Welcome to edition 23 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.

May Blog and Forum Entries:

Continuing the trend from the last two months, I did not blog much in May but did get a chance to write or respond to some forum posts. In case you missed them, given below are the blog entries for May and some investing related discussions in the forums,

• 2007 Dogs of the Dow: All Bark, No Bite
  
  
• Update on TCS Acquisitions
  
  
• Forum: Discussion About Medifast (MED)
  
  
• Forum: Question About United Capital Corp (AFP)
  
  
• Forum: Question About iShares Malaysia ETF (EWM)
  
  
• Forum: ETF Cheat Sheet
  
  

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Instant Online Access To Newsletters:

Despite our efforts, the investment newsletters sometimes get gobbled by spam filters and do not reach subscribers. We have designed something that will allow subscribers to access the latest newsletter online from the archives page as soon as it is sent out by email. All you have to do is login to SINLetter using your email address and your password. If you do not know your password, you can retrieve using the forgot password link. Once logged in, you can also post to our new forums.

The archives page will display the latest newsletter only to subscribers who are logged in and it will become available to everyone else a week later. How cool is that?

Portfolio Performance:

Revised GDP figures for the first quarter of 2007 showed that economic growth almost ground to a halt with GDP growth coming in at just 0.6%, down from the estimated 1.3% that was reported in late April. So while I had the direction of the economy right, I did not anticipate such a strong stock market. My slightly bearish outlook and hedging activity through put options has certainly impacted SINLetter portfolio returns over the last couple of months.

Despite a pull back in Unilever (UL) and the near annihilation of our Salesforce.com (CRM) put options, the SINLetter portfolio managed to close the month of May with only a tiny loss of 0.15% thanks to strong gains in our April pick EMC and gains in portfolio veterans Medifast (MED) and Tata Motors (TTM). However the monthly performance when compared to the major indices was dismal as you can see below. The only saving grace is that we have almost doubled our initial $100,000 in less than two years without significant monthly drops.

Performance Metric	Dow	S&P 500	Nasdaq	SINLetter
May 2007	4.32%	3.25%	3.15%	-0.15%
Since Inception (Aug 2005)	28.28%	23.9%	18.64%	94.52%

So what exactly happened to our Salesforce.com (CRM) put options? As I had expected, earnings were actually hurt by the millions of dollars in stocks options they had to expense and the stock dropped more than 5% the following day. However the options did not move much and I made the fatal mistake of holding on to them. The stock then took off on news about a partnership between Google (GOOG) and Salesforce.com, which now appears to be nothing more than hype. It looks like founder and CEO Marc Benioff's marketing genius also rubs off on the stock of Salesforce.com. At its current price of $47.25, the stock is way too high for our $40 put options to be worth anything and I am glad I only allocated 0.5% of the portfolio to this position. These options will expire by June 15th and I will probably hold on to them for another week to see if the weakness the stock exhibited on May 31st continues.

Irish medical research company ICON plc (ICLR) has done very well over the last four months, registering a gain of 24.37% since we picked it in February 2007. The company reported another outstanding quarter in late April with both earnings and revenue beating analyst forecasts. Diluted earnings per share increased 56% to 42 cents while revenue increased 38% to $136.1 million when compared to $98.5 million in the first quarter of 2006. The stock hit an all-time high of $49.65 intraday on May 29th but has retreated a little over the last two days. Given that the company raised its revenue guidance for 2007, has a solid balance sheet and a forward P/E of just 21.18, I plan to continue holding this company in the SINLetter model portfolio.

It hard enough to arrive at a fair valuation for a profitable company after taking into account factors such as current earnings, growth estimates, sector trends and even market sentiment but to try to arrive at a valuation for a start-up or a young unprofitable company is very difficult. This is one of the reasons venture capitalists tend to spread their bets on seed or early stage companies so that even if one or two hit it big, they will more than make up for the losses on the rest.

The only company in the portfolio that is likely to keep me up at night is WisdomTree Investments (WSDT.PK). Every valuation method I have tried to use for this company, whether it is discounted cash flow analysis (I might as well throw darts at a board), looking at what similar companies like PowerShares were acquired for or using a percentage of assets under management (AUM) has yielded a different result. I almost considered selling WisdomTree when the stock sailed past our purchase price of $7.40 in mid-May and that wouldhave been a wise decision as the stock dropped more than 20% in the last two weeks.

As mentioned in the blog entry WisdomTree AUM Climbs to $2.4 billion, it looks like the company continues to grow AUM by about $500 million per month and as of May 10th, had $3.8 billion in AUM. The company plans to list on the Nasdaq (pdf) by the end of 2007 and if it can continue this rate of growth by introducing new ETFs or offering its products in 401K retirement plans, this recent pullback may be a great opportunity to get into the stock. I picked some up for my personal portfolio on May 31st but my position size is half my usual position size because of the amount of risk and the highly volatile nature of this stock. To get a feeling for just how volatile this stock is, consider the fact that it was up 20% in the sinletter portfolio when I wrote my last blog entry about WisdomTree in February and is now down more than 20%.

Gold had a tough month, dropping to close the month of May at $660.60 per troy ounce, a loss of $19.40 or 2.85%.

Portfolio Readjustment:

This is a SINLetter first but I am going to leave the portfolio untouched this month. As mentioned below, I might add Gymboree to the portfolio sometime in the near future.

Gymboree (GYMB) $44.70

With over 581 Gymboree retail stores, 57 Gymboree outlet stores and 81 Janie and Jack stores, San Francisco based Gymboree has positioned itself well since 1986 in the growing area of clothes for children aged 0 to 12. While Gymboree and its competitors Carter's (CRI) and Children's Place (PLCE) have been on my radar for quite some time, I started taking a closer look at the group in early May. Unfortunately the group as a whole had an outstanding month before this newsletter was published and Gymboree gained 17.07% in May. These gains were driven by better than expected quarterly results and because Gymboree raised its outlook for 2007 to a range of $2.42 to $2.46 from its previous guidance of $2.36 to $2.40.

As long-time SINLetter readers are aware, I believe we are in the middle of a "new baby boom", which I discussed in the July 2006 edition of SINLetter. Beyond anecdotal evidence of this trend, the US Census Bureau has stated that the number of children aged 5 and under is expected to grow more than 10% over the next decade. While this is certainly favorable for children's retailers like Gymboree, what excites me most about Gymboree at this juncture is the company's decision to launch a new division called Crazy Eights. This new division will sell clothes at a lower cost than its flagship brand and will target a wider range of kids from age 0 to 14. Just like Carter's entered Gymboree's space with its acquisition of OshKosh kids stores in July 2005, Gymboree appears to be entering Carter's space with the launch of Crazy Eights. If this new brand succeeds and if management can retain focus on the Gymboree brand, the stock has a lot of upward potential. Crazy Eights could become to Gymboree what Old Navy became to Gap (GPS).

With a P/E of 22.99 and a P/S of 1.67, Gymboree does sell at a premium to its competitors but the company also enjoys better operating margins of 13.75% and a higher earnings growth rate of 16.6%. Considering that the forward P/E of 15.85 is less than the average P/E of the S&P 500 and less than Gymboree's 4 year P/E range of 17.1 to 34.2, this company that has no debt on its balance sheet begins to look quite attractive. The company also happens to have about $5 per share in cash and short-term investments on its balance sheet and will most likely be able to fund the expansion of the Crazy Eights stores from cash flow instead of debt.

Any discussion of a company in the retail sector is not complete without looking at an important metric called same-store sales that compares the sales at stores that have been open for a year or more. Gymboree saw same-store sales growth of 3% in the first quarter and expects same-store sales growth in the low-to-mid single digits in the second quarter. It should be noted that in the month of April, Gymboree actually saw same-store sales drop by 5%. I am not sure how much of that could be attributed to the shift of the Easter holiday to March.

Since the stock has appreciated so much in such a short period of time, I am considering waiting until the stock take a breather before initiating a position just like I mentioned for Unilever (UL) in the May newsletter. In fact, with its recent pullback and 4.1% dividend yield, Unilever is beginning to look very attractive right now, especially as the company plans to pay its "final" dividend of 32.04 pence (63.4 cents) sometime in June.

The Numbers:

After drafting some informationl for a second stock, I decided not to feature it at the last moment. Instead, I will write a more detailed Stocks That Almost Made The Cut blog entry this month and you can learn more about why I decided to scrap the idea in that blog entry.

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 (May 31, 2007 for the June 2007 newsletter).

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), Alvarion (ALVR), WisdomTree (WSDT.PK) and Unilever (UL) as well as put options on Salesforce.com (CRM), Countrywide Financial (CFC) and YRC Worldwide (YRCW).

DISCLAIMERS: