Thursday Picks

No picks at end of day 7/16/2009... Let's see what they were on 7/15/2009: No stocks either...

These are the current Fisher method selections from AAII for this month:
Company name Ticker Exchange Price Price--high 52 week Price--low 52 week
American Dairy, Inc. ADY N - New York 39.66 44 6.4
Atwood Oceanics, Inc. ATW N - New York 24.91 63.46 12.6
True Religion Apparel, Inc. TRLG M - Nasdaq 22.3 31.82 7.8
HQ Sustainable Maritime Indust HQS A - American 9.15 16.45 3.29
Transocean LTD. RIG N - New York 74.29 154.5 41.95
Amedisys, Inc. AMED M - Nasdaq 33.02 67.98 25.2
American Oriental Bioengineeri AOB N - New York 5.29 10.01 3.29
Deckers Outdoor Corporation DECK M - Nasdaq 70.27 139.83 37.24
EZCORP, Inc. EZPW M - Nasdaq 10.78 19.25 9.5
Harbin Electric, Inc. HRBN M - Nasdaq 15.64 16.91 4.25
Comtech Telecomm. Corp. CMTL M - Nasdaq 31.88 51.21 19.56
CONN'S, Inc. CONN M - Nasdaq 12.5 25.27 4.64
Homex Development Corp. (ADR) HXM N - New York 27.89 62.07 9.96

An overview of the Fisher philosophy is below:
The Fisher Growth Approach in Brief
Philosophy and Style:
Investment in "outstanding" companies that over the years can grow in sales and profits more than its industry as a whole. The best opportunity for extraordinary profits comes from buying "outstanding" companies at undervalued levels. The key features of "outstanding" companies are: strong management that has a disciplined approach designed to achieve dramatic long-term growth in profits, with products or services that have the potential for sizable sales long term, and with other inherent qualities that would make it difficult for competitors and newcomers to share in that potential growth.

Universe of Stocks:
No restrictions on universe of stocks from which to select. Over-the-counter stocks should not be overlooked, but "outstanding" companies are not necessarily young and small.

Criteria for Initial Consideration:
Prospective companies should pass most of the following 15 points, which can be divided into three main dimensions:

Functional Factors:

* Products or services with sufficient market potential for sizable increase in sales for several years. Major sales growth, judged over series of years.
* Superiority in productionlowest-cost production (for manufacturing firms) or lowest-cost operation (for service firms or retailers).
* Strong marketing organizationefficiency of sales, advertising, and distributive organizations.
* Outstanding research and development effortsamount expended relative to its size, effectiveness of effort as indicated by ability to bring research ideas to production and to market and by how much research contributed to net profits.
* Effectiveness of company's cost analysis and accounting controls, and choice of capital investments that will bring the highest return.
* Financial strength or cash positionsufficient capital to take care of needs to exploit prospects for next several years without the need to raise equity capital.

Excellence in Management:

* Attitude of management to continue to develop products or services that will further increase sales. Development of good in-house management and teamwork.
* Management depth.
* Good labor and personnel relations: Affiliation with an international union may be an indication of bad relations; labor turnover relative to competitors.
* Long-range outlook by management even at the expense of short-term profits.
* Good investor relations, and willingness to talk freely about problems.
* Management of unquestionable integritysalaries and perks in line with those of other managers.

Business Characteristics:

* Above-average profitability: Compare profit margins per dollar of salescompare within industry and examine for several years, not just single years. Older and larger firms are usually the best in their industry. Younger firms may elect to speed up growth by spending all or a large part of profits on research or sales; for these, make sure a narrow profit margin is due to spending in these areas alone.
* Ability to maintain good profit margins: Good position relative to competitionfor instance, skill in a particular line of business, or patent protection for a small business.

Secondary Factors:
Once an "outstanding" company is found, purchase stock when it is out-of-favor either because the market has temporarily misjudged the true value of the company, or because of general market conditions. "Outstanding" companies can also be purchased at fair value, but investor should expect a lower (but respectable) return.

Stock Monitoring and When to Sell:

* Use a three-year rule for judging results if a stock is underperforming but no fundamental changes have occurred.
* Hold stock until there is a fundamental change in its nature or it has grown to a point where it will no longer be growing faster than the overall economy.
* Don't sell for short-term reasons.
* Sell mistakes quickly, once they are recognized.
* Don't overdiversify10 or 12 larger companies is sufficient, investing in a variety of industries with different characteristics.