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Stock Picks

Stock Picks. Presented by Paul Kadota to the Maxidigm Investment Club Nov. 30, 2001. Economy, Industries, Stocks. Sell Line. Basic Industries. Food Drugs Bev. Consumer Staples. LSZ SKX. BBD. CMRC ARBA. ADCT. BMO. FLEX. IGI. Financials. NOK. Capital Goods. INTC. Brokerages.

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Stock Picks

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  1. Stock Picks Presented by Paul Kadota to the Maxidigm Investment Club Nov. 30, 2001

  2. Economy, Industries, Stocks Sell Line Basic Industries Food Drugs Bev. Consumer Staples LSZSKX BBD CMRC ARBA ADCT BMO FLEX IGI Financials NOK Capital Goods INTC Brokerages Consumer Durables Jun N.A. Economy, New Buy Line Oct

  3. Economy • Officially in a Recession • consumer spending unemployment • US Military Advancement • travel international trade • Stimulus • 9 rate cuts by Greenspan in 2001 • Tax cuts 10

  4. Approach to Selection • Focus on US Stocks • Potential growth higher in US • Hedge against CDN$ • Filters • Earnings estimate revised upward • Beat estimates last 2 quarters • Current P/E Ratio < 1 yr ago, or < 5 yr ave • Lowish P/BV • Eliminate special situations and sectors

  5. Filtered Stocks • 22 Stocks using P/E < 1 yr Ago • 19 Stocks using P/E < 5 yr Ave • Arbitrary point system developed • Inverse of PE Factor • % Surprise / 10 • Book Value/P • Inverse of normalized market cap

  6. Point System Ranking (partial list)

  7. Elimination of Special Situations and Sectors • End of good run on oil & gas stocks • Company specific situations • Price drop because of warning • Legal or reporting irregularities • Market cap too small • Yo-Yo revenues and earnings

  8. Sector & Company Elimination

  9. Other Financial Numbers

  10. Portfolio Consideration • Portfolio already include two financial stocks • IGI - Investors Group • BMO - Bank of Montreal • Consider other remaining stocks first • FHRX - First Horizon Pharmaceuticals • COCO - Corinthian Colleges Boomer Knowledge- based Economy

  11. FHRX Revenue & Earnings

  12. COCO Revenues & Earnings

  13. FHRX

  14. COCO

  15. Recommendations • Buy COCO for current down & up cycle • Buy FHRX for the longer term growth

  16. SFAS No. 142 “Goodwill and Other Intangible Assets” • Approved by the FASB in June • For goodwill and certain other intangibles • From an amortization method to an impairment-only approach • Amortization of goodwill and certain other intangibles will cease upon adoption of this standard

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