Recovering Damages

Collecting damages from brokers for investment losses will be more difficult, even in cases of excessive trading (or "churning"). A May, 1985 ruling, Dean Witter Reynolds v. Byrd, allows such claims to be arbitrated by the stock exchanges and the National Association of Securities Dealers, with compensation allowed for actual losses only. Churning has always been hard to prove anyway, since excessive trading for one investor is ofter acceptable for another.

*Source: Forbes, 60 Fifth Ave., New York 10011

Rules for Picking Common Stocks

Try to buy the industry leader or, at the very least, a company that has an important position in its industry. 

Look for an industry with a limited amount of competition. 

Avoid an industry that is an essential part of the Gross National Product or the Consumer Price Index, such as autos or steel. Reason: Highly visible companies are east targets for government pressure. 

Stick to stocks that have price/earnings ratios lower than that of the Standard & Poor's 500 index.

The stock should yield at least 4.5 % to 5%.

The company should have a record of significant dividend increases.

The market price of the stock should be close to book value per share.

Both the industry and the company should have growth rates higher than the median of American business. One rule of thumb: Sales and earnings ought to have doubled over the past decade. If they haven't, you probably won't be able to keep ahead of inflation in the years ahead. 

Stay away from companies that are too heavily in debt, especially in relation to industry-wide standards.

Look for companies where managers are owners, too. Nepotism can be a danfer in suc situations. More often, though, owner-management is a big plus. Owner-managers have a real incentive to keep the company growing, as well as to boost the stock's value. 

While you may not find a stock with all these characteristics, insist on at least these two: It should be in a growth industry with owner-management.

*Source: Roy Papp, incesment counselor, 5631 Echo Canyon Circle, Phoenix, AZ 85018

Bond-Buying Strategy

The classic bond-buying opportunity when interest rates drop: Investors can lock in high yields and defer interest income, too. One study calculates that 20-year, AAA-rated industrial bonds rose an average of 15.6% during five interest rate seings. These seings, from peak to trough, usually lasted for about one year.

Conservative strategy: AAA-rated coporates or Treasury issues.

Aggressive strategy: Lower-rated issues that swing more in price, providing greater tax deferral (and greater risk). However, even speculators avoid bonds rated lower than A when the depth of recession is not completely clear.

Easy Profit for Small Stockholders

Some companies are willing to pay a premium of 10% to buy back small holdings (under 100 shares). It helps them cut the cost of servicing minor shareholders. There's no broker's fee for selling holdings directly to the company.

Options As Indicators

Often the first sign of a rally in a stock is increased activity in its options.


Recommended: Look for newcomers on the "Most Active Options" list in The Wall Street Journal.

The R&D Indicator

The amount of money a corporation spends on research and development is a good guide to its earnings prospects. Generally, the higher the expenditure in relation to sales, the greater the company's emphasis on new-product development. 

Benchmark: 5% of annual sales spent on research is considered a sizable commitment to research spending.

*Source: Merrill Lynch Stockfinder Research Service, 165 Broadway, New York 10080

How Institutional Investors Think

High priorities for institutional investors in selecting stocks for their investment portfolios:

• Price/earnings ratio, current and projected earnings, and management competence. 
• Least Important: Product quality, the state of the US economy, and the industry group. 
• Middle ranking: Balance sheet, price per share, and long-term earnings record.

*Source: Investor Relations Update, 1730 M St., NW, Washington, DC 20036

Eight Tests for a Growth Stock

Prime growth stocks should meet all or most of the following characteristics:

1)    A dominant position in a growth industry.

2)   A long record of rising earnings and high profit margins.

3)   Superb management.

4)   A commitment to innovation and a good research program.

5)   The ability to pass on cost increases to the consumer.

6)   A strong financial position.

7)   Ready marketability of the stock.

8)   Relative immunity to consumerism and government regulation. 

*Source: Preserving Capital by John Train, Clarkson N. Potter Publishers, 225 Park Ave. S., New York 10016.

Top News from BSOM

Alternative Energy Corporation (OTCBB: BSOM) stock closed yesterday at $1.80 and so far, no changes could be observed. The company however is doing well and has made the announcement providing a detailed overview on the business plan to be undertaken in respect of manufacturing, marketing and selling the products. The new product line includes cleaning products, which are biodegradable and are immensely environment –friendly.



*Source: emailwire.com

Monday, 6/21

Good morning!!!

Stocks to be watching and that are on the rise are the following:

BSOM - Bio Solutions Manufact.  $0.08

SECI - Sector 10 Inc.  $0.082

NRTLQ - Nortel Networks  $0.0335

SILA - Silver America Inc.  $0.072

Make sure you get in on the gains while you still can!

Happy Trading!