The Rude Awakening
Wall Street, New York
Friday, June 23, 2006 ------------------------- - Digging for value on L.A.'s Boulevard of Broken
Stocks, - The companies you want to own...and the ones you
wouldn't touch with your worst enemy's portfolio, - A big hint from a former insider, fortifying with
wide-moat stocks and the week's market data...
------------------------- Eric Fry, reporting from Baltimore, MD... Last month, our very own Chris Mayer, editor of Capital &
Crisis, hopped a plane to Los Angeles. But he did not head
out to Tinseltown to spend a few sunny afternoons sipping
cappuccinos on Sunset Boulevard...nor to search for William
Shatner's star on Hollywood Boulevard...nor to consult with
plastic surgeons on Wilshire Boulevard. He visited L.A. to attend the Value Investing Congress on
Century Boulevard. This unique conference features the
"who's who" of professional value investors – "rock stars,"
as Chris calls them. But these particular rock stars do not wear skin-tight
black leather and do not produce any music videos featuring
fawning, scantily clad females. Instead, these guys wear
khaki shorts and bi-focals...and they produce very sexy
investment returns. But when these professional investors are not busy making
millions for their clients...and for themselves...they make
an occasional appearance at a value-investing conference.
And what they have to say often bears repeating, which is
exactly what Chris Mayer does in the following column... --- Special Investment Alert --- FORMER INSIDER: $15.4 BILLION DEMAND WAVE
COULD HIT THESE SEVEN COMPANIES
A former star broker at one of Wall Street's most powerful
firms – one with over $500 billion in assets – now believes
a mammoth wave of "buy" orders worth up to $15.4 BILLION
DOLLARS could drive seven stocks through the roof, starting
just days from now.
Click below for a full, free report on his research, and
just how and why this may be the biggest money-making
opportunity you'll see this year.
http://www.isecureonline.com/Reports/MAL/EMALG610/
-------------------------
L.A. Confidential
By Chris Mayer Most investors like to talk about the stocks they're
buying. Carlo Cannell likes to talk about the stocks he
isn't buying. Cannell is a very successful hedge fund
manager, whose main fund, Tonga Partners, has earned 25%
annually since 1992. Unlike most hedge fund managers, Cannell is not just an
outstanding stock-picker, he is also an accomplished short-
seller. In other words, he's very good at identifying the
stocks that investors should NOT buy. He explored this exact theme at last month's Value
Investing Congress in Los Angeles. Cannell, an easygoing, West Coast kind of guy, stood up
there in his khakis and casual shirt and talked about short
selling — a way to make money when stocks go down. He started his presentation by showing how various market
indexes have gone up a whole lot over time. And he used a
short selling index devised by CSFB/Tremont that shows how
shorts have lost money since 1994 (the earliest data
available for this index). Basically, he was recognizing one of the key arguments
against short selling: Don't fight the tape. Or don't try
to swim upstream. You get the picture. But here is where it gets interesting. Cannell then chose
several industries that have not made money for investors,
on average, for years. These are the opportunities you want
to short — if you're a short seller. If you are a typical
long-side investor, you should tread very carefully here.
The charts tell the story quite well… 
Airlines stocks have been horrible investments. Since 1983,
investors have basically lost money. There are 14 companies
in this index, and the compound annual growth rate (CAGR)
is about minus 6.5% annually. By the way, all these charts say "average number of
constituents" because some companies go to zero. The index
drops these names. So these charts are making things look
better than they actually were for most investors. These
losses are only the losses experienced by surviving
investors — incredibly, they don't include the big zeros. Take a look at computer hardware manufacturers, another
graveyard of investment returns: 
Sixty-eight names make up this index. Again, the results
are horrible. Computer hardware has been a tough business
for investors. Here are a couple more examples. Look at semiconductor
equipment manufacturers and restaurants. Again, these
industries have cost investors money for over 20 years
running: 
The key takeaway here is that these businesses represent
areas that have been very tough places to make money for a
long stretch of time — since 1983, a stretch of time that
covers one of the best bull markets in stocks in history.
If a business can't generate a positive return for
investors over that stretch, when will it? After Cannell concluded his presentation, Mike Sellers, of
Sellers Capital, took the podium to deliver an entirely
different message: Buy the Blue Chips. Sellers did not base his recommendation on boring, time-
warn investments principles. He based it upon the fact that
Blue Chip stocks are downright cheap at this very moment. Many of these stocks are in top-quality businesses — wide-
moat businesses. (A wide-moat business is one that
possesses a unique, well-fortified competitive advantage)
And they are seldom cheap. Today, however, many of these
kinds of companies linger near their 52-week lows. Mike
Sellers thinks they are good bets. He provided the chart
"Wide-Moat Stocks Within 5% of 52-Week Low": 
A cursory review of this list reveals some quality
businesses — Johnson & Johnson, Dell, Wrigley, Intel and
others. At a price, you'd love to own these great American
brand names. Sellers' favorite was Dell Computer. With 18% of the
personal computing market and expansion plans in China and
India, Dell is not going away anytime soon. It is the low-
cost producer of computers. More pluses: Insiders own 11%
of the stock, and a number of savvy investors are buying
the stock here in the low $20s. The rest of the "wide-moat" stocks on Seller's list are
also attracting value investors. The draw-bridge to blue
chip value is down...for the moment. [Joel's note: Everyone loves a bargain, plain and simple.
But it's when the bargain starts coughing up big profits
that it truly becomes worth owning. The only trouble is
that the stock universe is rather large and it's not always
easy to know where to look. Now you can employ the
discerning eye of Capital & Crisis's Chris Mayer, a value-
investing specialist, to scour the markets for you. Have a
gander at the following report and decide if this is the
kind of bargain you want in your portfoli Capital & Crisis
http://www.isecureonline.com/Reports/FST/EFSTG109 --- Special --- The ONLY Stock You Need to Own... This stock is seriously the ONLY stock you will need to own
over the next 10 years. In fact, it's looking to be the next Berkshire Hathaway.
Buffett already has over $300 million in this company...
it's one of the biggest in his portfolio, even though it's
hardly a household name! Find out how you too can get in on
this amazing opportunity! www.isecureonline.com/Reports/FST/EFSTG609 ------------------------- 
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