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"Reality is merely an illusion, albeit a very persistent one."
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Albert Einstein
Wall Street is perhaps the only place where buyers avoid the bargains. When prices are depressed, fear or perhaps prudence creates an illusion of substantial risk. Psychologists have referred to this as "hindsight bias," where there is a tendency to assume that whatever has occurred in the past will likely continue into the future. One vivid example of this is the love affair investors had with the "high quality, low cost" S&P 500 Index mutual funds during the late 1990's. During that period of excessive returns for the market, people assumed thru "hindsight bias" that (1) there is safety and economy in numbers, (2) blue chips provide quality, and (3) the good times would last forever. Anyone who stayed with the S&P 500 Index funds over the last 6 or 7 years has eked out a smaller return than they would have received in a money market instrument. Additionally, the Index funds fell almost 50% from their highs before recovering several years later.
"Buy when everyone is complaining, and sell when they're celebrating."
- J. Paul Getty
The smartest move would have been to completely ignore past performance, and sell when everyone was celebrating their excessive returns in 2000. Then wait patiently for the inevitable complaining which reached it's zenith at the market bottoms of October 2002 before buying the S&P 500 Index funds again. Had you followed Mr. Getty's advice, your returns would have been a multiple of what the buy and hold investor received; probably averaging better than 20% annualized returns.
THE FALLEN ANGELS STRATEGY AND THE FALLEN ANGELS FUNDS
Whenever we buy a stock (or anything) when it's on sale, we run the risk that it will fall further afterwards. It's important to keep in mind that price fluctuations have no bearing on the underlying value of the business. There is a huge difference between a permanent loss of principal and what Ben Graham referred to as "quotation loss." Because of the likelihood that a stock will trade temporarily below our initial purchase price, it's important to avoid doing all of your buying at once. In our two no-load mutual funds, we strive to get the best average price when buying as well as when selling. Our suggestion is for subscribers to do the same with their portfolios.
FALLEN ANGELS ON SALE NOW
Company Name |
Symbol |
Price* |
| Cavco Industries (manufactured housing) |
CVCO |
$34.95 |
| Champion Enterprises (manufactured housing) |
CHB |
$8.94 |
| Fleetwood Enterprises (manufactured housing) |
FLE |
$7.43 |
STOCKS MENTIONED IN 11/11/06 REPORT
Company Name |
Symbol |
Price Then |
Current Price* |
| Florida Rock (materials) |
FRK |
$42.40 |
$42.30 |
| Eagle Materials (materials) |
EXP |
$39.90 |
$41.14 |
| USG Corp. (materials) |
USG |
$51.18 |
$50.79 |
| Cemex (cement) |
CX |
$31.22 |
$31.74 |
| Freeport-McMoRan (copper/gold) |
FCX |
$58.82 |
$60.80 |
| BHP Billiton Ltd. (mining) |
BHP |
$42.31 |
$40.10 |
STOCKS MENTIONED IN 10/29/06 REPORT
Company Name |
Symbol |
Price Then |
Current Price* |
| Gannet (media) |
GCI |
$60.29 |
$58.74 |
McClatchy (media) |
MNI |
$44.31 |
$41.11 |
| Alcoa (materials) |
AA |
$28.30 |
$30.20 |
| U.S. Steel (materials) |
X |
$68.74 |
$71.42 |
| Conoco Philips (energy) |
COP |
61.19 |
$64.91 |
| Halliburton (energy) |
HAL |
$32.15 |
$32.71 |
| Handleman (music) |
HDL |
$8.04 |
$7.98 |
| Tandy Leather Factory (retail) |
TLF |
$6.97 |
$7.52 |
STOCKS MENTIONED IN 10/14/06 REPORT
Company Name |
Symbol |
Price Then |
Current Price* |
| Yahoo (internet) |
YHOO |
$24.42 |
$27.00 |
| Google (internet) |
GOOG |
$427.30 |
$489.50 |
| Aegon (insurance) |
AEG |
$18.62 |
$18.40 |
| Prudential (insurance) |
PRU |
$77.69 |
$79.77 |
| Wal-Mart (retail) |
WMT |
$48.64 |
$46.71 |
| Costco (retail) |
COST |
$53.20 |
$52.90 |
| Ford (auto) |
F |
$8.17 |
$8.15 |
| Toyota (auto) |
TM |
$116.20 |
$117.44 |
* Current prices as of 11/28/06.
The Fallen Angels Funds
Gabriel Wisdom and Michael Moore manage two no-load mutual funds, the FALLEN ANGELS VALUE FUND and the FALLEN ANGELS INCOME FUND.
If you would like more information, please call American Money Management, LLC at (888) 999-1395 today. A prospectus is available at www.amminvest.com.
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Please carefully consider each fund’s objectives, risks, charges and expenses before investing. The prospectus contains this and other important information. Please read the prospectus carefully before you invest. To obtain a prospectus, please call American Money Management Funds at (888) 999-1395. Mutual fund investing involves risk, including possible loss of principal. |
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About American Money Management, LLC
American Money Management, LLC, an SEC Registered Investment Adviser, manages accounts for individuals, companies, trusts and retirement plans. Minimum account size is $100,000 but investors are invited to try a managed account with as little as $25,000 (AMM reserves the right to withdraw this option at any time). For more information on our managed accounts program, please call us at 888-999-1395 or visit us on the web at www.amminvest.com.
Subscribe to The Fallen Angels Report
Every two weeks, subscribers receive the Fallen Angels Report designed to help you find potential bargains that are cheap and timely. The Report is updated and sent out bi-weekly. The editors define Fallen Angels as quality businesses whose value is not currently recognized in the company's stock price.
1 Year Subscription - Only $30 (That's only $2.50 per month)
Disclaimer
The opinions expressed are those of Gabriel Wisdom and Michael Moore and do not necessarily reflect the opinions of American Money Management, LLC (AMM), an SEC registered investment advisor who serves as portfolio manager to private accounts as well as to mutual funds. Clients of AMM, Mr. Wisdom, Mr. Moore, employees of AMM, and mutual funds AMM manages may buy or sell investments mentioned without prior notice. This newsletter should not be considered investment advice. The opinions expressed do not constitute a recommendation to buy or sell securities. Investing involves risks, and you should consult your own investment advisor, attorney, or accountant before investing in anything. Current stock quotes are obtained at http://finance.yahoo.com. Prices are as of the close of the market on the previous day of trading. |
