Welcome to the Moderate Trader. Within these pages a potential investor can easily find information that will be helpful when making the decision to buy or sell a stock. These factors are explored in detail in the section titled “Investing.”


On January 15, 2003, Atwood Oceanics, Inc., (NYSE symbol: ATW) closed at $29.18 per share. Read on to see how we rate this stock. We are also featuring the stock of Transocean, Inc., (NYSE symbol: RIG) that closed at $21.90 per share on January 15, 2003. Those wondering whether to buy or sell these stocks will want to read the “Buy & Sell” section.


In November 2002, we started a new section titled “The high momentum Dow stocks.” In this section we will feature Dow Jones industrial stocks that either have appreciated at a fast pace, tumbled to a low level, or, depending on the money flow, could ascend or descend at a fast pace during the next three months.


In our Model Portfolio section, investors will find a brief description about each stock in our portfolio, our target level at which to buy these stocks, approximately when to sell them, and at what price level.


We have decided to increase cash position in our Model Portfolio. To find out which stocks were sold recently please read the section titled Sold in the December 2002 issue of the Moderate Trader.


Read our Buy Alert section to find out which stocks will be bought when they reach our target level.


For your convenience we have listed the stock split dates and change in value for each one of the stocks held in our Model Portfolio in the section titled Model Portfolio Chart.


In May 2002, we started a section called New investors with a list of five stocks provided in Model Portfolio II that may be bought by investors who are just starting to build their stock portfolio. On July 10, 2002, we added one more stock to the list and now there is a total of six stocks in our Model Portfolio II.


We welcome your questions, or comments. Please E-mail them to: webmaster@moderatetrader.com

JESSICA BEZOLD, Editor

There seems to be no end in sight for this horrendous bear market. On December 31, 2002, the Dow Jones industrial average closed at 8341.63, down 17 percent for the year, while the Nasdaq composite index closed at 1335.51, down 32 percent for the year. This is the worst and the lengthiest bear market in sixty years. The equities may not fare much better during 2003 and we may have a fourth down year.

Many large cap stocks have not reached their bottom yet. In such an environment speculators who buy stocks at their low levels and then sell them at higher levels may be able to generate higher gains than investors who are still sticking to a buy-and-hold strategy. In the previous decade an investor who held stocks long-term was rewarded with substantial gains. During any market downtrends investors were advised to ride it out. Furthermore, investors were told “You can’t time the market.”

Unfortunately, during the latest bear market, the worst in sixty years, investors found out that holding stocks long-term was very counterproductive and they saw the value of their stock portfolios plummet to low levels. Nowadays, investors are told that they should expect their stock portfolios to generate returns in single digits and that stocks should be traded.

In theory, trading stocks could provide annual returns of 100 percent or higher, but in reality it is difficult to find the most profitable entry point to buy a stock at its lowest level and an exit point to sell it at its highest level to generate the largest gain possible. On the other hand, if a speculator were able to lock in 50 percent of the upside gain of equity as it is proceeding in its uptrend, such a trader would still be able to make substantial gains.

This is a simplistic example of a trading strategy but in order for this simple strategy to work such a speculator would have to search through the extensive number of stocks, analyze their charts and find equities that have upside potential of gaining as much as twenty to thirty points within a quarter, or find stocks that are priced below $4.25 per share that could ascend to $7.50 per share.

During such a scenario an XYZ stock that has fallen from $72.87 to $40.25 per share could be bought by a speculator at approximately $45.18 per share after it started its uptrend. Afterwards, a speculator would have to monitor this stock closely and, in a best case scenario, if this equity were to reach $59.45 per share, sell it immediately to lock in a gain of $14.27 a share, or 31 percent in less than three months. Occasionally, on certain high momentum stocks such gains may be achieved in less than seven weeks.

Speculators should not fret about missing out on a larger gain if this particular XYZ stock were to reach a high of $67.45 per share four weeks later. It would be easy to look at the chart of such an XYZ stock after it has fallen to its bottom and then reached its top and then say: This stock could have been bought at $40.25 and then sold at $67.45 per share, for a short-term gain of $27.20 or 67 percent. In reality, a speculator may never buy a stock at its absolute bottom and then sell it at its highest price when it has reached its resistance level.

One example of a stock that could have been bought below $4.25 per share is Advanced Micro Devices, Inc., (NYSE symbol: AMD). On October 4, 2002, three hundred shares were bought at $3.58 per share and added to our Model Portfolio. On December 11, 2002, these 300 shares were sold at $7.86 per share and generated a short-term gain of 115 percent.

Nowadays, in the present market environment, how many speculators would be happy to achieve a gain of 31 percent, or even a gain of 11 percent in less than three months? Speculators should not be greedy. They should try to lock in their short-term gains and then move on to another trade.

Every speculator should be aware that buying a stock before it has reached its bottom could generate a paper loss. In order to prevent actual losses a stop-loss strategy should be used. After a stock is bought a speculator should set a mental stop-loss, or place an actual stop-loss order, approximately 10 percent of the price paid for the stock, depending on its volatility. Therefore, if a stock was bought at $50.45 per share such a speculator may place a stop-loss order at $45.15. If the stock were to fall to $40.25 per share, a stop-loss order would be executed on its way down and the stock may be sold at approximately $45.15 per share. By using such a strategy, speculators may be able to minimize their losses. Last of all, short-term trading is risky, therefore speculators should commit no more than 10 percent of their assets to such a strategy.

Investors have been informed by the media not to expect double-digit returns on stocks in the future years. That is incorrect. During this volatile market some of the tech stocks may fluctuate by 30 percent, or more, in less than three months. Just recently the stock of International Business Machines Corporation rose from $55.07 to $87.70 per share by November 27, 2002. That was a gain of $32.63, or 59 percent, in seven weeks. Although investors have to be aware that short-term trading, especially in tech stocks, is risky, it is also one of the major areas that has the potential to generate the highest short-term gains.

Speculators who have cash on the sidelines should wait patiently and then start buying stocks at their low levels. Many tech stocks may test their support levels by April 2003. Some of these tech stocks may never again reach such low levels. On the contrary, two years from now some of these tech stocks may revisit their previous highs and reward investors with gains as high as 400 percent.

Short-term, the market may remain very volatile and speculators could achieve the best results by trading stocks such as the ones mentioned in the section: The high momentum Dow stocks. Investors should remember that short-term trading is risky and will greatly increase one’s tax liability.

A year ago, in January 2002, we stated in Investing “Warning! Speculators who have marginal accounts should minimize the margin level as soon as possible. Sell some of the stocks in your account during the market rallies in January 2002. Bring your margin level to zero, if possible. Speculators who do not bring their margin level to zero should be prepared to have enough cash on hand to add to their marginal account.”

The market is still in an overall downtrend and has not reached its bottom yet. Speculators who are still on margin should sell some of their blue chip stocks before they generate a loss. Continue to build your cash position. As the remaining large-cap stocks continue to fall, these marginal accounts could generate margin calls during the next four months.

Cash is king! Investors should preserve the cash they have on hand and then start to accumulate equities at a moderate pace when they reach our buy target levels. Initially, do not commit more than 20 percent of your cash to equities because it could take this lengthy bear market several more months to reach its bottom. As of Wednesday, January 15, 2003, after the market closed, the asset allocation in our Model Portfolio was 43 percent equities and 57 percent cash.

Applied Materials, Inc. (NASDAQ symbol: AMAT) is a major supplier of wafer processing equipment that is used to produce semiconductors. The company produces systems that use physical vapor deposition technology, chemical vapor deposition, and oxide etching. The demand for the company’s equipment continues to accelerate in line with the growing sales of computers and telecommunication devices.

Although short-term, there may be a temporary decline in demand for the equipment made by Applied Materials, but in our opinion long-term outlook for the company is excellent. As the demand for chips continues to grow worldwide, the sales of Applied Materials could grow approximately 20 percent annually during the next five years.

On July 16, 2001, this stock fell to a low of $41.95 per share and then closed at $45.86 on July 31, 2001. In the September issue, we stated that AMAT could fall to $39 per share in September and at such a level would be a strong buy. Due to the horrific events of September 11, 2001, this stock fell tremendously and closed at $27.87 on September 27, 2001.

The company issued a 2-for-1 stock split on April 17, 2002. Now there are 320 shares in our Model Portfolio. Immediately after the company issued the stock split, this stock reversed its upward trend and proceeded to fall. On May 10, 2002, this stock closed at $23.70 per share. During the next four weeks money flow fell $1.4 billion and the stock closed at $19.83 per share on June 14, 2002.

The chip sector has not rebounded yet and chip manufacturers are still postponing the purchases of additional chip making equipment. As the revenues remain flat, or even fall, this stock may test its support level. In July 2002, we stated, “This stock could test its support level of $13.75 by October 2002.” This equity broke through this support level sooner than we projected and closed at $12.76 per share on August 5, 2002. Afterwards, this stock proceeded to test its resistance level and closed at $14.70 per share on August 16, 2002.

On November 15, 2002, AMAT closed at $15.83 per share. To our surprise money flow rose $701 million during the next twelve days and this stock closed at a high of $17.49 per share on November 27, 2002. Afterwards, money flow proceeded to fall at a fast pace and this equity closed at $13.03 per share on December 31, 2002. On January 15, 2003, this stock closed at $14.45 per share.

If the money flow were to fall $3.9 billion, this stock could drop to $6.27 per share by April 2003. At such a level we would rate this stock a strong long-term buy. Investors who bought this equity at approximately $13.75 per share may want to average down and acquire more shares. Long-term, this stock could reach $48.25 per share. Hold this stock at least four years.



CMGI, Inc. (NASDAQ symbol: CMGI) finds, acquires, develops, and operates Internet companies. It is one of the world’s largest Internet investment companies. CMGI consists of three venture capital funds.

CMGI, Inc. has developed a strategy to acquire start-up Internet companies, and then either sell them outright, or sell a minority interest and reinvest the cash proceeds. The company has a history of acquiring successful Internet companies. CMGI, Inc. acquired a majority stake in Alta Vista, while Compaq retained 17% equity ownership in the Alta Vista business.

To find out more about Alta Vista, visit the company’s Web site at www.altavista.com and to find out more about CMGI, Inc., visit the company’s Web site at www.CMGI.com.

The main reason why we like this company is because it has an 83 percent interest in Alta Vista. CMGI planned to issue an Initial Public Offering in Alta Vista but due to the negative market condition the IPO has been postponed. When the market improves and the company issues an IPO on Alta Vista, the stock of CMGI could establish a strong upward trend and may even reach $90 per share by the year 2008.

Once this stock reaches our revised target level of $59.75 per share, all three hundred shares will be sold to lock in the gain. We would like to remind investors that the risk of owning this stock is high; therefore it should only be bought by speculators. On December 2, 2002, this stock closed at a high of $1.68 per share and then proceeded to descend. As the money flow fell, this equity closed at $1.12 per share on January 15, 2003, and we maintain our rating of speculative long-term buy.



Cisco Systems, Inc. (NASDAQ symbol: CSCO) makes data networking equipment, data switches, and networking gear. Cisco Systems continues to expand its market share. As John T. Chambers, who is the CEO of Cisco Systems, continues to steer the company on a path to high growth, the long-term outlook for the company is good.

In our opinion, Cisco Systems, Inc. could resume its acquisition spree and the annual revenues may reach $50 billion in six years. Cisco Systems, Inc. is positioned to offer the latest equipment to service providers. IP internetworking technology which allows any company to host Internet applications and expand their service from basic voice traffic to broadband (which can carry data and provide Internet access and video conferencing) is among their innovations.

This stock closed at a low of $11.24 per share on September 27, 2001. It then proceeded to rebound and closed at $21.79 on December 6, 2001. Afterwards, as the money flow fell, this stock reversed its uptrend and proceeded to descend.

On January 15, 2003, this stock closed at $15.18 per share. This equity is in a very slow downtrend and may test its support level by mid April 2003. If the money flow were to continue falling, in a worst case scenario this stock could drop to $5.75 per share by April 2003, and at such a level we would rate it a strong long-term buy. Investors who already own this stock could add to their position.

Previously we stated that this stock should be held at least ten years. Although patient investors may want to hold this stock five years, speculators may achieve a better return by trading this equity. On December 16, 2002, one hundred shares of Cisco Systems, Inc., were sold at $13.45 per share. There are still 100 shares of CSCO left in our Model Portfolio.



Compuware Corporation (NASDAQ symbol: CPWR) makes software that manages corporate networks and improves productivity. Its revenues are growing at a fast pace. The stock of Compuware Corporation reached $40 per share in December 1999.

This stock closed at a high of $13.75 per share on January 24, 2002 and then proceeded to fall. Due to the weakness in the sector this stock maintained its downtrend and closed at $12.20 per share on March 15, 2002. In March 2002 we stated, “This stock may test its support level of $9.90 by the end of March or the beginning of April 2002 and investors may want to buy it at such a level.”

On April 4, 2002, this stock broke through its support level of $9.90 and closed at $8.28 per share, down $2.82 for the day. This equity continued its downtrend and closed at a low of $2.56 per share on August 13, 2002.

The money flow rose $154 million during the following three months and this stock closed at a high of $5.78 per share on November 25, 2002, and then proceeded to fall. On January 15, 2003, this equity closed at $4.50 per share. Buy this stock on a pullback, preferably below $3.25 per share.

Due to the negative outlook for this sector, we have revised our long-term target level down to $25.75 per share from $35.00 per share. Once this stock reaches our revised target level it will be sold immediately.



Sold 100 shares of Corning Incorporated on January 15, 2003, at $4.65 per share. Corning Incorporated (NYSE symbol: GLW) is a major supplier of fiber-optic cable. Its inventory has been depleted to a low level and as the demand improves the company could sell more products. Afterwards this stock may establish a strong upward trend.

On March 11, 2002, this stock reached a high of $8.90 per share. Then, as money flow fell $631 million during the next four weeks, this equity proceeded to fall and closed at $6.38 per share on May 10, 2002. This stock continued its overall downtrend and closed at a low of $1.10 per share on October 8, 2002.

This equity closed at $4.71 per share on January 15, 2003 and was fully valued at that level. If the money flow were to fall $1.4 billion during the next four months, this equity could descend to $1.71 per share.



Delia’s Corporation (NASDAQ symbol: DLIA) sells clothing and accessories for girls and women. Over half of the sales are generated at the company’s Web site.

In April of 1999, this stock closed at a high of $39.00 per share and then proceeded in a downtrend. As the money flow fell $266 million during the next nineteen months, this equity descended to a low level of $0.57 per share on December 22, 2000. Afterwards, as the money flow rose $229 million during the next seven months, this equity proceeded to ascend and closed at $7.16 per share on June 29, 2001.

Due to the negative outlook for this sector this stock fell and closed at a low level of $0.40 per share on October 8, 2002. On October 9, 2002, one thousand shares of Delia’s Corporation were bought at $0.43 per share. As the sales improve and if the money flow were to ascend $210 million during the next eight months this equity could rebound to approximately $4.50 per share. At such a level this stock will be sold immediately. On January 15, 2003, DLIA closed at $0.39 per share and we rate it a speculative short-term buy.

This stock was previously held in our Model Portfolio for slightly over two years and then on February 1, 2002, all of the shares of Delia’s, Inc., were sold at a gain of 84 percent.



Elan Corporation, plc (NYSE symbol: ELN) is a pharmaceutical manufacturer that develops and distributes a variety of prescription drugs. During the past seven years the company expanded by making aggressive acquisitions. On April 12, 2002, five hundred warrants of Elan Corporation, plc were bought at $0.50 per warrant.

These warrants trade under the symbol ELANZ and expire on August 31, 2005. As this stock tumbled, the price of warrants fell along with it and on October 22, 2002, ELANZ closed at a low of $0.06 per warrant. As the money flow rose $182,000 these warrants proceeded to ascend. On January 15, 2003, these warrants closed at $0.52 per warrant. The risk of owning these warrants is high; therefore only speculators should buy them. These warrants will be sold as soon as they reach approximately $2.00 per warrant.



Hewlett-Packard Company (NYSE symbol: HPQ) is the second largest computer manufacturer in the world. The Company designs and makes notebook personal computers, servers, consumer PCs, and networking equipment. Although revenues continue to grow, the earnings are still below the levels reached three years ago.

Hewlett-Packard Company acquired Compaq Computer Corporation on May 3, 2002. There were 100 shares of Compaq Computer Corporation in our Model Portfolio. For each share of Compaq, Hewlett-Packard issued 0.6325 shares of its stock. Now, there are 63 shares of Hewlett-Packard Company in our Model Portfolio. The new stock symbol for the company is HPQ. On May 10, 2002, HPQ closed at $19.26 per share and we rated it a hold.

We were not enthusiastic about this merger. Now that this merger is finalized, the only thing we can do is to hold HPQ shares long-term until they reach approximately $46 per share, perhaps in 2006.

While Compaq Computer was an independent company, it sold 83 percent of interest in Alta Vista website to CMGI, Inc. and retained 17 percent equity in Alta Vista. In the future this website could generate a substantial amount of revenue.

This stock broke through its support level of $14.96 sooner than we projected and closed at $14.62 per share on July 2, 2002. As the money flow continued to fall this equity closed at $11.52 on July 23, 2002. Then this stock proceeded to rebound and HPQ closed at $15.30 per share on August 22, 2002.

On October 9, 2002, HPQ broke through its support level and closed at a low of $11.16 per share. Then, as money flow rose $402 million, this stock proceeded to ascend and closed at $17.70 per share on November 4, 2002. During the next four weeks the money flow rose $1.7 billion and this equity continued its uptrend. On December 2, 2002, this stock closed at $19.83 per share.

This equity broke through its resistance level and closed at $20.85 per share on January 10, 2003. Afterwards the money flow proceeded to descend and the stock closed at $20.25 per share on January 15, 2003.

Speculators should wait until this equity tests its $11.16 support level and if it were to fall below that level, in a worst case scenario, this stock could reach a low of $5.75 per share during the next six months. At such a level we would rate this stock a long-term buy.

Speculators may buy this stock and trade it, while patient investors may want to hold it until it reaches our target level of approximately $46 per share. As soon as this stock reaches our target level, the 63 shares of HPQ that are held in our Model Portfolio will be sold immediately.



Intel Corporation (NASDAQ symbol: INTC) is the leading manufacturer of microprocessors. The company continues to switch production to a 0.18 micron manufacturing process that yields more semiconductors from each wafer.

The stock of Intel Corporation has kept rising ever since 30 shares were bought in March of 1995, at $78.25 per share. The company issued a 2-for-1 stock split on June 22, 1995, another one on July 14, 1997, a 2-for-1 stock split on April 11, 1999, and another 2-for-1 split on July 30, 2000. The original 30 shares bought became 480 after these stock splits.

On October 30, 2000, two hundred shares were sold and now there are 280 shares in our Model Portfolio. This stock continued to fall and closed at $30.06 per share on December 29, 2000. As the institutional investors proceeded to buy this stock, it rebounded and closed at $37 per share on January 31, 2001.

This stock closed at $35.58 per share on January 8, 2002, and we stated, “At this level the stock is fully valued.” This stock was in a slow downtrend and on May 10, 2002, closed at $27.01 per share. On June 6, 2002, Intel lowered its revenue projection. The stock fell $5.00 on June 7, 2002, and closed at $22.00 per share. This equity continued to fall and closed at a low of $13.22 per share on October 8, 2002.

As the money flow rose $14 billion during the following eight weeks, this stock proceeded in a strong uptrend. On December 2, 2002, this stock closed at $21.05 per share and was fully valued at that level. As the money flow fell, this equity closed at $17.35 per share on January 15, 2003.

If the money continues to fall, in the worst-case scenario, this stock could reach a low level of $7.85 per share by April 2003. At such a level we would rate this stock a strong long-term buy.



Internet Capital Group (NASDAQ symbol: ICGE) is a venture capital group that owns a stake in over 52 Internet companies. This venture capital group owns a stake in Vertical Net Inc.

In July 2000, this stock traded at $45.18 per share and then proceeded to fall. Due to the carnage in the Internet sector this stock closed at a low of $3.28 per share on December 29, 2000, down from its high of $143.55 reached in March 2000.

Afterwards, this stock proceeded to build a slow upward momentum and closed at $6.44 per share on January 31, 2001. It is highly unlikely that this stock will ever revisit its previous high of $143.55 per share.

On April 12, 2002, five hundred shares of Internet Capital Group were bought at $0.57 per share. These 500 shares will be held in our Model Portfolio long-term until this equity reaches our revised target level of $22.75 per share; perhaps by 2006. At such a level all of the shares will be sold immediately. On January 15, 2003, this stock closed at $0.45 per share, and we rate it a speculative long-term buy.



JDS Uniphase (NASDAQ symbol: JDSU) makes components used in fiber-optic networks and is a leader in the sector.

Although our original objective was to buy 100 shares, due to the substantial amount of cash in our Model Portfolio, a decision was made to buy more shares. On February 6, 2002, two hundred shares of JDSU were bought at $6.33 per share.

Due to the negative outlook for this sector this stock continued to descend and closed at a low level of $1.62 per share on October 7, 2002. As the money flow rose $1.225 billion during the next two months, this stock proceeded to ascend and closed at $3.41 per share on November 29, 2002.

On January 15, 2003, this stock closed at $3.10 per share and once again is in a downtrend. This stock could test its support level of $1.62 per share by April 2003 and speculators may want to buy it.

Due to the unfavorable short-term outlook for this sector it may take this stock longer to reach our sell target level. These 200 shares will be sold as soon as this stock reaches approximately $12.26 per share, perhaps in the second half of 2004.



LSI Logic Corporation (NYSE symbol: LSI) makes chips for cellular phones, satellite set-top boxes, DVD products, and personal computers. LSI Logic has manufacturing facilities in the United States, Europe, and Japan.

The company may continue to invest 15-17 percent of its revenues in R & D. As the demand for cellular phones and set-top boxes continues to grow, the revenues and earnings of LSI Logic could outperform the rest of the companies in the chip sector. This stock closed at $32.63 per share on October 31, 2000 and then proceeded to descend. Due to the bear market, this stock broke below $20.00 per share and closed at a low level of $16.43 per share on December 21, 2000, way down from its high of $71.32.

On January 8, 2002, this stock closed at $16.21 per share and at that level was fully valued. After testing its support level of $13.95 on January 22, 2002, this stock proceeded to rebound and closed at $15.60 on February 7, 2002.

Due to the negative short-term outlook for this sector this stock continued to fall and closed at $8.26 per share on August 16, 2002. This equity proceeded to test its support level and closed at $6.65 per share on September 20, 2002.

In September 2002, we stated, “If the money flow continues to fall, this stock could test its support level of $4.65 per share by mid November 2002. At such a level we would rate this stock a strong buy.” This stock fell sooner than we projected and closed at $4.15 on October 10, 2002.

On October 18, 2002, LSI closed at $4.49 per share and we stated “… investors may want to accumulate it at a moderate pace.” This equity closed at $8.54 per share on November 29, 2002, and then proceeded to descend. On January 15, 2003, this stock closed at $6.26 per share.

If the money flow were to fall $718 million during the next three months there is a very slight probability that this stock could fall to a low of $1.25 per share by mid April 2003. At such a level we would rate this stock a strong long-term buy.

We projected that LSI may appreciate substantially by the end of 2002, but it may take this stock a while longer. As the earnings improve it could reach our sell target level of approximately $15.45 per share in the second half of 2005. At such a level, speculators should sell it immediately to lock in their gain.

On the other hand, patient investors may want to hold this stock at least five years and if it were to reach $58.75 per share sell it immediately.

This stock will be held in our Model Portfolio and will be sold as soon as it reaches approximately $41.75 per share, perhaps at the end of 2006.



Sold 250 shares of Lucent Technologies, Inc., on January 15, 2003, at $1.77 per share. Lucent Technologies, Inc. (NYSE symbol: LU) is the largest manufacturer of telecommunications equipment. Lucent Technologies makes fiber-optic equipment and optical network equipment that allows phone companies to increase capacity and to provide high speed Internet access.

This high flying stock closed at a high of $81.75 per share in December 1999 and has been in a downtrend ever since. At that time no one would have thought that this equity could fall below $10.00 per share. As the money flow fell, this stock continued to plunge and closed at $0.58 per share on October 11, 2002.

On October 18, 2002, Lucent Technologies announced that it will seek shareholder approval to do a reverse stock split to bring its stock price between $15.00 and $25.00 per share. If shareholders were to approve this reverse stock split at the company’s next annual meeting, the reverse split could be as bad as 1-for-36 shares. In such a horrendous scenario an investor who owns 100 shares would receive less than three shares.

Investors who still own shares of Lucent Technologies may want to sell the stock now, before the company issues a reverse stock split.



Microsoft Corporation (NASDAQ symbol: MSFT) is the largest maker of software. The operating system made by Microsoft is used in the majority of computers. The company has no debt and has approximately $42 billion in cash and short-term investments.

Although this timely stock may not appreciate at its previous fast pace, it could generate a gain of 700 percent in six years. This stock will be held long-term, at least five years. On December 29, 2000, this stock closed at $43.38 per share and we rated it a screaming buy.

On January 8, 2002, we stated, “…this stock closed at $69.38 per share and at this level is fully valued.” A month later, on February 7, 2002, this stock closed at $59.80 per share. Then, this stock proceeded to test its resistance level and closed at $64.34 per share on March 11, 2002.

In July we stated, “If money flow were to fall, this stock could test its support level of $43.38 in August or September 2002.” This equity reached such a low level sooner than we projected. On July 23, 2002, MSFT closed at $43.01 per share, down $4.50 for the day and then proceeded to rebound.

As the money flow rose sharply this stock tested its resistance level and closed at $53.23 per share on August 22, 2002. Afterwards, this equity proceeded to descend and closed at $43.74 per share on September 30, 2002.

On September 20, 2002, we stated “If the money flow were to fall in October, this equity could test its support level of $42.83 and if it were to break below this level it may fall to a low level of $32.45 per share by December 2002. In a worst case scenario, if this stock were to break below that support level it could fall to a low of $14.67 per share in the first quarter of 2003. At such a level we would rate this stock a strong long-term buy.”

This equity closed at $43.77 per share on October 4, 2002, and then as the money flow rose $32.9 billion, the stock closed at $58.23 per share on November 25, 2002. On January 15, 2003, this stock closed at $56.27 and at that level was fully valued. If the money flow were to fall $67 billion, then this stock could fall to a low level of $32.45 by March 2003. At such a level we would rate this stock a long-term buy.

Perhaps we were overly pessimistic about this stock falling to $14.67 per share but if the money flow were to fall $94 billion during the following eight months then MSFT could fall to a low level of $22.75 per share by mid August 2003.



Sold 600 shares of Nortel Networks Corporation on January 15, 2003, at $2.43 per share. Nortel Networks Corp. (NYSE symbol: NT) is the leading provider of networking solutions, including optical networking solutions and wireless networking systems.

In September 2002, the company announced that it plans to do a reverse stock split of 1-for-20, or higher, in the beginning of 2003. We have finally sold this stock. This stock could test its support level after a reverse stock split and we will buy it again and add it to our Model Portfolio.



Rite Aid Corporation (NYSE symbol: RAD) is the largest drug store chain in the United States. The company operates approximately 3,600 drug stores in 29 states. In the past, Rite Aid Corporation expanded rapidly through acquisitions. This stock approached a high level of $50.00 per share in December 1998.

After several missteps and a very heavy debt load, the company was almost driven into bankruptcy. New management sold assets and pared down debt.

After reaching a low level of $2.13 per share in December 2000, this stock proceeded to rebound and closed at $9.74 per share on June 15, 2001. Then, the stock reversed its trend and proceeded to fall. On January 8, 2002, RAD closed at $4.38 per share.

In January 2002, we featured the stock of Rite Aid Corporation (NYSE symbol: RAD) in the “Buy & Sell” section. We stated “If this stock were to maintain its downtrend and fall to approximately $2.80 per share in February 2002, speculators may start to accumulate this equity for a short-term trade.” This stock broke through our target level much sooner and closed at a low level of $2.06 per share on January 22, 2002.

In order to slightly diversify our Model Portfolio, 400 shares of Rite Aid Corporation (NYSE symbol: RAD) were bought at $2.57 per share on February 25, 2002. These 400 shares will be held short-term and as soon as this equity reaches our revised target level of approximately $7.71 per share, all of these shares will be sold to lock in a short-term gain.

On January 15, 2003, this stock closed at $3.03 per share and we maintain our rating of speculative short-term buy.



Sold 600 shares of Sun Microsystems, Inc., on January 15, 2003, at $3.81 per share. Sun Microsystems, Inc.(NASDAQ symbol: SUNW) is among the major suppliers of hardware to the Internet. The company continues to introduce new servers, competitively priced, in order to expand its market share.

As additional hundreds of millions of users access the Internet, the demand for servers could grow during the next five years. On March 20, 2001, one hundred shares were bought at $18.82 per share. These one hundred shares will be held in our Model Portfolio approximately four years, and as soon as they generate a gain of 200 percent, all of the shares will be sold.

On January 8, 2002, this stock closed at $13.93 per share and then proceeded to fall. This stock tested its support level of $8.07 on February 22, 2002, a month sooner than we estimated.

On February 28, 2002, an additional 300 shares of SUNW were bought at $8.61 per share and added to our Model Portfolio.

An additional 300 shares of Sun Microsystems were bought at $3.71 per share on August 6, 2002, and added to our Model Portfolio.

As the money flow continued to fall, this equity proceeded to break through its support levels. On August 5, 2002, this stock closed at a low level of $3.53 per share and we stated, “If the money flow were to fall during the next two months, SUNW could break through its support level of $3.53 and may reach a low level of $2.95 per share.” As the money flow fell, this stock closed at $2.70 per share on September 19, 2002. This equity continued its downtrend and closed at a low level of $2.42 per share on October 4, 2002.

This equity closed at $4.29 per share on November 29, 2002, and then proceeded to descend. On January 15, 2003, this stock closed at $3.87 per share. After 600 shares of SUNW were sold on January 15, 2003, there are still 100 shares that were bought on March 20, 2001, left in our Model Portfolio and these will be held long-term.

If this stock were to break below its support level of $2.42 it could fall to a low level of $1.15 per share by April 2003. At such a level we would rate this stock a long-term buy. Investors may want to average down and buy more shares at this low level. Patient investors may hold this stock until it reaches approximately $41.25 per share, perhaps in the second half of 2006. Investors should sell this stock immediately at such a high level to lock in a long-term gain.



Vertical Net, Inc. (NASDAQ symbol: VERT) owned and operated over 50 websites designed as online business-to-business communities. Recently the company sold its websites and plans to generate its revenues from the sales of software.

This stock was featured in our “Buy & Sell” section in August 2000. At that time, we stated that this stock could fall to approximately $35 per share. Furthermore, we stated that the risk of owning this B2B startup is high; therefore this stock should only be bought by speculators.

At that time, who would have thought that this stock would break through a $35 level and continue to fall? When this stock fell below $5 per share it looked as it may have reached its bottom. In February 2001, two hundred shares were bought at $3.72 per share and added to our Model Portfolio.

During this bear market, VERT continued to fall and when this stock tested its support level again in April 2002, an additional 500 shares were bought at $0.58 per share. On July 15, 2002, the company issued a 1-for-10 reverse stock split and now there are only 70 shares of VERT in our Model Portfolio.

On January 15, 2003, this stock closed at $1.00 per share and we maintain a hold rating on this equity. Due to the reverse stock split we have revised our sell target level from $10.00 to $22.50 per share. As soon as this stock reaches such a level all of the shares held in the Model Portfolio will be sold.



Sold 400 shares of Vitesse Semiconductor Corporation on January 15, 2003, at $2.67 per share. Vitesse Semiconductor Corporation (NASDAQ symbol: VTSS) makes gallium arsenide semiconductors that are used by manufacturers of networking equipment. On August 20, 2002, this equity was removed from the S&P 500 Index and 31.6 million shares were traded on that day. On September 20, 2002, four hundred shares of Vitesse Semiconductor Corporation were bought at $1.04 per share and added to our Model Portfolio.

At its height, this stock closed at $103.83 per share in February 2000 and then proceeded in a downtrend. Among the company’s major customers are Cisco Systems and Lucent Technologies. When that sector rebounds, the stock of Vitesse Semiconductor Corporation could ascend to a higher level.

Although our initial objective was to hold this stock long-term, a decision was made to sell it and lock in a short-term gain. That is why on January 15, 2003, four hundred shares of VTSS were sold. This trade has generated a short-term gain of $612.50, or 140 percent.



WorldCom Group (NASDAQ symbol: WCOEQ) has grown from a small telecommunications provider to a behemoth through mergers and acquisitions. On September 14, 1998, WorldCom merged with MCI Communications Corporation. Once this merger was finalized, WorldCom was in possession of one of the world’s largest and most advanced digital networks that connects local markets in the United States to more than 280 countries and locations worldwide.

Due to the accounting debacle that has pushed WorldCom to its bankruptcy, this stock became almost worthless. This equity will be held in our Model Portfolio as a reminder of what could happen to the stock of any company.

On January 15, 2003, a decision was made to sell 100 shares of Corning Incorporated (NYSE symbol: GLW). These 100 shares were sold the same day at $4.65 per share. This equity was bought on February 6, 2002, at $6.62 per share and this trade generated a short-term loss of $237.10. If the money flow were to fall $1.4 billion during the next four months, this stock could descend to $1.71 per share. At such a level 400 shares of Corning Incorporated will be bought and added to our Model Portfolio.


A decision was made to sell 250 shares of Lucent Technologies, Inc., (NYSE symbol: LU). On January 15, 2003, this stock was sold at $1.77 per share. This trade generated a long-term loss of $6,661.50. After the company issues a reverse stock split this stock could test its support level and approximately 100 shares will be bought and added to our Model Portfolio.


On January 15, 2003, a decision was made to sell 600 shares of Nortel Networks Corporation (NYSE symbol: NT). These 600 shares were sold the same day at $2.43 per share. This trade generated a long-term loss of $2,602.95 and a short-term loss of $375.94. If the money flow were to fall, this stock could test its support level by mid April 2003 and it will be bought again and added to our Model Portfolio.


A decision was made to sell 600 shares of Sun Microsystems, Inc., (NASDAQ symbol: SUNW). On January 15, 2003, six hundred shares were sold at $3.81 per share. This trade generated a short-term loss of $1,470.85 for 300 shares that were bought on February 28, 2002, at $8.61 per share and a short-term gain of $0.45 for 300 shares that were bought on August 6, 2002, at $3.71 per share.

There are still 100 shares of SUNW left in our Model Portfolio. These were bought on March 20, 2001, at $18.82 per share and will be held long-term.


On January 15, 2003, four hundred shares of Vitesse Semiconductor Corporation (NASDAQ symbol: VTSS) were sold at $2.67 per share. This trade generated a short-term gain of $612.50, or 140 percent. As the money flow falls, this stock could test its support level of $1.55 per share. At such a level 800 shares will be bought and added to our Model Portfolio.


The cash received from these trades was added to the existing cash in our Model Portfolio and now there is $32,731 cash in our Model Portfolio. After these trades, on January 15, 2003, the asset allocation of our Model Portfolio was 43 percent equities and 57 percent cash.

Advanced Micro Devices, Inc. (NYSE symbol: AMD) manufactures microprocessors, flash memory devices, data communications products, and network products. While the demand for microprocessors continued to grow worldwide in the year 2000, Intel Corporation was not able to produce enough chips due to insufficient manufacturing capacity. During that time AMD was able to increase its market share. AMD and Intel continue their fierce competition.

AMD could continue to spend a large percentage of its gross revenues on research and development and try to keep pace with Intel by introducing faster processors to the market. As AMD sells a larger quantity of higher priced processors, the average selling price will continue to rise, thus improving profit margins. On January 15, 2003, this stock closed at $7.45 per share. There is a probability that this stock could reach our target level of $2.50 per share by April 2003. If this equity were to reach such a low level then, 1,000 shares will be bought immediately and added to our Model Portfolio.



Cisco Systems, Inc. (NASDAQ symbol: CSCO) makes data networking equipment, data switches, and networking gear. Cisco Systems continues to expand its market share. This stock is in a downtrend. On January 15, 2003, this stock closed at $15.18 per share. If the money flow were to continue falling, in a worst case scenario this stock could test its support level of $5.75 and at such a level we would buy 200 shares and add these to our Model Portfolio.



Ericsson LM Telephone (NASDAQ symbol: ERICY) is a leading supplier of mobile phones and telecommunications equipment. Ericsson’s telecom equipment is among the most advanced in the world. On January 15, 2003, ERICY closed at $9.63 per ADR. If this equity were to fall to approximately $5.75 per ADR we will buy it again and add it to our Model Portfolio.



Oracle Corporation (NASDAQ symbol: ORCL) is the world’s third largest software company. The company makes database management system software. Approximately 90 percent of corporate websites are using Oracle’s database software. On January 15, 2003, this stock closed at $12.53 per share. If the money flow were to fall $24 billion during the next four months this stock could descend to a low level of $4.97 per share. At such a level 800 shares of Oracle Corporation would be bought and added to our Model Portfolio.



RF Micro-Devices, Inc. (NASDAQ symbol: RFMD) designs, develops, manufactures, and markets semiconductors and components for the wireless handset market, wireless Local Area Networks (LAN), pagers, the broadband cable communications sector, and wireless security. The company offers a wide selection of products such as amplifiers, mixers, single chip transmitters, receivers and transceivers.

Among the microprocessors made by the company are gallium arsenide-based chips that are the most expensive and generate the highest profit margin. The company’s largest customer is the Nokia Corporation. This equity is in a very slow downtrend. On January 15, 2003, this stock closed at $7.78 per share. If the money flow were to fall $1.4 billion during the next five months then this stock could descend to $1.65 per share. At such a price level we would buy 800 shares of RF Micro-Devices, Inc., and add these to our Model Portfolio.



Yahoo Inc. (NASDAQ symbol: YHOO) is a global Internet media company that provides comprehensive information and shopping services to over 200 million users worldwide. The company’s website, www.yahoo.com, is the most visited site and has the highest name recognition. The company provides web content around the world in 12 languages.

Advertising revenues on the web in the United States alone are projected to reach an average of over $8 billion annually within a year. Yahoo, Inc., could receive 20 percent of these revenues; thus we estimate that the company’s annual revenue could grow to approximately $1.6 billion in the year 2003. On January 15, 2003, this stock closed at $19.58 per share. This stock is still in an overall long-term downtrend and could reach our revised buy target level of approximately $4.77 per share, perhaps by May 2003. At such a level 400 shares would be bought and added to our Model Portfolio.



The stock of Motorola Inc. (NYSE symbol: MOT) is in a slow downtrend. We will continue to monitor this equity. In September 2002, we stated “If money flow continues to fall, this stock could descend below $8.55 per share, perhaps in October 2002. At such a level 200 shares will be bought and added to our Model Portfolio.”

On October 18, 2002, this stock closed at $7.77 per share. Although this equity fell below our buy target level, it was not bought. On January 15, 2003, this stock closed at $9.25 per share. This stock could maintain its overall downtrend and reach a low level of $4.95 by April 2003. At such a level 300 shares will be bought and once again added to our Model Portfolio.



We will continue to monitor Dell Computer Corporation (NASDAQ symbol: DELL). This stock closed at $29.82 per share on November 15, 2002, and was trading at approximately 49 times earnings. On January 15, 2003, this stock closed at $25.96 per share. Depending on the money flow, volume, and other key indicators, this stock could break through its support level of $16.65. There is a slight probability that this stock could fall to approximately $10.15 per share by June 2003. If this stock were to reach such a low level, 200 shares will be bought and added to our Model Portfolio. If this stock doesn’t reach our buy target level then the cash will be used to buy more shares of Advanced Micro Devices and another stock.



Nokia Corporation (NYSE symbol: NOK) is the world’s largest manufacturer of mobile phones. The company is located in Finland, with subsidiaries in the United Kingdom and China. On January 15, 2003, this equity closed at $16.47 per ADR. This equity is still in an overall downtrend. If the money flow were to fall $27 billion during the next five months, in a worst case scenario this equity could descend to a low level of $2.95 per ADR. If this equity were to reach such a low level then 800 ADR’s of Nokia Corporation will be bought and once again added to our Model Portfolio.



On October 18, 2002, we added the stock of Juniper Networks, Inc. (NASDAQ symbol: JNPR) to our buy list. The company makes Internet Protocol routers. On January 15, 2003, this stock closed at $9.70 per share. If this stock were to reach a low of approximately $2.15 per share, three hundred shares will be bought and added to our Model Portfolio. We will wait patiently until April 2003 for this stock to reach our buy target level.



We also added the stock of EMC Corporation (NYSE symbol: EMC) on October 18, 2002. If this stock were to reach a low of $2.55 per share, five hundred shares will be bought and added to our Model Portfolio. EMC Corporation is the major supplier of enterprise storage devices, software, and services. The company’s top of the line Symmetrix® system can hold 19 terabytes of data on 384 individual drives.

EMC Corporation acquired Data General in October 1999, and that added a selection of mid-priced storage devices. Although EMC Corporation’s hardware and software is the most expensive, 98 percent of customers are willing to recommend it to their colleagues and business associates.

As the Internet continues to grow and hundreds of millions of people go online during the next decade, we project that the need for storage devices could continue to grow in double-digits. In our opinion, EMC Corporation’s annual revenues could grow ten-fold, and reach $60 billion in nine years. During the past decade, this was the top performing stock on the NYSE. The company consistently splits its stock, and the most recent stock split was 2-for-1 on June 5, 2000. After the split, the stock continued to ascend and closed at $103.18 per share on September 20, 2000.

During the carnage in the technology sector this stock plummeted to a low level. On Friday, October 4, 2002, the company announced that it will cut 1,350 jobs and furthermore added that it does not expect to return to profitability in the second half of the year. The stock fell $1.18 on that day and closed at $3.83 per share. Although this equity ascended to a higher level and closed at $7.57 per share on January 15, 2003, it is still in an overall downtrend.

We have lowered our buy target level for this stock to $2.55 per share. If this stock were to reach such a level speculators may want to buy it and hold it at least one year. Do not commit more than five percent of your cash to this stock.

EMC has the largest market share for storage equipment. As the sales rebound and earnings improve, this stock may test its resistance level, although it may take a while longer to reach it. This stock may reach our sell target level of $22.12 in 2005, and speculators should then sell it immediately to lock in their gain.

Our Model Portfolio is already extremely overweighed in the technology stocks. We advise investors against acquiring so many technology stocks in their portfolios. Investors may want to buy some of these stocks and add them to their portfolios. Speculators who are below thirty years of age may allocate up to 50 percent of their portfolios to technology stocks.

Investors who are just starting out should establish a Roth Individual Retirement Account (commonly called a Roth IRA) and may buy equities listed below in our Model Portfolio II as soon as possible, while these stocks are at their lowest level. In the year 2002, the annual contribution limit for Roth IRA for these taxpayers who were under age 50, was $3,000.

The Roth IRA has many advantages. One of the biggest advantages is that no taxes are due on qualified withdrawals, while withdrawals from the traditional IRA are taxable.

By not having to pay taxes to the government, a retiree may be able to save over $200,000 throughout his or her retirement years. Surely, you could think of many ways to spend $200,000 on yourself and your family. Furthermore, an investor could trade stocks, knowing that any capital gains, short-term and long-term, achieved in the Roth IRA are not taxable. This allows each investor to reinvest these gains and to generate a much higher annual return on their portfolio.

Investors should be aware that Model Portfolio II is heavily weighed in the technology stocks. The risk of such asset allocation is much greater than owning a portfolio of stocks in several sectors.

Ericsson LM Telephone (NASDAQ symbol: ERICY) is a leading supplier of mobile phones and telecommunications equipment. On May 10, 2002, two hundred American Depository Receipts were bought at $2.29.

On October 23, 2002, the company issued a 1-for-10 reverse stock split and afterwards instead of 200 ADR’s there were only 20 ADR’s. On December 16, 2002, twenty ADR’s of ERICY were sold at $8.53 per ADR. The cash proceeds from this trade will be held in the Model Portfolio II. When the stock of Advanced Micro Devices, Inc., (NYSE symbol: AMD) reaches our buy target level of approximately $2.50 per share, additional cash will be added and one hundred shares of AMD will be bought and added to Model Portfolio II.



Lucent Technologies, Inc. (NYSE symbol: LU) is the largest manufacturer of telecommunications equipment. Lucent Technologies makes fiber-optic equipment and optical network equipment that allows the phone companies to increase capacity and to provide high speed Internet access. On May 10, 2002, one hundred shares were bought at $4.46 per share.

On October 18, 2002, Lucent Technologies announced that it will seek shareholder approval to do a reverse stock split to bring its stock price between $15.00 and $25.00 per share. If shareholders were to approve this reverse stock split at the company’s next annual meeting, the reverse split could be as bad as 1-for-36 shares. In such a horrendous scenario an investor who owns 100 shares would receive less than three shares. On January 15, 2003, one hundred shares of LU were sold at $1.77 per share. The cash received from this trade will be held in Model Portfolio II.



Nortel Networks Corp. (NYSE symbol: NT) is the leading provider of networking solutions, including optical networking solutions and wireless networking systems. On May 10, 2002, one hundred shares were bought at $2.84 per share.

In September 2002, Nortel Networks announced that it plans to do a reverse stock split of 1-for-20, or higher, in the beginning of 2003. Due to this horrendous plan a decision was made to sell this stock. On January 15, 2003, one hundred shares of NT were sold at $2.43 per share. The cash received from this trade was added to the existing cash in Model Portfolio II.



Oracle Corporation (NASDAQ symbol: ORCL) is the world’s third largest software company. The company makes database management system software. Approximately 90 percent of corporate Web sites are using Oracle’s database software. On May 10, 2002, one hundred shares of Oracle Corporation were bought at $8.37 per share. This stock should be held long-term.



Rite Aid Corporation (NYSE symbol: RAD) is the largest drug store chain in the United States. The company operates approximately 3,600 drug stores in 29 states. In the past, Rite Aid Corporation expanded rapidly through acquisitions. This stock approached a high level of $50 per share in December 1998.

After several missteps and a very heavy debt load, the company was almost driven into bankruptcy. New management sold assets and pared down debt. After reaching a low level of $2.13 per share in December 2000, this stock proceeded to rebound and closed at $9.74 per share on June 15, 2001. Then, the stock reversed its trend and proceeded to fall. On May 10, 2002, one hundred shares were bought at $3.07 per share. These 100 shares of RAD will be held short-term and as soon as this equity reaches our revised target level of approximately $7.71 per share, all of these shares will be sold to lock in a short-term gain.



Sun Microsystems, Inc.(NASDAQ symbol: SUNW) is among the major suppliers of hardware to the Internet. The company continues to introduce new servers, competitively priced, in order to expand its market share. On July 10, 2002, one hundred shares of Sun Microsystems were bought at $5.12 per share and added to the Model Portfolio I I.

As additional hundreds of millions of users access the Internet, the demand for servers could grow during the next five years. Patient investors may hold this stock until it reaches approximately $41.25 per share. At such a level this stock should be sold immediately to lock in a long-term gain.



After the recent trades there was $529.34 of cash in Model Portfolio II.