Portable Alpha Daily

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Thursday, March 01, 2007

Dead Cat Bounce?

Our long-term market model remains bearish as of December 8th. The total universe of stocks, ETF’s and mutual funds which we review on a daily basis is 1876. Of those reviewed,188 are rated "Buy," 653 are rated "Sell" and 1035 "Neutral." Our model fund portfolios are currently allocated with 50% in cash or money market investments and the other 50% mixed between long and inverse funds. The model stock portfolio remains roughly 75% long with 25% cash.

There are currently no “buy” recommended major market, style box or sector investments being generated by our models. This is to be expected after such a large sell-off since momentum and relative strength are critical components. In terms of AAS Rating Score analysis, Mid and Small cap investments continue to out-rank their Large cap counterparts. Performance comparisons over various time frames validate the ranking. However, investors concerned about a more substantial correction or even potential recession will shift their allocation focus to large cap equities, which often produce dividends and defensive earnings growth. If this broad-based shift takes place, large cap investments will begin to generate alpha based primarily on the influx of capital.

With regards to our sector analysis, those sectors previously listed as “buy” recommended over the last several weeks have maintained their position at the top of our list. These sectors include Utilities (IDU), Telecom (IXP and IYZ), Basic Materials (IYM) and Real Estate (IYR). Weakness in the Financial (IYF and IYG) sectors can be partially attributed to the sub-prime mortgage market as well as uncertainty surrounding the interest rate environment.

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bearish since December 8th.

Asset Allocation – AAS Model Portfolios have 50% cash allocations and mixed long – short allocations.

Beta Exposure and Portable Alpha Generation
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top Rated Major Market Derivative – No buy recommended major market investments

Top Rated Style-Box Derivative – No buy recommended style-box investments

Top Rated Sector Derivative – No buy recommended sector investments.

Today’s Top “Buy” Recommended Stocks

Vulcan Materials Co. (VMC 10/31/06)

Martin Marietta Materials, Inc. (MLM 11/6/06)

Texas Industries Inc. (TXI 10/11/06)

U.S. Steel Corp. (X 2/28/07)

Avnet Inc. (AVT 10/5/06)

Weyerhaeuser Co. (WY 1/3/07)

TXU Corp. (TXU 2/23/07)

Temple-Inland, Inc. (TIN 12/5/06)

Itron Inc. (ITRI 1/19/07)

Ryerson Inc. (RYI 12/7/06)

Today’s Top “Sell” Recommended Stocks

New Century Financial Corp. (NEW 6/13/06)

Google Inc. (GOOG 12/18/06)

Fremont General Corp. (FMT 12/29/06)

Plexus Corp. (PLXS 12/29/06)

SanDisk Corp. (SNDK 10/20/06)



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