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 November 20, 2003, Scientific-Atlanta, Inc., (NYSE symbol: SFA), closed at $26.92 per share. Read on to see how we rate this stock. We are also featuring the stock of Novellus Systems, Inc., (NASDAQ symbol: NVLS) that closed at $41.82 per share on November 20, 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 five 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.


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

While investors committed more cash into equities, the Dow Jones industrial average continued its uptrend and closed at a high of 9856.97 on November 6, 2003. Shortly afterwards, as some investors started selling equities to lock in their gains, the market proceeded to fall. On November 20, 2003, the Dow Jones industrial average closed at 9619.42, down 71.04 points, while the Nasdaq composite index finished the day at 1881.92, down 17.73 points.

Finally, this economic expansion is beginning to create jobs. In August, September, and October 286,000 jobs were created. Unfortunately, these jobs were in the service sector where the wages are much lower than in the manufacturing sector. On the other hand, workers continue to lose jobs in the manufacturing sector. The overall future outlook for jobs is positive; as the economy continues to expand, over 100,000 jobs could be created each month, but as long as these jobs are in the low paying service sector, these workers may not have much disposable income left to allow our economy to continue expanding at a fast pace.

Recently some of the technology stocks have reached higher price levels even though they were already trading at extremely high price to earnings ratios. Although many investors consider earnings as the major factor that affects the price of the stock, that is not necessarily the case. On many occasions a stock could trade at a high P/E ratio and yet it continues to ascend.

The most recent example is the stock of Applied Materials, Inc. (NASDAQ symbol: AMAT). On September 30, 2003, AMAT closed at a low of $18.13 per share while the P/E was still at a sky high level of 151. From September 30, 2003, to November 6, 2003, the money flow rose tremendously, by $11 billion, and AMAT closed at a high of $25.61 per share on November 6, 2003. At that price level this equity was trading at 206 times earnings, almost unimaginable (does anyone remember the stock market bubble?).

Investors and speculators should remember that money flow can highly affect the price of a stock in either direction (if the money flow rises tremendously the stock will ascend, and if the money flow falls sharply, the stock could drop at a fast pace). Listed below are several factors that affect the price of a stock.

There are several factors that will determine whether the price of a stock will rise or fall. Below are several of these factors. Depending on the particular stock, the economy, the factor that is listed last, could affect the price of particular stock more than the factors which are listed first.

First of all, earnings affect the price of a stock. As earnings grow, the price of a stock will typically reach higher levels. If the opposite were to happen and earnings fall, the price of the stock will drop. Furthermore, earnings could affect the P/E ratio (price to earnings ratio of the stock). For example, if the stock of XYZ company was trading at $20.00 per share and earnings for the previous year were $1.00 a share, the P/E ratio was 20. If the earnings were to improve and reach $1.25 a share the following year and the P/E ratio remained stable, the stock could rise to $25.00 per share. On the other hand, if the earnings of $1.25 a share were below analyst’s expectations, the stock could fall to $12.50 and at that level would be trading at 10 times earnings. When a stock is trading at 24 times earnings, it indicates a high level of expectations by investors who expect the earnings to grow. On the other hand, when the price of a stock falls to a P/E of 12, it indicates that expectations are low. Typically, stocks should be bought when the P/E ratios are low, and sold when P/E ratios are high.

Second of all, is money flow. When there are more buyers than sellers of a particular stock and more money flows into the stock, the price of the stock will increase. For example, if within two minutes of time there are 30 sellers of XYZ stock, each selling 100 shares, and during the same time there are 100 buyers of XYZ stock, each willing to buy 100 shares, the money flow will increase and the price of the stock will move higher. This could happen for a few minutes, a few hours, or the trend could last for several months and as more investors want to buy the stock, the price will continue its strong upward momentum. On the other hand, when there are fewer buyers than sellers, the opposite will happen and the price of the stock will continue to drop.

Third of all, book value, or shareholder equity, plays an important part in the price of a stock. Depending on the stock, it could be trading at 2 to 4 times book value. When a stock starts trading below 1.5 times its book value, it presents a buying opportunity for value investors.

Fourth of all, past performance of a stock provides investors with an insight into the pace of growth of a particular stock. If during the previous ten years the revenues of XYZ Corporation have risen 19 percent annually, earnings have risen 22 percent annually, and the stock has risen seven-fold in value, as long as the management continues on the same course, the stock could provide similar returns over the next ten years. Investors should be aware that past performance does not guarantee future results, but it does give investors insight as to at what pace the stock could appreciate.

Fifth of all, investors’ outlook on the market is among the factors that affect the price of stocks. If the outlook is positive (bullish), the stocks will reach higher levels. On the other hand, if the outlook is negative (bearish), stocks could drop in a very short time. During recent years, as stocks rocketed upwards and some started trading at 40 times earnings (versus the historical average of 19), some analysts stated that this is a different scenario and such high P/E levels are justifiable. Although such P/E levels could be justifiable for stocks that generate an annual growth of revenues and earnings above 20 percent, the remaining stocks might not deserve such valuation. Furthermore, as the media distributes vast amounts of positive news about the market, investors continue to have a positive outlook and stocks reach new highs. On the other hand, as the media starts providing negative news, such as suggesting the Fed could raise interest rates, or stating that the economy is overheating, or comparing the market to a bubble ready to burst, investors’ outlook could change almost immediately and the prices of stocks could drop literally overnight.

Sixth of all, the economy is among the major factors that affect the price of a stock. For example, a blue chip stock that was trading at $70.00 a share and a P/E of 20 could drop to $35.00 a share and a P/E of 10 at a fast pace, as the expansionary cycle ends and recession begins. As long as the company has a strong balance sheet and the level of debt is not excessive, that is the time to buy the stock. Investors who already own the stock should use this opportunity to acquire more shares.

There are more factors that influence stock prices. Depending on investors’ outlook on the market, these factors could propel stocks higher, or bring them to lower levels. Investors should always evaluate all of the factors before buying stocks.

Speculators are once again chasing hot technology stocks. While there is a lot of money pouring into these tech stocks, the market will continue to be momentum driven. Although some of the tech stocks have already risen ten-fold, they could reach a higher level. When this short-term rally runs out of steam you don’t want to be the last speculator to sell a stock when it has reached its bottom.

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 secular bear market several more months to reach its bottom.

As of Thursday, November 20, 2003, after the market closed, the asset allocation in our Model Portfolio was 14 percent equities and 86 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 semiconductors could accelerate in 2004 and along with it, the sales of chip processing equipment could grow. 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.

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 of 2001, we stated that AMAT could fall to $39.00 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. After the stock split there were 320 shares in our Model Portfolio. Immediately after the company issued the stock split, this stock reversed its uptrend 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.

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 and this equity closed at $14.31 per share on May 16, 2003. On July 21, 2003, AMAT closed at $17.87 per share.

To our surprise, the money flow rose $4.2 billion during the following four weeks and AMAT proceeded to test its resistance level. This equity closed at a high of $20.73 per share on August 21, 2003, and we stated: “At such a level this equity is overvalued and short-term may have no other way to go, but down.” On September 22, 2003, AMAT closed at $19.67 per share.

Afterwards, as the money flow rose $5 billion, the stock reversed its short-term downtrend and proceeded to ascend. On October 20, 2003, this equity closed at $21.60 per share. During the next three weeks, as the money flow rose $5.4 billion this stock proceeded to ascend. On November 6, 2003, AMAT closed at a high level of $25.61 per share. At that price level this equity was trading at 206 times earnings, almost unimaginable (does anyone remember the stock market bubble?). On November 20, 2003, this stock closed at $22.85 per share and is fully valued.

While there is a very slight probability, depending on the positive money flow and other factors, that this equity could ascend and reach approximately $27.31 per share during the next 6 weeks, longer-term this stock could fall.

If the money flow were to fall $19.7 billion during the next five months, this equity could fall to a low level. This equity could fall at a slower pace than we originally believed and although it may not reach our initial projected low of $6.27 per share, it could close at a low of $10.35 per share by mid April 2004.

Long-term, this stock could reach $48.25 per share, perhaps by 2007. There are 160 shares of AMAT left in our Model Portfolio and these will be held long-term.

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. To find out more about CMGI, Inc., visit the company’s web site at www.CMGI.com.

This year, CMGI, Inc., has sold some of its core holdings. Among them were the Alta Vista unit and uBid, Inc. Due to these events we have revised our long-term sell target level from $59.75 to $17.50 per share.

The shares of CMGI, Inc., closed at a low of $0.29 per share on August 19, 2002. Afterwards, as the money flow rose $534 million during the following 11 months, this equity proceeded to ascend. On November 20, 2003, this stock closed at $1.96 per share and we maintain our rating of a speculative long-term buy. We would like to remind investors that the risk of owning this stock is high; therefore it should only be bought by speculators and should not account for more than three percent of one’s portfolio.

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.

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 July 21, 2003, this stock closed at $17.93 per share. We have been projecting that this equity may test its $8.60 support level by mid September 2003. It hasn’t happened because the money flow started rising at a fast pace and since June 2003, rose $10.3 billion by November 12, 2003. Although we may have been wrong about the time frame when this equity could reach its low level, only time will tell if we were correct about the price that this stock could drop to.

This equity had risen at a slow pace and it could also fall at a slow pace. On November 20, 2003, this equity closed at $21.94 per share and is fully valued. In our opinion the stocks in the technology sector are overvalued and if the money flow were to fall, CSCO could slowly descend and may reach our buy target level of approximately $8.60 per share by April 2004. At such a level we would rate this stock a strong buy. Investors who already own this stock could add to their position.

In our opinion, Cisco Systems, Inc., could resume its acquisition spree and the annual revenues may reach approximately $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.

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. There are still 100 shares of CSCO left in our Model Portfolio and these will be held long-term.

Compuware Corporation (NASDAQ symbol: CPWR) makes software that manages corporate networks and improves productivity. The stock of Compuware Corporation reached a high of $40.00 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.

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. Afterwards, as the money flow rose $460 million during the following 10 months, this equity proceeded to ascend and closed at a high of $6.38 per share on June 18, 2003.

On September 3, 2003, CPWR closed at $6.40 per share. Afterwards, as the money flow proceeded to descend, this stock fell and closed at $5.22 per share on November 20, 2003. Buy this stock on a pullback, preferably below $2.95 per share.

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 has 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 and closed at $0.60 on January 13, 2003.

On May 16, 2003, we lowered our buy target level from $0.15 to $0.10 per warrant. These warrants continued to descend at a slow pace. On August 21, 2003, these warrants closed at $0.10 per warrant and could continue to descend; therefore we have lowered our buy target level to $0.05 per warrant. On November 20, 2003, these warrants closed at $0.14 per warrant. The risk of owning these warrants is high; therefore only speculators should buy them when they reach our buy target level, perhaps in December 2003.

Internet Capital Group (NASDAQ symbol: ICGE) is a venture capital group that owns a stake in approximately 30 Internet companies.

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 2008. At such a level all of the shares will be sold immediately.

On June 2, 2003, ICGE closed at a high of $0.82 per share and then proceeded to descend. As the money flow fell $37 million during the following 25 days, this equity descended and closed at a low of $0.46 per share on June 27, 2003. On November 20, 2003, this stock closed at $0.38 per share, and we maintain our rating of a speculative long-term buy. We would like to remind investors that the risk of owning this stock is high; therefore it should only be bought by speculators and should not account for more than three percent of one’s portfolio.

JDS Uniphase Corporation (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 $2.3 billion during the following 8 months, this stock proceeded to ascend and closed at a high of $4.28 per share on June 5, 2003.

As the money flow rose, this equity proceeded to ascend and closed at $4.28 per share on June 5, 2003. On August 21, 2003, JDSU closed at $3.50 per share and we stated: “If the money flow were to fall $420 million during the following 7 weeks, this stock could test its support level of $1.62 per share by mid October 2003 and speculators may want to buy it.”

The money flow rose by $1 billion during the next three weeks and the stock proceeded to ascend. On September 9, 2003, JDSU closed at $4.20 per share. The stock was not able to break through its resistance level of $4.28, reversed its course and proceeded in a downtrend.

On November 20, 2003, this equity closed at $3.28 per share. This stock could fall at a slow pace. If the money flow were to fall $2.8 billion during the next five months, this stock could fall to $1.62 per share, perhaps by the end of March 2004.

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 of JDSU will be sold as soon as this stock reaches approximately $12.26 per share, perhaps in the second half of 2005.

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 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 September 22, 2003, we added several stocks to our list. Although there may not be enough cash in our Model Portfolio to buy all of these stocks, we do not anticipate that all of the equities that are on our buy list will reach our buy target levels. Our list is not in an alphabetical order. The stocks are listed with the most desirable to own listed first and the less desirable listed last.

Although the market did not fall in September, or October 2003, it could still fall during the next 6 months. While some of the tech stocks could drop sharply in a very short time, other stocks could fall at a slow pace; therefore we will wait patiently until the stocks on our list reach our buy target levels.

Nasdaq-100 Trust (AMEX symbol: QQQ) is a unit investment trust that invests in the largest companies traded on NASDAQ. The trust issues tracking stocks on the Nasdaq-100 Index called QQQ’s, or Q’s. At the height of the Internet frenzy, QQQ’s closed at a high level of $117.55 in April 2000, their price doubling in less than a year.

Then, as the money flow proceeded to fall, QQQ’s, or cubes, as the tracking stock is commonly called, closed at a low level of $28.19 on September 21, 2001. Afterwards, as money flow rose $20 billion, cubes proceeded to test their resistance level and closed at $42.85 on December 5, 2001.

As the money flow fell, QQQ’s closed at $33.52 on April 12, 2002. At that time we stated: “There is a probability that cubes may test their support level of $28.19 by the end of May 2002.” Afterwards, money flow fell $18 billion during the next four weeks and QQQ”s closed at $28.70 on May 7, 2002.

Immediately afterwards, money flow rose $14.4 billion during the next ten days and QQQ’s closed at a high of $32.86 on May 16, 2002, then again resumed their downtrend. In May 2003, we stated: “The risk of owning shares in this unit investment trust is much smaller than that of owning only a few stocks. Nevertheless, speculators who plan to trade cubes short-term will have to be aware that this unit investment trust could fall below its recent support level.”

On September 18, 2003, cubes closed at $34.78 and were fully valued. To our surprise, money flow rose $6.7 billion and QQQ’s maintained their uptrend for a few more weeks. Cubes closed at a high level of $35.81 on November 12, 2003. If the money flow were to fall $58 billion during the next 6 months, cubes could fall to a low of $20.75, perhaps by April 2004. At such a level we would rate these a short-term buy and 250 QQQ’s would be bought and added to our Model Portfolio.

International Business Machines Corporation (NYSE symbol: IBM) is the world’s largest manufacturer of computer hardware. The stock of Big Blue closed at a high of $133.62 per share on September 1, 2000. Since then this equity is in an overall long-term downtrend. The long-term fast stochastic indicator generated a sell signal on May 16, 2003. In June 2003, we stated: “This stock could continue its downtrend until July 20, 2003, and may fall to an intraday low of $72.95 per share. Although this equity could try to test its recent resistance level and may reach approximately $80.05 per share by August 18, 2003, the long-term trend is still down.”

As the money flow proceeded to descend, this equity fell and closed at a low of $79.85 per share on August 5, 2003. Then, as the money flow rose $2.3 billion during the next 12 days, the stock of Big Blue closed at a high of $83.52 per share on August 18, 2003, slightly above the level we projected in June 2003.

Afterwards, money flow rose $6.5 billion during the next four weeks and this equity proceeded to rise at a fast pace. This stock broke through its previous resistance level and closed at a high of $93.28 per share on September 19, 2003. Just 11 days later, on September 30, 2003, this equity tested its support level and closed at a low of $88.33 per share.

As the money flow reversed its course and once again proceeded to ascend, the stock of Big Blue proceeded to rise and closed at $93.20 per share on October 13, 2003. Afterwards, as the money flow fell $3.4 billion during the next five weeks, this equity proceeded to descend and closed at $88.39 per share on November 20, 2003. Depending on the positive money flow and several other factors, this equity could reach a high of approximately $102.75 per share, perhaps by mid January 2004, and at such level would be fully valued.

We are maintaining our buy target level of $55.07 and believe International Business Machines Corporation could reach it by April 2004.

On August 21, 2003, we decided to add International Business Machines Corporation to our buy list. If this stock were to fall to our projected buy target level of $55.07 per share by April 2004, then 100 shares would be bought and added to our Model Portfolio.

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. If the money flow were to fall $40 billion during the next five months, this equity could descend to a low level of $16.75 per share, perhaps by mid April 2004. At such a level 400 shares of Intel Corporation would be bought and added to our Model Portfolio.

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.

There is a slight probability that AMD could reach our target level of $2.50 per share by mid April 2004. If this equity were to reach such a low level, 1,000 shares would be bought immediately and added to our Model Portfolio.

Rite Aid Corporation (NYSE symbol: RAD) is the third largest drug store chain in the United States. The company operates approximately 3,400 drug stores in 29 states.

In July 2003, we stated: “If the money flow were to rise sharply during the next four weeks, this equity could ascend to approximately $6.35 per share by the end of August 2003 and all of the shares held in our Model Portfolio would be sold.” The money flow did not rise sharply and RAD appeared to reverse its uptrend, that’s why 400 shares of RAD that were held in our Model Portfolio were sold at $4.41 per share. If this stock were to fall to approximately $2.45 per share, perhaps by June 2004, then 700 shares of RAD would be bought and once again added to our Model Portfolio.

Applied Materials, Inc., (NASDAQ symbol: AMAT) is a major supplier of wafer processing equipment that is used to produce semiconductors. If the money flow were to fall $19.7 billion during the next five months, this equity could fall to a low level. This equity could fall at a slower pace than we originally believed and although it may not reach our initial projected low of $6.27 per share, it could close at a low of $10.35 per share by mid April 2004. If the stock of Applied Materials, Inc., were to fall to approximately $11.85 per share during the next 6 months, 400 shares would be bought immediately and added to our Model Portfolio.

On April 17, 2003, we added the warrants of Elan Corporation, plc, to our buy list. These warrants trade on NASDAQ under the symbol ELANZ and expire on August 31, 2005. As the 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 and closed at $0.60 on January 13, 2003.

Our initial buy target level for these warrants was $0.15 per warrant. On August 21, 2003, we lowered our buy target level to $0.05 per warrant. As soon as these warrants reach our buy target level, perhaps by mid December 2003, then 5,000 warrants will be bought and added to the 500 warrants that are already held in our Model Portfolio. The risk of owning these warrants is high; therefore only speculators should buy them.

Cisco Systems, Inc., (NASDAQ symbol: CSCO) makes data networking equipment, data switches, and networking gear. Cisco Systems continues to expand its market share. On November 12, 2003, this stock closed at a high of $22.97 per share. At that level the stock was fully valued. If the money flow were to fall $26 billion during the next five months, this stock could descend to a low of $10.60 per share by mid April 2004, and 300 shares would be bought and added to our Model Portfolio.

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. If the stock of LSI Logic Corporation were to fall below $2.95 per share, perhaps by mid March 2004, then 1,000 shares would be bought and added to our Model Portfolio.

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 $45 billion in cash and short-term investments. If this equity were to fall below $21.25 per share, perhaps by mid February 2004, then 200 shares of MSFT would be bought and added 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. If the money flow were to fall $19 billion during the next 6 months, this stock could descend to a low level of $5.75 per share. At such a level 800 shares of Oracle Corporation will 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.

If the money flow were to fall $3 billion during the next five months, then this stock could descend to approximately $1.65 per share. At such a price level 800 shares of RF Micro-Devices, Inc., will be bought and added to our Model Portfolio.

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 PC’s, and networking equipment. This stock is overvalued and could fall below $14.95 per share by mid March 2004. If this stock were to fall below $14.95 per share, 100 shares will be bought and added 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.

This stock ascended at a very slow pace and it could also descend at a slow pace. If the money flow were to fall $8 billion during the next 6 months, this stock could fall to a low of $14.45, perhaps by mid May 2004. At such a level 100 shares would be bought and added to our Model Portfolio.

The stock of Motorola, Inc., (NYSE symbol: MOT) had run-up recently and closed at $14.06 per share on October 7, 2003. At such a level this stock was overvalued. We will continue to monitor this equity. If the money flow were to fall drastically, this stock could reverse its uptrend and drop to a low level of approximately $4.95 per share by mid April 2004. At such a level 300 shares would 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. In our May issue we stated: “On May 16, 2003, this stock closed at a high level of $31.19 per share and was fully valued.”

On February 10, 2003, this equity closed at a low level of $22.86 per share. Afterwards, as the money flow rose $15.6 billion during the next 8 months, this stock proceeded to ascend and on October 21, 2003, closed at $36.98 per share. This equity was overvalued at that level.

If the money flow were to fall $16 billion during the next 7 months, this stock could fall to a low of $17.75 per share, perhaps by mid May 2004. If this equity were to reach such a low level, 100 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, Inc., 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. This equity is still in an overall long-term downtrend. If the money flow were to fall $16 billion during the next five months, in a worst case scenario this equity could descend to a low level of $4.95 per ADR. If this equity were to reach such a low level then 600 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. If this stock were to reach a low of approximately $2.15 per share, four hundred shares will be bought and added to our Model Portfolio. We will wait patiently until June 2004, 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 a 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. As the Internet continues to grow and hundreds of millions of people go online during the next decade, we predict 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, most recently on June 5, 2000. After the split, the stock continued to ascend and closed at $103.18 per share on September 20, 2000.

If this stock were to reach our buy target level of $2.55 per share, perhaps by mid May 2004, speculators may want to buy it and hold it at least two years. Do not commit more than five percent of your cash to this stock.

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.

Afterwards, GLW established a strong uptrend and closed at a high of $12.01 per share on November 6, 2003. At that level this equity was fully valued. If the money flow were to fall $2.5 billion during the following 6 months, this stock could fall and reach our revised buy target level of $2.95 per share, perhaps by mid May 2004.

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.

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, but at this time this equity is in an overall long-term downtrend. This stock could fall to approximately $1.55 per share by June 2004. At such a level 800 shares would be bought and added to our Model Portfolio.

Sun Microsystems, Inc., (NASDAQ symbol: SUNW) is among the major suppliers of hardware to the Internet. The company continues to introduce competitively priced new servers in order to expand its market share.

If the money flow continues to fall, then this stock could descend and fall to $2.42 per share. Depending on the money flow and other technical indicators, this equity could maintain its downtrend and fall to a low level of $1.15 per share by mid April 2004. At such a level 1,000 shares would be bought and added to our Model Portfolio.

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 this reverse stock split were approved it 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.

We will monitor this equity and if the company were to issue a reverse stock split, the stock could pull back to a lower lever after two or three months. When this stock reaches its low level we may buy it again and add it to our Model Portfolio.

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 2003.

We will monitor this equity and if the company were to issue a reverse stock split, the stock could pull back to a lower lever after two or three months. When this stock reaches its low level we may buy it again and add it to our Model Portfolio.

Our Model Portfolio is 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 while speculators who are below thirty years of age may consider allocating 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 when they reach 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 in our Model Portfolio II. 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 it 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 will be held long-term.

Rite Aid Corporation (NYSE symbol: RAD) is the third largest drug store chain in the United States. The company operates approximately 3,600 drug stores in 29 states.

This stock appears to have reversed its uptrend and that’s why a decision was made to sell all of the shares of Ride Aid Corporation held in the Model Portfolio II.

On August 20, 2003, all 100 shares of RAD were sold at $4.41 per share. This trade generated $421.50 in cash, after commission, and it was added to the existing cash in our Model Portfolio II.

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 II.

Our initial objective was to hold this stock long-term until it reaches approximately $41.25 per share. Although short-term trend for this stock appears to be upward, long-term this equity could continue to descend. Therefore, a decision was made to sell this stock. One hundred shares of SUNW were sold on June 12, 2003, at $5.47 per share and the cash was added to existing cash in Model Portfolio II.

As of November 20, 2003, there was $1,485.26 in cash in Model Portfolio II. Cash continues to generate interest of only 0.005 percent.