Portable Alpha Daily

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Wednesday, June 20, 2007

Mid-Week Alpha

The U. S. Markets eked out small gains early in the week only to give them back and more yesterday as fear and uncertainty moved the markets into negative territory for the week. Investors just couldn't shake their bond and energy afflictions Wednesday, and the major indexes each ended down more than 1%.

Stocks were dragged lower as the price of crude oil fell from a nine-month high. Further exacerbating the decline is the concern that rising rates will slow down the buyout boom that has propelled the market this year, as acquirers will have to fund acquisitions with higher-cost capital. Additionally, investors fear that rising rates will further damage the already battered housing market, crimp consumer spending and slow corporate borrowing, all of which have fueled the rise in stocks prices.

The news of the pending demise of the two leveraged hedge funds carrying the Bear Sterns name which focus on collateralized mortgage backed securities added to the already choppy session. Questions surrounding the amount of leverage used in these investment partnerships, which focus to a large extent on the use of derivatives to accomplish the partnership goals, loom large for the markets.

On a sector basis, all were down for the session lead by Energy, specifically oil and natural gas stocks. Only the Consumer Service and Consumer Goods sectors showed any signs of optimism today and that came from the Automobiles and Airlines categories.

Short-Term Technical Indicators

Investor Sentiment

Long-Term Market Model – Bearish since May 15, 2007

Asset Allocation Recommendation – AAS Model Portfolios are allocated at 50% cash and 50% long.

Top Alpha Generating Securities
Date = Date of AAS “Buy” or “Short/Sell” Recommendation

Top AAS Rated Major Market – Fidelity Nasdaq Composite Index (ONEQ 6/1/07)

Top AAS Rated Style-Box for Alpha – iShares Morningstar Mid Cap Growth (JKH 5/29/07)

Top AAS Rated Sector for Alpha – iShares Goldman Sachs Natural Resource (IGE 3/19/07)

Top AAS Rated Long Stocks for Alpha

Crocs, Inc. (CROX 5/9/07)

Martin Marietta Materials (MLM 11/6/06)

Deckers Outdoor Corp. (DECK 9/7/06)

Cummins Inc. (CMI 1/31/07)

Apple Inc. (AAPL 4/24/07)

National-Oilwell Varco Inc. (NOV 3/7/07)

LandAmerica Financial Group Inc. (LFG 2/8/07)

Precision Castparts Corp. (PCP 9/20/06)

Nash-Finch Co. (NAFC 2/21/07)

Google, Inc. (GOOG 5/29/07)

Top AAS Rated Short Stocks for Alpha

Brush Engineered Material (BW 5/1/07)

NBTY Inc. (NTY 6/7/07)

Simon Property Group Inc. (SPG 5/1/07)

RTI International Metals (RTI 5/1/07)

Volt Information Sciences Inc. (VOL 3/26/07)


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