Archive for April, 2007

Imitation, The Best Form of Flattery?

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April 4, 2007 | Stocks | Author Asif

A couple of months ago, I decided to feature an Irish medical research company called ICON plc (ICON) in the February 2007 edition of my free investment newsletter. The focus of that newsletter was closed-end funds and while I decided to add ICON to the SINLetter model portfolio, I was only able to write very briefly about the company due to time constraints. There was very little mention about ICON in the mainstream financial media and the only reason I discovered this company was because I noticed its hiring activity while looking for a new IT project. A few days after writing about ICON, I noticed this article on SeekingAlpha by Mr. Hans Wagner, who runs a subscription based stock picking website called Trading Online Markets.

While I was surprised that someone else decided to write about this little known company shortly after I wrote about it, I was thrilled to see that Mr. Wagner’s article covered ICON in greater detail and I mentioned it to subscribers in the portfolio performance section of my March newsletter.

A month later, I decided to write about EMC Corp (EMC) in the April 2007 edition of SINLetter primarily because of EMC’s decision to file an IPO for its subsidiary VMware this summer. Imagine my surprise when I noticed this article about EMC in SeekingAlpha by Hans Wagner less than a week after I sent my newsletter out to subscribers.  I was not surprised by the fact that Mr. Wagner decided to write about EMC and the VMware IPO, which was commonly known to many market observers, but by the actual content of his article. To illustrate my point, check out the following paragraphs from my writeup about EMC,

“Beyond the data storage business, the reason I am interested in EMC is because of a subsidiary of EMC called VMware that was acquired by EMC in 2004 for $635 million. VMware sells virtualization software that allows companies to run multiple “virtual” machines on a single server or on distributed hardware. Virtualization allows companies to utilize hardware more effectively and this is something that is very appealing to power conscious large enterprises. AMD took market share from Intel primarily because of its power efficient line of server chips last year (if you live in the San Francisco bay area, you may have seen the huge AMD billboard on highway 101 advertising this fact). Beyond hardware efficiency, VMware also allows companies to rapidly deploy and easily maintain these virtual machines. VMware is expected to have sales of over $1 billion this year and is sometimes referred to as the fastest growing software company on the planet.

EMC has decided unlock value in its VMware subsidiary by deciding to file an IPO for VMware this summer, representing 10% of its stake in VMware. EMC’s IPO of VMWare could be valued anywhere between $600 million to $1 billion, giving VMware a valuation of between $6 billion to $10 billion. This is more than 10 times what EMC paid for VMware just three years ago and represents close to one third of EMC’s $29.2 billion market cap.”

and the following paragraphs from Mr. Wagner’s article,

“The primary near term reason I am interested in EMC is their VMware business that EMC acquitted in 2004 for $635 million. VMware virtualization software allows companies to run multiple “virtual” machines on a single server or on distributed hardware. This allows companies to utilize hardware more effectively and this is something that is very appealing to power conscious large enterprises. Beyond hardware efficiency, VMware also allows companies to rapidly deploy and easily maintain these virtual machines. VMware is expected to have sales of over $1 billion this year. Some refer to VMware as the fastest growing software company on the planet.

On February 7, 2007 EMC announced they intend to IPO 10% of its stake in VMware sometime during the summer of 2007. This IPO of VMWare could be valued anywhere between $600 million to $1 billion. This would give VMware a market value of $6 billion to $10 billion, more than 10 times what EMC paid for VMware in 2004. EMC’s market cap is $29.8 billion market cap, making VMware worth a third of the company.”

People have borrowed my ideas in the past and I have borrowed ideas from other investors. In fact the famous investor and founder of Fisher Investments, Philip Fisher also mentions other investors as a source of ideas in his book Common Stocks and Uncommon Profits. But it is highly disrespectful to borrow both ideas and content from a free website without permission or acknowledgement and then make your subscribers pay for those ideas and content.

One might wonder why I would be concerned about my content being copied given that SINLetter is free and I allow websites like SeekingAlpha to redistribute my content. While I have not yet determined what I would like to do with SINLetter, I am trying to build a track record and traffic in case I decide to launch a fund or a subscription service in the future. Someone using my content without permission or acknowledgement does not help my goals in the least bit and can actually have a negative effect as illustrated below.

My content being reproduced without my knowledge has already happened twice in the past but I did not write about it on this blog. The first time this happened, a website was posting my entire newsletter without permission and all of a sudden SINLetter disappeared from search engine results because Google and other search engines imposed the “duplicate content penalty” on my website. I asked this website to stop posting my content and after a few weeks my ranking was restored on the search engines. Given that almost a third of my traffic comes from search engines, it can be clearly detrimental to have almost all your content copied by another website.

While I cannot claim that Mr Wagner did something similar, I felt that it was time I spoke up about this so that subscribers to websites like Trading Online Markets would realize exactly what they are getting for their money.

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SINLetter – April 2007

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April 1, 2007 | Newsletters | Author Asif

Welcome to edition 21 of Suria Investment Newsletter (SINLetter), a free monthly investment newsletter. The objective of this newsletter is to provide you with unbiased initial research and basic facts about individual stocks and other financial instruments so that you can research them further before deciding to add them to your portfolio or not. If you are reading this and are not a subscriber, you can subscribe by going to www.sinletter.com/subscribe.aspx and you will start receiving this newsletter from next month. I have provided relevant links throughout this newsletter, but if you have any questions or comments, feel free to write to me.

March Blog Entries:

I did not get a chance to blog much in March as a new IT project took up a lot of my time. I expect this time constraint to continue in the coming months but will try to post something at least once a week and plan to continue writing these newsletters. As mentioned in the blog entry Selling our NEW Position For a Gain of 850%, I did make some changes to the SINLetter model portfolio by selling our remaining put options in the sub-prime mortgage lender New Century Financial (NEWC.PK). Other blog entries posted in March that may be of interest to you include,

  1. Stocks That Almost Made The Cut: March 2007
  2. Medifast Slims Down
  3. Two Old Picks Make A Strong Comeback

In case you do not receive blog entries by email, you can still subscribe to receive blog entries by email here.

Portfolio Performance:

A volatile month of March and an equally volatile first quarter ended with all the major indices managing to eke out tiny gains in March. Only the Dow Jones Industrial Average dropped 0.87% in the first quarter of 2007. A 11.92% gain in last month’s pick Ambassadors Group (EPAX) combined with almost surreal appreciation in some of our put options offset weakness in other parts of the portfolio and helped us outperform the major indices in March. The monthly, quarterly and “since inception” performance is tabulated below.

Performance Metric Dow S&P 500 Nasdaq SINLetter
March 2007 0.70% 1.00% 0.23% 1.89%
First Quarter 2007 0.87 % 0.18% 0.26% 4.04%
Since Inception (Aug 2005) 16.29% 15.02% 10.31% 90.59%

It looks like calls for an early recovery in the housing market and the possibility of an interest rate cut by the federal reserve (the “fed”) have been met with the harsh reality that new home sales continued to decline, home builder confidence remains low, the consumer confidence index dropped more than expected in March and the fed remains biased towards fighting inflation. Without the interest rate cut shot-in-the-arm that some in the housing/mortgage industry have been looking for, the sector is not likely to recover this year and any bounce in home builder or mortgage lender stocks is likely to be a dead cat bounce. The two bright spots for the economy were the upward revision of Q4 2006 GDP to 2.5% from the previously reported 2.2% and a drop in new jobless claims. However it should be noted that this rise in the GDP was primarily driven by growth in inventories.

Based on my negative outlook of the housing sector (I have been unwaveringly negative since September 2005), I am going to continue holding our put options on the mortgage lender Countrywide Financial (CFCSH.X), which are now up 188.62% in less than three months. While our put LEAPs on St Joe (JOE) and trucking company YRC Worldwide (YRCW) recovered in March, they are still in negative territory. I plan to continue holding these LEAPs as a hedge against an economic slowdown.

While our overall portfolio has gone up, a few stocks in our portfolio were hit hard in March. WisdomTree Investments (WSDT.PK) swung from a profit of 10.25% to a loss of 5.41%. Given the lack of concrete financial information from this company, which is listed on the pink sheets, the price of WisdomTree is currently tied to its ability to increase assets under management (AUM). As I mentioned in the blog entry WisdomTree AUM Climbs to $2.4 billion, assets have been increasing partly because the market has been going up.

With the market almost flat during March and Q1 2007, the stock was probably down on the perception that growth has slowed down at WisdomTree. While a majority of their domestic ETFs were down for the month of February, most of their international ETFs posted a gain. They have not yet posted the March performance numbers on their website, but from a quick check on Yahoo Finance, it looks like other than a single domestic ETF (DON), the other domestic ETFs posted a tiny gain. Most of their international ETFs continued to do well in March, with WisdomTree Europe Small Cap Dividend Fund (DFE) and WisdomTree Pacific ex-Japan Hi-Yield Equity Fund (DNH) posting gains of almost 6% in a single month. Unless there were significant fund outflows in March, I doubt growth has slowed down at WisdomTree and plan to continue holding the stock for now.

SanDisk (SNDK) recovered lost ground in March after benefiting from a series of upgrades and signing a patent cross-licensing agreement with Hynix Semiconductor. The stock is now down only 8.94% in the model portfolio when compared to being down 24.28% last month. I still like the long-term prospects of SanDisk and am glad I did not sell into the weakness last month.

Barclays Bank (BCS) had a highly volatile month, dropping fast on news that it had exposure to the US subprime mortgage sector through $900 million in mortgage loans it had bought from near bankrupt New Century Financial (NEWC.PK). This drop was the perfect opportunity to start a position in Barclays as the dividend yield of this premier British bank jumped up to 5.26% (better than the yield of 3 month treasury bills and most CDs) and I am still kicking myself (I do that frequently) for not acting quickly enough. The company launched a bid for Netherlands based bank ABN Amro (ABN) towards the end of March and the stock recovered rapidly.

Gold had a volatile month, dropping almost 5% in early March before recovering to close the month at $663.30 per troy ounce, a loss of $4.70 or 0.70%.

Portfolio Readjustment:

I am going to use the cash generated from the sale of our New Century Financial put options along with some existing cash to finance the purchase of 600 shares of EMC Corp (EMC).

How Did the Dogs Do?

As the first quarter of 2007 comes to a close, I figured it would be a good idea to see how the Dogs of the Dow have performed. After excellent gains in 2006, I was cautious about the prospects of the dogs this year and that caution was well founded as the dogs posted a gain of just 0.19% in the first quarter of 2007, barely outperforming the Dow Jones Industrial Average and actually underperforming the Nasdaq and the Russell 2000 as you can see from the following list of the current Dogs of the Dow. If the universe of stocks I could pick from was restricted to the ten dogs of the dow, I would pick General Electric and AT&T.

2007 Dogs of the Dow

Company Name Symbol Price Then* Price Now % Change
Pfizer PFE $25.90 $25.26 -2.47%
Verizon VZ $37.24 $37.92 1.83%
Altria MO $85.82 $87.81 2.32%
AT&T T $35.75 $39.43 10.29%
Citigroup C $55.70 $51.34 -7.83%
Merck MRK $43.60 $44.17 1.31%
General Motors GM $30.72 $30.64 -0.26%
DuPont DD $48.71 $49.43 1.48%
General Electric GE $37.21 $35.36 -4.97%
JP Morgan Chase JPM $48.30 $48.38 0.17%
Total Returns Excluding Dividends 0.19%

* Price as of market close on Dec 29th, 2006

Dogs Of The Dow Performance Vs Major Indices

2007 Dogs Of The Dow 0.19%
Dow Jones Industrial Average -0.87%
S&P 500 0.18%
Nasdaq 0.26%
Russell 2000 1.66%

Performance of the Ten Stocks For 2007:

Despite a plunge in Amgen (AMGN) due to unsuccessful trials for its cancer and anemia drugs, the ten stocks for 2007 that I picked in December 2006 have done very well, posting an average gain of 8% in the first quarter thanks to solid double digit gains in Landec (LNDC), Alvarion (ALVR), Teva Pharmaceutical (TEVA), Nautilus (NLS) and Brazilian aircraft manufacturer Embraer (ERJ). These gains do not include any regular dividends or the $4 per share special dividend by Diamond Offshore Drilling (DO).

Ten Stocks for 2007

Company Name Symbol Price Then* Price Now % Change
Amgen AMGN $68.31 $55.88 -18.2%
Diamond Offshore DO $79.94 $80.95 1.26%
Landec LNDC $10.76 $14.18 31.78%
Nautilus NLS $14.00 $15.43 10.21%
Airspan Networks AIRN $3.70 $3.8 2.7%
Barclays Bank BCS $58.14 $56.94 -2.06%
Teva Pharmaceutical TEVA $31.08 $37.43 20.43%
Embraer ERJ $41.43 $45.86 10.69%
Banco Santander Chile SAN $48.16 $49.87 3.55%
Alvarion ALVR $6.72 $8.05 19.79%
Total Returns Excluding Dividends 8.02%

* Price as of market close on Dec 29th, 2006

Performance of the Ten Stocks for 2007 Vs Major Indices

Ten Stocks For 2007 8.02%
Dow Jones Industrial Average -0.87%
S&P 500 0.18%
Nasdaq 0.26%
Russell 2000 1.66%

Spinoffs:

Our pick from the March 2007 edition of SINLetter, Ambassadors Group (EPAX), performed well with a gain of 11.92% in a single month while most major market indices were essentially flat. However this performance pales in comparison to the 400% the stock has gained since it was spun off from its parent company Ambassadors International (AMIE) a little over five years ago. In fact the parent company has also done very well, gaining 300% since the spin-off was completed.

Another example of a company that was spun off from its parent and has performed very well is Chipotle Mexican Grill (CMG), which was spun off from McDonald’s (MCD) in January 2006. After raising the IPO price a couple of times, Chipotle (their yummy burritos are not to be missed) was finally priced at $22 per share and closed the first day of trading at $44. The stock currently trades at $62.10 per share. McDonald’s has also performed well, gaining almost 30% since the Chipotle IPO.

Numerous studies have shown that companies that are spun off tend to outperform the market over the next few years and even the parent company that is spinning off one of its subsidiaries or divisions tends to outperform the S&P 500. Any theory or strategy that becomes widely known loses its edge over time and recent studies have shown that the extent to which spun off companies outperform the market has narrowed. However this could also be a function of the different time periods these studies looked at and opportunities abound in this often overlooked area of the market.

There are relatively few websites/newsletters dedicated to spin-offs. One of these websites is Spinoff and Reorg Profiles, which publishes a monthly newsletter edited by William Mitchell, a former hedge fund analyst. I contacted William to see if he would be willing to provide me with a list of spin-offs that have been announced in the first quarter of 2007. William was kind enough to share his data with us and the list of recent spin-offs is given below followed by some amusing and informative notes. While the target audience of the Spinoff and Reorg Profiles newsletter is institutional investors, I believe sophisticated individual investors could also benefit from the wealth of information in William’s newsletters.

List of Spin-offs Announced in the First Quarter of 2007

Spinoff Parent Type Domicile Date Market Cap
Spectra Energy (NYSE: SE) Duke Energy (NYSE:  DUK) Distrib USA 1/2/2007 > $2b
Indiabulls Real Estate Ltd. Indiabulls Financial Svcs (532544.BO) Distrib India 1/9/2007 $500m – $2b
Wire and Wireless (WWIL) Zee Telefilms (505537.BO) Distrib India 1/10/2007
Zee News Limited (ZNL) Zee Telefilms (505537.BO) Distrib India 1/10/2007
Harris Stratex Networks (Nasdaq: HSTX) Harris Microwave (HRS.N) Merger USA 1/26/2007 > $2b
TravelCenters of America (Amex: TA) Hospitality Trust (NYSE: HPT) Distrib USA 1/26/2007 $500m – $2b
Southland Health Services Bad Toys Inc. (BTYH.OB) Distrib USA 2/2/2007 < $100m
Network 18 Fincap (532798.BO) Television Eighteen (532299.BO) Distrib India 2/2/2007 < $100m
Verichip (Nasdaq:  CHIP) Applied Digital Solns. (Nasdaq: ADSX) IPO USA 2/8/2007 < $100m
Time Warner Cable (TWCAV.PK, TWC.N) Time Warner (TWX.N) Distrib USA 2/13/2007 > $2b
*OptiCon Systems Hathaway Corporation (HWYI.PK) Distrib USA 2/19/2007 < $100m
*Plastinum Corporation New Generation Holdings (NGPX.OB) Distrib USA 2/20/2007 < $100m
Emperor Capital Group Emperor Intl Hldgs Ltd (0163.HK) Distrib HK 3/1/2007 < $100m
*NuPower Resources (NUP.AX) Arafura Resources Ltd (ARU.AX) Distrib Australia 3/5/2007 < $100m
Domtar (NYSE: UFS) Weyerhaeuser (NYSE: WY) Distrib /Merger USA 3/7/2007 $500m – $2b
Xinhua Finance Media (Nasdaq: XFML) Xinhua Finance (9399.T, XHFNY.OB) IPO China 3/9/2007 $500m – $2b
China Agri Holdings (0606.HK) COFCO Intl. Ltd. (0506.HK) IPO HK 3/12/2007 $500m – $2b
Kraft Foods Inc (NYSE: KFT) Altria (MO.N) Distrib USA 3/16/2007 > $2b
Organon BioSciences Akzo Nobel (Nasdaq:  AKZOY) IPO Holland 3/27/2007 > $2b
KBR (NYSE: KBR) Halliburton (NYSE:  HAL) Exchange USA 3/29/2007 > $2b
Broadridge Financial Solns (NYSE: BR) Automatic Data Processing (NYSE: ADP) Distrib USA 3/30/2007 > $2b
*Tekmira Pharmaceuticals Inex Pharmaceuticals (Toronto: IEX) Distrib Canada 3/31/2007 < $100m
*Southern Uranium Ltd (SNU.ASX) Southern Gold Ltd (SAU.AX) IPO Australia Mar-07 < $100m
Notes
“*” indicates promotional stocks — typically large losses relative to revenue, exciting speculative story, etc. Extra credit for companies with “con” built right into the name, e.g. “Opticon.”
Akzo Nobel agreed to sell Organon to Schering-Plough on 3/11, making Akzo an interesting stub: EUR15b market cap, soon to collect EUR11b for Organon.

For further information about spinoffs, check out this excellent blog entry and this second part at Old Niu’s blog. I also contacted George of Fat Pitch Financials to share his thoughts about a recent spinoff, Sally Beauty Holdings, that he has written about frequently and his thoughts are given below.

Sally Beauty Holdings (SBH) $9.19

Asif invited me this week to discuss my investment in Sally Beauty Holdings for SINLetter. I am George, the author of the value investing blog, Fat Pitch Financials, and the founder of the community powered investment site, Value Investing News. I am honored to be a guest author in this edition of SINLetter.

Sally Beauty Holdings was spun off from Alberto-Culver on November 16, 2007. Alberto-Culver, the beauty and hair care products company that makes VO5, TRESemme, St. Ives, and several other brand name beauty products, gave their shareholders one share in the newly spun off Sally Beauty, for each share of ACV they owned. I purchased shares in Sally Beauty Holdings right after the spin off on November 17th in my Special Situations Real Money Portfolio, which is the model portfolio for my special situations tracking service called Fat Pitch Financials Contributor’s Corner.

Sally Beauty Holdings is one of the largest beauty supply distributors in the world, selling hair and skin care goods, cosmetics, and styling aids through direct sales and in stores in the U.S., Canada, Germany, Japan, and Britain. I believe Sally Beauty has a sustainable competitive advantage in its distribution network. Academic research on spinoffs by John J. McConnell and Alexei V. Ovtchinnikov show that investors earn an above normal rate of return by investing in recently spun off subsidiaries. In addition, based on the criteria laid out by Joel Greenblatt in his book, You Can Be a Stock Market Genius, I believed the newly spun off Sally Beauty Holdings was being undervalued and would likely outperform in the future.

Here’s a quick run down of what made Sally Beauty Holdings a special situation opportunity that appeared to be a “fat pitch” to me:

  1. Institutions didn’t want it. I discovered that Sally Beauty would not be added to the S&P Composite 1500 index. This means that index funds will have to dump the shares of Sally Beauty that they receive and thus depress the market price of this stock.
  2. Insiders want it. The new management of Sally Beauty will be highly motivated to boost the value of this stock since they will be receiving generous stock option grants.
  3. A previously hidden investment opportunity is uncovered by this spinoff transaction. Because Alberto-Culver produced many of the products that Sally Holdings distributed, other beauty and hair care product manufacturers that would potentially use Sally Beauty to distribute their products were concerned about potential conflicts of interest. This spinoff frees up Sally Beauty and allows it to now more fully compete to expand their distribution of a wider range of products from a larger base of manufacturers. This seemed like a great move to me. However, it seems to have not worked 100% since Sally Beauty lost exclusive rights to distribute products of the L’Oreal Professional Products Division.
  4. Leverage! Sally Beauty will also be loaded up with debt ($1.85 billion) and thus be highly leveraged, which is a good thing for spinoffs according to Joel Greenblatt. This leverage will act to turbo charge returns to shareholders if the company is able to generate returns greater than their costs of capital. Based on the numbers I’ve seen for Sally Holdings, I don’t think this will be a problem.
  5. Margin of Safety. I estimate that the intrinsic value of SBH shares is about $10. This is a fairly conservative estimate. I purchased my shares for $7.42, but SBH is now trading $9.19.
  6. Clayton, Dubilier & Rice owns almost half of the equity in this spin-off. Having this savvy private equity firm involved with SBH is likely a good sign. Sally Beauty Holdings could easily be bought out at any time.

Since I purchased Sally Beauty Holdings, management is beginning to flex their independence. Last month, Sally Beauty Holdings announced they acquired Salon Services. Chapelton 21 Limited’s Salon Services includes over 80 stores with a combination of company-owned and franchised locations in the United Kingdom, Ireland, Germany, and Spain. The international expansion of Sally Beauty Holdings provides an excellent growth opportunity for this wholesaler.

Growth is already occurring. For the quarter ending December 31, 2006, Sally Beauty’s net sales have increased 7.4% since the previous year’s quarter. Gross profits are up 6.6%. Cash flows from operating activities are up a whopping 47%. Net income however is down over $30 million from the previous year’s quarter primarily due to interest and transaction expenses. I expect that net income will start to climb after the independent Sally Beauty Holdings gets a few more quarters under its belt.

My original investment criteria for Sally Beauty Holdings appear to still be intact. If you find this spinoff as compelling as I have, I believe building a position of SBH when its price drifts below $9 will still provide an entry opportunity.

The Numbers:

P/S 0.69 Cash and Investments $31.38 million
P/E 4.32 Long Term Debt $1.78 billion

Editor’s Note: As George mentions above, the company has a lot of debt on its balance sheet and it may be prudent to follow the stock for a couple of quarters before starting a position. I am going to continue monitoring Sally Beauty for now and will post an entry on the blog if I decide to add it to the SINLetter model portfolio.

EMC (EMC) $13.85

As the amount of data stored for both personal and business use continues to grow almost on a daily basis, the demand for data storage systems as well as reliable backup solutions remains strong. Data storage systems consisting of an array of drives are used by businesses that store large amounts of data on their servers. Data storage is one of the most profitable areas in the traditionally low margin hardware sector and EMC is the leading data storage provider with a 22% share of the enterprise market.

Beyond the data storage business, the reason I am interested in EMC is because of a subsidiary of EMC called VMware that was acquired by EMC in 2004 for $635 million. VMware sells virtualization software that allows companies to run multiple “virtual” machines on a single server or on distributed hardware. Virtualization allows companies to utilize hardware more effectively and this is something that is very appealing to power conscious large enterprises. AMD took market share from Intel primarily because of its power efficient line of server chips last year (if you live in the San Francisco bay area, you may have seen the huge AMD billboard on highway 101 advertising this fact). Beyond hardware efficiency, VMware also allows companies to rapidly deploy and easily maintain these virtual machines. VMware is expected to have sales of over $1 billion this year and is sometimes referred to as the fastest growing software company on the planet.

EMC has decided unlock value in its VMware subsidiary by deciding to file an IPO for VMware this summer, representing 10% of its stake in VMware. EMC’s IPO of VMWare could be valued anywhere between $600 million to $1 billion, giving VMware a valuation of between $6 billion to $10 billion. This is more than 10 times what EMC paid for VMware just three years ago and represents close to one third of EMC’s $29.2 billion market cap.

The stock has already bounced strongly off its July 2006 low of $9.44 and is up 46.72% since then but has hardly done anything over the last five years despite consistently growing both revenues and earnings. Based on this IPO, the growing data storage business, a low forward P/E of 17.76 and a strong balance sheet, I believe that EMC represents a good opportunity at these levels.

I am adding 600 shares of EMC to the SINLetter model portfolio and plan to start a position in my personal portfolio as well.

Every month we add featured stocks into a model portfolio started with a cash position of $100,000 on August 2, 2005. To keep calculations simple, trading costs and regular dividends are not included. Prices reflect the closing price as of the last trading day of the previous month (March 31, 2007 for the April 2007 newsletter).

Model Portfolio – March 31, 2007

Stocks

Stock Number of Shares Cost Current Value Diff ($) Diff (%) Date Added
EMC 600@13.85/share $8,310 $8,310 $0 0% 3/31/2007
EPAX 300@29.70/share $8,910 $9,972 $1,062 11.92% 2/28/2007
ICLR 250@37.30/share $9,325 $10,650 $1,325 14.21% 1/31/2007
DO 80@76.65/share $6,132 $6,476 $344 5.61% 1/3/2007
ALVR 1000@6.87/share $6,870 $8,050 $1,180 17.18% 1/3/2007
WSDT.PK 1000@7.40/share $7,400 $7,000 -$400 -5.41% 11/30/2006
BCS 200@54.06/share $10,812 $11,388 $576 5.33% 11/30/2006
SNDK 200@48.10/share $9,620 $8,760 -$860 -8.94% 10/31/2006
MAT 600@19.70/share $11,820 $16,542 $4,722 39.95% 9/30/2006
TEVA 300@35.05/share $10,515 $11,229 $714 6.79% 9/1/2006
STP 400@25.93/share $10,372 $13,844 $3,472 33.47% 7/31/2006
INTC 550@19.00/share $10,450 $10,522 $72 0.68% 6/30/2006
PG 180@55.60/share $10,008 $11,369 $1,361 13.6% 6/30/2006
LOGI 240@20.385/share $4,893 $6,679 $1,786 36.49% 5/31/2006
JNJ 200@57.65/share $11,530 $12,052 $522 4.53% 2/28/2006
MED 1000@6.955/share $6,955 $7,160 $205 2.95% 11/30/2005
TTM 900@11.94/share $10,746 $14,589 $3,843 35.76% 11/30/2005
AIRN 1700@5.62/share $9,554 $6,460 -$3,094 -32.38% 8/1/2005

Options

Option Number of Units Cost Current Value Diff ($) Diff (%) Date Added
CFCSH.X 8@2.46/contract $1,968 $5,680 $3,712 188.62% 1/3/2007
LRXMJ.X 3@7.00/contract $2,100 $1,380 -$720 -34.29% 10/31/2006
YBQMG.X 8@2.60/contract $2,080 $1,400 -$680 -32.69% 10/31/2006
Cash $1,074
Total $190,586 $90,586 90.59%

Voluntary Disclosure: I currently own shares of Airspan Networks (AIRN), Medifast (MED), Tata Motors (TTM), Logitech (LOGI), Intel (INTC), Suntech Power (STP), Teva (TEVA), Mattel (MAT), SanDisk (SNDK) and Alvarion (ALVR) as well as put options on Countrywide Financial (CFC) and YRC Worldwide (YRCW).

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