several that will be mentioned later. When tech stocks begin to wind up for a ride it will translate into money made. There is no question about that. Tech stocks are not the only stocks that show good energy. The defense and aerospace sector is quite hot right now. That is a good area to be involved with your money, in addition to tech. Interest rates are still remarkably low and that will keep the housing market and all that is related to that marketplace in top shape.

www.wealthcast.com
3 June 2005
Market Comment
continued from page 2
Roundtable Discussion
Tuesday, June 28, 2004 • 7:30 pm-9:00 pm
Bob Adams will join Jack to answer your questions.
Bring your portfolio, your friends,
your stocks and we’ll discuss strategy.
This event will be held in Jack’s office at
3600 Chain Bridge Road, Fairfax, Virginia 22030.
For Reservations call Bob Adams at 703.352.8778
or email him at adams@jrmoney.com
—Adv., Rothstein Investment Advisory Services.
Company Name: AmSouth Bancorporation (ASO)
Exchange: NYSE Last Trade: 5/27/05
Sector: Banks
Company Data Close on on 5/27/05 with 394,400 shares traded
Shares Outstanding: 352,965,120 Market Cap: 9.4 Billion
Short Interest: 4,788,213 (1.36%)
52-Week EPS: 1.79 P/E Ratio: 14.87
52-Week High: 27.00 on 52-Week Low: 23.80 on
Friday,November 5, 2004 Monday, August 9, 2004
Averages
Average Price: 25.86 (50-day) 25.63 (200-day)
Average Volume: 1,089,600 (50-day) 924.900 (200-day)
Company Data Close on on 5/27/05 with 585,000 shares traded
Shares Outstanding: 57,004,000 Market Cap: 822.6 Million
Short Interest: 2,465,994 (4.33%)
52-Week EPS: -0.25 P/E Ratio: n/a
52-Week High: 14.50 on 52-Week Low: 6.10 on
Friday, May 27, 2005 Tuesday, May 25, 2004
Averages
Average Price: 12.14 (50-day) 11.08 (200-day)
Average Volume: 469,400 (50-day) 550,100 (200-day)
Company Name: BE Aerospace Inc. (BESAV
Exchange: NASDAQ NM Last Trade: 5/27/05
Sector: Aerospace
Company Data Close on on 5/27/05 with 142,900 shares traded
Shares Outstanding: 29,377,008 Market Cap: 929.8 Million
Short Interest: 1,417,914 (4.83%)
52-Week EPS: 1.07 P/E Ratio: 29.58
52-Week High: 32.61 on 52-Week Low: 20.45 on
Wednesday, May 18, 2005 Monday, July 26, 2004
Averages
Average Price: 30.75 (50-day) 28.60 (200-day)
Average Volume: 249,200 (50-day) 200,000 (200-day)
Company Name: CONMED Corp. (CNMD)
Exchange: NASDAQ NM Last Trade: 5/27/05
Sector: Medical Supplies
because of its volatile nature. The stock
is volatile and it’s important to buy and
sell at key points. Get as close to the key
point as possible. CNMD should be
bought aggressively closing above 32.65.
It will more likely ease into the 29.50
to 30 zones. You can buy the stock in
that range and place a stop loss in the
vicinity of 28.25.
Gilead Sciences
(GILD) NYSE 41.01
What a good stock right now, and it
is true that the Biotech segment of the
healthcare sector is on a tear. It’s nice to
own both AMGN and GILD right now.
The action displayed by GILD is superb.
The action reflects a stock that is advancing.
The best time to be involved in a
stock is when it is advancing over a
short, intermediate or long term. GILD
is advancing over a long-, intermediateand
short-term. I invite you to examine
the chart and check out the positive view.
The stock is in a long-term uptrend.
Check out the weekly chart and see for
yourself. The pattern always tells the
truth. It cannot be altered. The stock is
expressing a strong intention of going
higher in price. The recent bottoms
reflect that. The stock sits at 41. Buy it
on pullbacks near 40. This is a stock
that will provide a positive experience if
you have the ability to actually realize
a profit. It’s a stock that moves and when
it does you can feel it. Don’t pay attention
to the feeling. Pay attention to the
stock and the way it moves and how it
moves. The feeling you have will cloud
judgment. Feeling causes mistakes.
Just focus on the movement of the
stock and act accordingly. That means
be flexible and disciplined. This stock
should be bought closing above its
recent high of 41.33. Or pulling back to
40. Place the stop loss at 37.45 and
investors that are in it for the very long
stretch a good stop is 33.99. This could
be a huge winner for years and is worth
the investment. So 33.99 is a long leash.
Although it is in the midst of a very
long-term advance the stock has dropped
below its 200-day moving average a
number of times over the last 5 years
only to recover and move to higher highs.
There are many ways of playing this
and any stock. Many ways.
Intersil Corp.
(ISIL) OTC 18.59
This stock took quite a tumble last
year. ISIL experienced a brutal decline
last year and that decline resulted in a
bottom made in January of this year at
13.69. The stock currently trades at
18.59. The stock declined after topping
in January 2004 at 29-and-change. So
ISIL is on the way back up after building
a nice base. It could pull back to the top
of its new base before finally attacking
the top made in January 2004, after
recovering from the sizable decline
experienced a few years ago. The stock
appears to have slowed a bit after marching
higher with this current rally that is
taking place. The stock could be bought
right now and down to 18. Place a tight
stop at 16.99 for traders. Investors can
give more space and place the stop at
15.49. The stock has the ability to move
to major resistance points in the high
20’s. It could pull back first. So watch it.
LSI Logic (LSI)
NYSE 6.91
This stock has broken out. It’s about
time. Owned it earlier in the year and
watched it fail and got stopped out. I
got stopped out because it dropped
below its key inflection points. That
happened to be near the bottom. I did
sell in stages and got out in decent
shape. Now it is time to get back into
this stock, although at this point it is
extended. Buy the stock pulling back to
6.40-6.70. That is the zone to buy the
stock. I wouldn’t chase it right now.
The semiconductor sector has come to
life. Watch the SMH, which is the semiconductors
holders’ trust. If that rises
above 35 then a positive upward
advance will really get into gear and
www.wealthcast.com
Market Comment
continued from page 3
4 June 2005
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Company Data Close on on 5/27/05 with 669,400 shares traded
Shares Outstanding: 152,868,000 Market Cap: 2.8 Billion
Short Interest: 5,333,533 (3.49%)
52-Week EPS: 0.21 P/E Ratio: 88.52
52-Week High: 21.70 on 52-Week Low: 13.69 on
Wednesday, June 30, 2004 Friday, January 21, 2005
Averages
Average Price: 17.32 (50-day) 16.48 (200-day)
Average Volume: 1,914,700 (50-day) 1,951,300 (200-day)
Company Name: Intersil Corp. (ISIL)
Exchange: NASDAQ NM Last Trade: 5/27/05
Sector: Semiconductors
Company Data Close on on 5/27/05 with 1,925,400 shares traded
Shares Outstanding: 451,812,096 Market Cap: 18.5 Billion
Short Interest: 9,529,525 (2.11%)
52-Week EPS: 1.08 P/E Ratio: 37.97
52-Week High: 41.33 on 52-Week Low: 27.785 on
Thursday, May 26, 2005 Monday, July 26, 2004
Averages
Average Price: 37.70 (50-day) 35.67 (200-day)
Average Volume: 3,829,800 (50-day) 4,182,500 (200-day)
Company Name: Gilead Sciences Inc. (GILD)
Exchange: NASDAQ NM Last Trade: 5/27/05
Sector: Biotechnology
rocket. LSI will likely fill a small gap
between 8.40 and 8.20. That getting
filled could be the top and that top could
be short-, intermediate- or long-term. So
there is good upside that has the making
for a lovely trade in LSI. Place the
stop at 4.99.
Natl. Semiconductor
(NSM) NYSE 20.16
This is a pure speculative play. Take
a look at the chart and see why. It’s a
gamble. A long shot that NSM can
respond to the challenge of stiff resistance
at levels near 10% above the current
price. The current price is 20.16.
The stock is looking at heavy supply
into the 22 range. You can buy the stock
right now betting that it has the strength
to take out the supply that is likely to
sell into a rally that could lift it to that
level. If the stock breaks out of that stiff
resistance then the speculation becomes
successful. The risk is actually quite
low and that is what makes the gamble
worthwhile. Traders using the 50-day
line to place the stop will likely get
stopped and take a small loss. Investors
willing to use the 200-day average and
place the stop at 17.25 stand a better
chance over time. If the SMH rallies
above 35 on a closing price, and NSM
doesn’t rally alongside it and break out,
then sell the shares and look elsewhere.
The SMH is close, so watch it closely.
SCP Pool (POOL)
OTC 35.86
This is not the first time I have been
involved in POOL. I have made money
in the stock before and will make money
in the stock again. It’s an all season
stock. It really is. It regularly beats the
market. It's up over 12% this year and
34.87% over the last 52 weeks. The
chart clearly provides the necessary
evidence that POOL is a winner. It benefits
from the housing boom. As long
as housing stays solid then POOL stock
will continue to advance. The stock
ought to be bought aggressively if it can
close above 36.25. Otherwise buy the
shares in the 34.50 to 35 zone with a
stop at 31.99 and long-term investors
can place the stop at 29.99.
Western Digital
(WDC) NYSE 14.94
I mention WDC to throw some more
evidence on the table concerning the
present leadership in technology. It has
been a while since this neglected group
expressed muscle. WDC is a stock that
could be on steroids. The tape tells use
that it is powerful. It is powerful because
the fundamentals are improving. It
means that they are finally showing
some growth again; and that has traders
that like to bet on big momentum stocks
inspired to commit to the positions
taken. The stock is cheap. It’s also trading
at a 5-year high and is one of the
top performing tech stocks trading on
the NYSE. This stock is up 37% this
year and has been on the focus list for
quite a while. It is currently extended,
so a pullback is what is necessary to
get in at a better price. Short-term pivot
point for traders is 14.74. Better buy is
13.50. Use 12.99 to stop the loss. This
stock can be traded and it pays to keep
a regular watch on it.
Wind River
Systems (WIND) OTC 16.23
A powerful tailwind helped propel
WIND as the stock broke out the other
day in spirited fashion. The stock is in
fashion now as big volume came into
it, after a good earnings report and conference
call inspired powerful buying.
WIND broke out above the top of its
base. It sits perched atop of that base
and the question is whether the stock
has the power to engage more demand
causing a buildup in momentum. Most
breakouts are tested. That is the nature
of breakouts. If a test doesn’t happen
then the breakout typically leads to a
more powerful advance. Let's see what
happens to WIND. Buy on a rise above
www.wealthcast.com
5 June 2005
Company Data Close on on 5/27/05 with 120,100 shares traded
Shares Outstanding: 52,521,008 Market Cap: 1.9 Billion
Short Interest: 2,922,657 (5.56%)
52-Week EPS: 1.21 P/E Ratio: 29.64
52-Week High: 36.22 on 52-Week Low: 24.80 on
Thursday, May 19, 2005 Monday, October 11, 2004
Averages
Average Price: 32.98 (50-day) 30.98 (200-day)
Average Volume: 291,800 (50-day) 301,000 (200-day)
Company Name: SCP Pool Corp. (POOL)
Exchange: NASDAQ NM Last Trade: 5/27/05
Sector: Business Support Services
Company Data Close on on 5/27/05 with 5,164,500 shares traded
Shares Outstanding: 387,793,920 Market Cap: 2.7 Billion
Short Interest: 8,027,028 (2.07%)
52-Week EPS: -1.22 P/E Ratio: n/a
52-Week High: 8.23 on 52-Week Low: 4.01 on
Tuesday, June 01, 2004 Tuesday, September 28, 2004
Averages
Average Price: 5.73 (50-day) 5.39 (200-day)
Average Volume: 3,392,500 (50-day) 3,961,200 (200-day)
Company Name: LSI Logic Corp. (LSI)
Exchange: NYSRELast Trade: 5/27/05
Sector: Semiconductors
Company Data Close on on 5/27/05 with 1,909,700 shares traded
Shares Outstanding: 349,079,040 Market Cap: 7.0 Billion
Short Interest: 17,643,584 (5.05%)
52-Week EPS: 1.00 P/E Ratio: 20.16
52-Week High: 22.44 on 52-Week Low: 11.85 on
Tuesday, June 08, 2004 Wednesday, September 08, 2004
Averages
Average Price: 19.76 (50-day) 17.52 (200-day)
Average Volume: 3,712,100 (50-day) 5,179,000 (200-day)
Company Name: National Semiconductor Corp. (NSM)
Exchange: NYSE Last Trade: 5/27/05
Sector: Semiconductors
Company Data Close on on 5/27/05 with 1,419,700 shares traded
Shares Outstanding: 212,900,000 Market Cap: 3.2 Billion
Short Interest: 13,135,007 (6.17%)
52-Week EPS: 0.87 P/E Ratio: 17.17
52-Week High: 14.99 on 52-Week Low: 6.39 on
Friday, May 27, 2005 Friday, August 13, 2004
Averages
Average Price: 13.06 (50-day) 10.61 (200-day)
Average Volume: 3,340,600 (50-day) 2,433,000 (200-day)
Company Name: Western Digital Corp. (WDC)
Exchange: NYSE Last Trade: 5/27/05
Sector: Computer Hardware
17 on the close or pulling back to the
top of its base at 15-16. Place the stop
at 12.99.
Yahoo! Inc (YHOO)
OTC 37.27
YHOO is a very good chart right now.
The stock is advancing steadily and is
not extended. It made its top late last
year and rolled over and is now in the
process of turning toward a challenge
of the top made last year. The past few
years have seen the stock advancing and
giving way to intermediate-term declines.
The declines turn into new advances
and the highs made have been higher.
The stock closes above 40 and the top
made late last year is taken out and
enables room to move yet higher. If the
stock is able to rise above the levels
made in December 2004 then it can
skyrocket. YHOO has actually been a
great performer over the last three
years. Now that it is close to overcoming
that rolling top last year it pays to
get involved. Buy it very hard above 40.
It is a good buy between 35 and 36.
Place the stop at 33.99.
The negativity on the street persists.
It's less negative than it was a few weeks
ago. That is why we are having a rally.
Short positions among specialists on
the floor have dried up. Odd lots are
heavily short this market. They are
usually wrong. Most stocks are up each
day and that accounts for positive
breadth. That reality runs counter to
sentiment. The put/call ratio on a 10-day
smoothing basis favors that the rally
continues. Bargains are being had among
a wide array of tech stocks. Those
stocks have been the most neglected
over the past year, and, after being in
an over-neglected space, buying power
is coming into them. This rally will
change the psychology further if the
highs made earlier in the year get tested
and passed. That would bring the
Dow above 11000 and the SPX above
1230. The negativity will turn positive
and the market will move steadily for a
while till the buying power runs thin.
There are many that make a good argument
that we are in a narrow trading
range. It forces you to pay attention to
the sectors that are getting the bulk of
the flow of money. Right now technology
and health care lead the market,
reflecting the current reality.
www.wealthcast.com
6 June 2005
The Wealthcast Stock Market Letter is only delivered
electronically in PDF format. Those wishing to receive a hard copy
by US mail, must contact Taeko Rothstein at 703.352.8778, and pay
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Thank you.
Company Data Close on on 5/27/05 with 2,541,900 shares traded
Shares Outstanding: 83,921,008 Market Cap: 1.4 Billion
Short Interest: 4,451,684 (5.30%)
52-Week EPS: 0.14 P/E Ratio: 115.93
52-Week High: 16.95 on 52-Week Low: 8.17 on
Friday, May 27, 2005 Friday, August 13, 2004
Averages
Average Price: 14.07 (50-day) 13.23 (200-day)
Average Volume: 829,200 (50-day) 790,400 (200-day)
Company Name: Wind River Systems Inc. (R)
Exchange: NASDAQ NM Last Trade: 5/27/05
Sector: Software
Psychology of the Market
Company Data Close on on 5/27/05 with 10,259,9002 shares traded
Shares Outstanding: 1,396,455,936 Market Cap: 52.0 Billion
Short Interest: 78,710,896 (5.64%)
52-Week EPS: 0.65 P/E Ratio: 57.34
52-Week High: 39.79 on 52-Week Low: 25.52 on
Friday, December 3, 2004 Monday, August 09, 2004
Averages
Average Price: 34.42 (50-day) 34.56 (200-day)
Average Volume: 20,271,200 (50-day) 19,289,900 (200-day)
Company Name: Yahoo Inc. (YHOO)
Exchange: NASDAQ NM Last Trade: 5/27/05
Sector: Internet
While we pondered what subject
would be most helpful for this
month’s Safety Zone, we thought
of the gyrations of the markets year to date
and about the clear fact that market actions
are now compressed in time. Cycles are
shorter and more dramatic.
Our personal perspective and observation
spans the last twenty years as an
active participant and advisor. An observer
or participant who “grew up” in the market
of the past few years would have a different
perspective and such compression of time
and movement is likely to seem normal.
We suspect that it is the norm from here
on out. News and analysis reaches us all so
much faster. The busy pace of investors’ lives,
both the amateur and the pro, contributes
mightily to reliance on that news and (immediate)
analysis. The staggering amount of
market capitalization and the number of
issues and shares traded daily greatly accelerate
price movement. Those huge numbers
are facilitated by ever faster and more
sophisticated technologies. Thus it takes no
more than minutes for a stock to plunge or
skyrocket as reaction to some news (accompanied
of course by the emotional reaction).
Those are just a few, major factors at work.
No wonder the norm has changed!
To illustrate, just look at the S&P 500 in
2005. On March 7 it hit its high of 1225.
Just six weeks later on April 20 the yearly
low of 1137 was recorded. That’s a 7% drop.
Does this compression of time and movement
mean safety rules and considerations
should change? That the axioms we learned
over twenty years are ineffective at today’s
pace? Absolutely not. In fact it is more
important than ever to employ them. Is
safety of more concern on a gently undulating
ride or on a roller coaster?
Because of the aforementioned accelerated,
dynamic market environment, this
month’s Safety Zone is a review of some
important ideas presented in this column
over the past six months. An annual review
is no longer appropriate, we think.
Regular Wealthcast readers know that we
believe the greatest threat to the creation
and preservation of wealth is emotion. Now,
with the avalanche of information (often
actually opinion) that we are subjected to,
it is harder than ever not to succumb to
emotion. Plus, the consequences of losing
objectivity are more rapid and severe…a
double whammy.
The concepts included in this review when
appropriately applied are all ways to remove
from our buying and selling decisions the
most costly factor investors face. That costly
factor is not bad news or some other setback
for the stock in question. It is not a natural
disaster or political turmoil. It is not the
comments of Alan Greenspan or anyone
else. Above all else, emotion costs investors
more thaan any other factor. The inability to
stick to the rules because of an emotional
bias regarding this or that (fill in the blank)
will surely erode wealth.
Our first important point of review:
Technical analysis is best.
Rather than react to news, read the chart.
Often the chart will predict impending
news. Do fundamentals matter? Of course!
But fundamentals are almost always already
incorporated in the price. Let the market
digest all of the relevant fundamentals
(known and anticipated) and let the market’s
judgment be your guide. Your results will
soar. Forget about all the media news you
read, see or hear and the endless (inconsistent)
brokerage house analysts’ reports.
Reacting to news is too late! Chances are
great that it’s already in the stock, and there
are usually clear technical indicators leading
up to news. What tells you what is really
happening? THE CHART TELLS IT ALL.
Will you miss some dramatic wins by
resisting emotional reactions to news and
fundamental reports? Yes, but not many.
Next point of review: Stay in the game.
Without citing every major shakeup in
the history of the U.S. equities market (as
Casey Stengel would suggest, “you could
look it up.”), the immutable fact is that after
each sudden decline, investors who hung in
there recovered their losses and eventually
prospered. In fact for any five year period
since 1900, the U.S. stock market has been
the most profitable place to be among major
investment classes. For some of the long
history of supporting evidence, take the case
of October 1987 when the market lost 23%
in virtually one day. It took until July of
1989 to reach pre-crash levels, but buyers at
that 1987 bottom got well quickly. Getting
out of the game as a fearful, emotional
reaction was very costly. Today our markets
have not yet fully recovered from the
extended, painful action from March 2000
through October 2002, when the bottom
was finally seen. But they will.
Our next point concerns: Rules for Buying.
Your buying decisions should be the result
of careful technical analysis, a complicated
endeavor. But some general rules should
supercede all other indications. Here are
eight of them:
1. Be convinced that the overall market
trend is up. Swimming against the tide is
difficult. Clue: Just as individual charts can
predict price movement, the charts of the
major indices do so also. Trust the charts,
not the news!
2. Identify the sectors that look good
technically.
3. Find stocks with bullish patterns within
a sector that have not broken out to the
upside. Note the breakout price.
4. Look for stocks with nearby overhead
resistance and eliminate them.
5. Examine relative strength. Eliminate
underperformers.
6. For those stocks that survive the above
filters (if any, don’t fudge!), place orders for
half your intended position. These should
be buy-stop orders, GTC.
7. Now watch volume carefully. If there is
heavy volume on the breakout and less
volume on corrections, use a pullback toward
the initial breakout to complete your position.
8. If the breakout is not accompanied by
increased volume, sell on the first rally. If
there is no rally and the stock is falling
toward or through the breakout point, sell it!
www.wealthcast.com
7 June 2005
Safety Zone—
Accelerated Annual Review
By Bob Adams
www.wealthcast.com
8 March 2005
We also made the point: When Not to Buy.
1. Don’t buy a stock when the general market
trend is bearish. Sure there are stocks that
will defy the trend, but there are better ways
to make money in those circumstances (keep
checking the Safety Zone, we’ll get to that!).
2. Stay away from a stock in a negative
sector, no matter how good it looks.
3. Never buy a stock that is below its 200-
day moving average.
4. Even if the stock is above that average,
don’t buy it if the 200 day line is declining.
5. Resist the temptation to buy after an
upside breakout if you missed the breakout
point and it is now extended, especially if
there is still substantial supply at or above
the current price. Those who own the stock
at the current price and higher and are emotionally
led will likely sell here. You’ll probably
get your chance again. Watch the chart!
6. Don’t buy unless a breakout is confirmed
by volume. Look for twice the average daily
volume for the past month.
7. Take a pass on a stock if its relative strength
is not positive.
8. Overhead resistance within 5% of the
current price means “no go”. Don’t worry
that you’ll miss out (that’s an emotion!). If
it takes out the resistance and then you
buy, you’ll likely enjoy a better ride.
9. Don’t buy when you “sense” a bottom.
Buy only breakouts.
In February we made these points
about: Hold or Sell?
Common emotional traps litter the landscape
when it comes to making a decision
to sell or not. Here are seven traps to avoid:
1. Do not base a decision solely on tax consequences.
If you insist that the tax bite on
a sale is too big, we’ll eagerly split the capital
gains cost with you (as well as the profit
of course). The market (king of emotionless
decisions) does not know or care whether
you have a gain or a loss, or what your tax
consequences may be. It will not prevent a
stock from plummeting until you are in a
more favorable tax situation. When a stock
needs to be sold, sell it!
2. A great dividend yield is not a reason to
hold a loser. You may soon become a startled
victim of the math. If a stock pays a 4%
dividend and falls 10%, your account is
lower. Sounds simple, but emotion wins out
so often and only the yield is in an investor’s
mind. As a stock falls, that yield may look
even better! If the dividend remains intact,
the yield goes up. Of course that increased
yield does not apply to your shares. But
emotion may convince you that it does! And
remember, a falling chart is usually the precursor
of negative news. Such news may
well be a dividend cut or worse.
3. P/E ratios don’t tell the whole story. Simply
put, don’t hold a stock primarily because of
a low P/E and conversely, a high P/E does
not mean it should be sold. The market is
not a rational being. P/E valuation is a subjective
exercise. Let the chart tell you what
is happening despite the P/E!
4. Averaging down is a fool’s game. The emotional
trap that seduces one into thinking
that a lower average cost will cut losses or
enable a break-even at a lower price once
the stock rallies has bankrupted more than
a few investors. We said it before…if a stock
is performing poorly and needs to be sold,
sell it. Hope is not a sound reason to hold or
buy more. Disciplined investors buy more
if a stock confirms their buy decision, not
if it proves they were wrong!
5. A rising, healthy market does not make
a bad stock rise. Yes, all else being equal, a
rising tide affects all ships. But not one with a
hole in the hull! Notice the next time there is
a big advance that the advance/decline ratio
is not 100% advancing. You take a big chance
if you depend on the overall market and not
on the health of your stock to see a rise.
6. You can get old waiting for the next rally
to sell. What a trap this one is! A close
cousin to the averaging down debacle.
7. “High Quality” and “Blue Chip” can be
dangerous appellations. How can a stock
that is an old household name or a bastion
of commerce decline? Shouldn’t we hold it?
No. If it is declining there is a reason. It
may sound radical, but I don’t care if their
latest widget is inferior, if the CEO is stepping
down, if legislation is about to zap them
or if any other of a hundred scenarios is in
play. All I need to know is that there are
more sellers than buyers, and that shows
up in the chart. That’s my reason.
Here’s a very important point of review:
Short selling can be very profitable.
Studies show that historically, about one
third of the time U.S. equities are falling in
value. How would you feel about your chances
of winning a baseball game if your team
could only go to bat for 2/3 of the innings?
Your team bats six times and your opponent
gets nine chances to score. Are you that good?
Here is another interesting fact gleaned
from studies: Most of the time stocks fall
faster and farther than the rate and extent to
which they rose prior to a decline. Did we
mention emotion? Fear and panic are even
stronger than greed. The collective emotions
that drive buying and consequently higher
share prices are not as powerful as the emotions
that fuel the action as a stock plummets.
Even on a great day in the market, hundreds
of stocks lose value. Yet short selling
is a vastly underused strategy. Human
nature generally opposes profiting from the
negative and embraces winning. At play
here again are investors’ enemies….those
money-eating emotions that rob us of objectivity.
This reluctance to short stocks is not
confined to the small investor or the individual
managing his or her own portfolio.
No, human nature and emotions are very
hard to overcome. Brokers and professional
money managers share that reluctance to a
large degree. In no small part because of our
ability and inclination to short stocks,
Rothstein’s fund has significantly outperformed
the indexes.
Next point: Use Stops!
The safety net of stops, whether buy or
sell, limits the consequences when a stock
misbehaves (that’s our euphemism for not
acting as we would like it to). In our opinion
and experience, the most important aspect
of a stop is that it eliminates an emotional
decision. There is no wishing and hoping
that the stock will rise when you’re long or
decline when you’re short and restore your
full investment. Once the stop price is hit,
you automatically have a market order.
Close the position and go on to the next
one. No exceptions.
We hope that this review of some points
that we feel are important is helpful. The
hallmark of our trading philosophy is consistent,
unemotional adherence to technical
trading rules. We do the hard, daily work
required. To learn more about services
available from Rothstein Investment
Advisory Services, Inc. please contact
adams@jrmoney.com or call our Warrenton,
VA office at 540-341-8628.
Jack and I have scheduled another small
gathering of accredited investors at our
Fairfax, VA office on Tuesday, June 28th at
7:30 PM. In order to ensure maximum value,
attendance is limited to twelve investors.
There is no charge, and we will describe in
detail the investment vehicle of our choice
right now for our clients. We will also
reveal our best picks at that moment. We
are confident that nothing you have ever
attended can match the money making
potential available to a few investors on
June 28th. Please see the announcement
and link to information in this Wealthcast
issue. Reserve a spot now.
8 June 2005
www.wealthcast.com
Courtesy of BigCharts.com
Company Name: S&P 500 INDEX (SPX)
Exchange: INDEX Last Trade: 5/27/05
Sector: Not available
Company Data Close on 5/27/05 with n/a shares traded
Shares Outstanding: no shares data Market Cap: n/a
Short Interest: Exchange provides no short interest data.
52-Week EPS: n/a P/E Ratio: n/a
52-Week High: 1,635.70 on 52-Week Low: 1,301.93 on
Wednesday, December 15, 2004 Friday, August 13, 2004
Averages
Average Price: 1,547.28 (50-day) 1,478.66 (200-day)
Average Volume: n/a n/a
Company Name: CBOE Nasdaq 100 Index (INDEX)
Exchange: INDEX Last Trade: 5/27/05
Sector: Not available
Company Data Close on 5/27/05 with 167,356,800 shares traded
Shares Outstanding: No Shares Data Market Cap: n/a
Short Interest: Exchange provides no short interest data.
52-Week EPS: 592.65 P/E Ratio: 17.79
52-Week High: 11,207.15 on 52-Week Low: 9,660.18 on
Monday, March 7, 2005 Monday, October 25, 2004
Averages
Average Price: 10,352.26 (50-day) 10420.70 (200-day)
Average Volume: 268,202,500 (50-day) 252,412,100 (200-day)
Company Name: Dow Jones Industrial Average (DJIA)
Exchange: INDEX Last Trade: 5/27/05
Sector: Not Available
Company Data Close on 5/27/05 with n/a shares traded
Shares Outstanding: No Shares Data Market Cap: n/a
Short Interest: Exchange provides no short interest data.
52-Week EPS: 57.75 P/E Ratio: 20.84
52-Week High: 1,229.11 on 52-Week Low: 1,060.72 on
Monday, March 7, 2005 Friday, August 13, 2004
Averages
Average Price: 1,170.85(50-day) 1,165.86(200-day)
Average Volume: n/a (50-day) n/a(200-day)
Company Data Close on on 5/27/05 with 2,595,700 shares traded
Shares Outstanding: 826,326,016 Market Cap: 52.1 Billion
Short Interest: 8,843,112 (1.07%)
52-Week EPS: 2.12 P/E Ratio: 29.73
52-Week High: 63.40 on 52-Week Low: 44.02 on
Friday, May 27, 2005 Monday, May 24, 2004
Averages
Average Price: 59.32 (50-day) 54.41 (200-day)
Average Volume: 3,910,800 (50-day) 3,546,700 (200-day)
Company Name: Boeing Co. (BA)
Exchange: NYSE Last Trade: 5/27/05
Sector: Aerospace
Stocks To Watch
Company Data Close on on 5/27/05 with 639,500 shares traded
Shares Outstanding: 50,151,008 Market Cap: 257.3 Million
Short Interest: 1,908,862 (3.81%)
52-Week EPS: -1.11 P/E Ratio: n/a
52-Week High: 5.43 on 52-Week Low: 3.31 on
Wednesday, November 03, 2004 Tuesday, February 01, 2005
Averages
Average Price: 4.37 (50-day) 4.36 (200-day)
Average Volume: 398,700 (50-day) 399,700 (200-day)
Company Name: Time Warner Telecom Inc. (TWTC)
Exchange: NASDAQ NM Last Trade: 5/27/05
Sector: Fixed Line Telecommunications
Company Name: Au Optronics Corp. (AUO)
Exchange: NYSE Last Trade: 5/27/05
Sector: Computer Hardware
Company Data Close on on 5/27/05 with 1,181,600shares traded
Shares Outstanding: 495,804,006 Market Cap: 3.2 Billion
Short Interest: 4,756,260 (0.96%)
52-Week EPS: 1.10 P/E Ratio: 15.77
52-Week High: 23.39 on 52-Week Low: 9.74on
Thursday, May 27, 2004 Monday, November 01, 2004
Averages
Average Price: 15.73 (50-day) 13.99 (200-day)
Average Volume: 1,747,100 (50-day) 2,154,500 (200-day)
Company Data Close on on 5/27/05 with 782,100 shares traded
Shares Outstanding: 131,819,008 Market Cap: 2.7 Billion
Short Interest: 5,821,796 (4.42%)
52-Week EPS: 1.06 P/E Ratio: 19.15
52-Week High: 20.72 52-Week Low: 12.06 on
Thursday, May 19, 2005 Friday, August 13, 2004
Averages
Average Price: 18.15 (50-day) 16.87 (200-day)
Average Volume: 1,805,300 (50-day) 1,678,400 (200-day)
Company Name: Freescale Semiconductor Inc.. (FSL)
Exchange: NYSE Last Trade: 5/27/05
Sector: Semiconductors
Company Data Close on on 5/27/05 with 83,900 shares traded
Shares Outstanding: 32,545,008 Market Cap: 1.2 Billion
Short Interest: 2,287,769 (7.03%)
52-Week EPS: 1.92 P/E Ratio: 18.91
52-Week High: 36.40 on 52-Week Low: 26.52 on
Tuesday, May 10, 2005 Thursday, August 12, 2004
Averages
Average Price: 34.37 (50-day) 30.94 (200-day)
Average Volume: 238,200 (50-day) 193,400 (200-day)
Company Name: Black Hills Corp. (BKH)
Exchange: NYSE Last Trade: 5/27/05
Sector: Electricity
Company Data Close on on 5/27/05 with 4,211,600 shares traded
Shares Outstanding: 44,611,008 Market Cap: 186.9 Billion
Short Interest: 4,797,202 (10.75%)
52-Week EPS: -5.68 P/E Ratio: n/a
52-Week High: 7.10 on 52-Week Low: 0.69 on
Tuesday, June 8, 2004 Monday, August 23, 2004
Averages
Average Price: 3.57 (50-day) 2.38 (200-day)
Average Volume: 1,118,200 (50-day) 2,102,800, (200-day)
Company Name: Wet Seal Inc. (WTSLA)
Exchange: NASDAQ NM Last Trade: 5/27/05
Sector: Apparel Retailers
Abbott Laboratories ABT 48.00 38.26 - 49.98 74.432B 3,621,730 23.28
Amgen AMGN 62.85 52.00 - 65.24 77.776B 7,645,610 32.22
American Power Conv. APCC 25.30 14.55 - 27.16 4.881B 1,559,260 28.18
Ammsouth Bncp. ASO 26.62 23.80 - 27.00 9.396B 1,034,080 14.86
AU Optronics CP A AUO 17.35 9.74 - 22.55 8.250B 1,794,070 18.89
Boeing Co. BO 63.02 45.45 - 63.40 52.075B 4,085,160 28.67
Becton Dickinson BDX 57.40 45.64 - 60.37 14.495B 975,806 26.99
BE Aerospace Inc. BEAV 14.43 5.75 - 14.50 822.6M 478,462 N/A
Black Hills Cp. BKH 36.30 26.52 - 36.40 1.181B 227,648 20.51
Bristol Myers Squibb BMY 25.53 22.22 - 26.60 49.892B 5,369,760 25.83
Comcast Corp. A CMCSA 32.03 26.25 - 34.50 70.641B 8,950,090 68.46
Conmed Cp. CNMD 31.65 20.45 - 32.61 929.8M 227,536 29.90
Cypress Semiconductors CY 13.02 8.45 - 16.38 1.716B 3,294,330 N/A
Diodes Inc. DIOD 33.51 16.15 - 33.85 480.4M 173,405 18.55
Duke Energy Corp. DUK 27.65 19.14 - 29.52 25.624B 4,100,720 13.18
Emulex Corp. ELX 18.86 9.26 - 19.70 1.567B 1,927,840 N/A
EMC Corp. EMC 14.16 9.24 - 15.09 34.023B 12,041,900 34.49
Freescale Semiconductor FSL 20.30 12.06 - 20.72 8.156B 1,832,940 37.27
General Electric Co. GE 36.88 30.82 - 37.75 391.1B 18,135,900 22.39
Gilead Sciences GILD 41.01 27.785 - 41.33 18.529B 3,823,820 38.36
Humana Inc. HUM 36.89 15.51 - 37.09 5.970B 1,158,120 18.49
Headwaters Inc. HW 32.50 20.56 - 34.96 1.344B 623,341 19.70
Intersil Corp. CLA ISIL 18.59 13.69 - 21.70 2.842B 1,880,270 103.87
Innovative Sol. & Su. ISSC 36.40 17.43 - 39.20 432.4M 213,119 21.47
The Coca Cola Co. KO 44.93 38.30 - 52.75 108.2B 5,868,280 23.01
LSI Logic CP LSI 6.91 4.01 - 8.23 2.680B 3,431,390 N/A
Merck Co. Inc. MRK 32.45 25.60 - 48.78 71.492B 8,439,730 12.91
Microsemi CP MSSC 20.07 9.44 - 20.47 1.237B 816,386 81.74
www.wealthcast.com
9 June 2005
New Wealthcast Focus List
What is the Wealthcast Focus List
The Wealthcast Focus List provides
you with stocks that are leading the
market. It is not a recommendation to
buy or sell. The list is updated regularly
because leaders drop off the board,
and new stocks start advancing. Until
the advance concludes, the stocks will
remain on the list.
How we choose the
Wealthcast Focus List
We pay close attention to the tape
relative to the stocks on the list.
Stocks trade in cycles. Some stocks
may have been selected at the outset
of a breakout that caused the trend
in the issue to reverse. In some cases,
pyramiding is a gainful approach. In
other cases, our strategy is to wait to
scoop up winning instruments on a
pullback. Stocks that end a major
advance should be sold. We don’t
care about the past. Losses and gains
are forgotten. We care only about the
present and going forward. We don’t
guarantee a gain or a loss. In fact, we
take both gains and losses.
What we do care about is providing
excellent service by never losing focus
or deviating from a sound discipline.
Our commitment to you is to increase
your capital and preserve it.
Name Symbol 5/27/05 52-Week Low-High Market Cap Avg. P/E
(last trade) (Intraday) (Bil$) Volume
New Wealthcast Focus List
Additions this month: AMGN, ASO, DIOD, EMC, FSL, HUM,
HW, ISIL, ISSC, KO, LSI, MUSE, NLS, NSM, NVDA, POOL,
PWR, SBAC, SMH, TE, THC, WB, WYE, YHOO
Deletions this month: ATI, BBBB, BHP ,BNI, CCK, CMVT,
ENER, ESLR, GMT, HSC, PSUN, SID
www.wealthcast.com
10 June 2005
Micromuse Inc. MUSE 6.28 3.37 - 6.78 506.7M 1,008,390 53.91
Nautilus Inc. NLS 27.03 14.75 - 27.62 899.8M 419,900 27.32
Natl. Semiconductor NSM 20.16 11.85 - 22.44 7.037B 4,194,660 20.44
Nvidia Corp. NVDA 27.52 9.30 - 29.60 4.676B 5,092,670 34.20
Wild Oats Markets OATS 11.25 5.60 - 14.22 321.5M 809,958 N/A
PepsiAmericas Inc. PAS 24.56 18.29 - 25.05 3.370B 364,692 18.94
Pepsico Inc. PEP 56.60 47.37 - 57.20 94.780B 3,669,470 22.75
Pfizer Inc. PFE 28.35 21.99 - 36.30 210.8B 24,229,000 23.44
SCP Pool Cp. POOL 35.86 24.80 - 36.22 1.883B 266,656 29.07
Quanta Services Inc. PWR 9.05 5.09 - 9.45 1.065B 677,322 N/A
SBA Comm. Cp. CL A SBAC 11.22 3.77 - 11.50 737.3M 667,623 N/A
ML Semicond. Hldr.1 SMH 34.53 27.78 - 39.02 N/A 27,303,500 N/A
Seagate Tech. STX 20.95 10.11 - 21.21 9.940B 3,734,700 26.65
Teco Energy Inc. TE 17.41 11.30 - 17.50 3.603B 1,059,400 N/A
Tenet Healthcare Cp. THC 12.00 9.77 - 13.43 5.623B 2,815,950 N/A
Time Warner Telec. TWTC 5.13 3.31 - 5.43 595.5M 378,436 N/A
United Therapeutics UTHR 48.81 21.91 - 57.65 1.104B 513,784 50.30
Wachovia Cp. WB 51.04 43.05 - 56.28 80.461B 3,682,430 13.38
Western Digital C. WDC 14.94 6.39 - 14.99 3.181B 3,028,320 17.05
Wind River Sys. WIND 16.23 8.17 - 16.95 1.362B 903,745 173.16
Aqua America Inc. WTR 27.49 18.90 - 28.00 2.633B 238,619 31.11
Wet Seal Inc. CL A WTSLA 4.1899 0.69 - 7.10 172.8M 1,236,090 N/A
Wyeth WYE 43.82 33.50 - 45.67 58.652B 4,613,640 37.73
Yahoo! YHOO 37.27 125.52 - 39.79 52.046B 19,814,400 57.76
Yum! Brands Inc. YUM 51.98 35.75 - 53.56 15.061B 1,563,800 20.80
Name Symbol 5/27/05 52-Week Low-High Market Cap Avg. P/E
(last trade) (Intraday) (Bil$) Volume
www.wealthcast.com
Wealthcast Stock Market Letter and Wealthcast.com
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Phone: (703) 352-8778
1-(888) 343-4825
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E-mail: jrothstein@wealthcast.com
© Wealthcast Stock Market Letter and Wealthcast.com
STOCK MARKET LETTER
Publisher
Jack S. Rothstein, jrothstein@wealthcast.com
Editor
Lewis A. Fein, lewisafein@aol.com
Circulation Manager
Taeko Rothstein, trothstein@wealthcast.com
Design and Production
Coblyn Design, ccoblyn@home.com
Webmaster
Lissa Levinson
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