To prevent this e-mail from being delivered to your bulk mail folder, please add our 'From' e-mail address, subscriberservice@alphaprofit.com to your address book.

AlphaProfit Newsletter: January Indicator Update
January 1, 2007

Dear Valued Subscriber,

The AlphaProfit model portfolios were repositioned based on December 29, 2006 closing prices. The Repositioning Alert and Model Portfolio Composition documents are available in the Subscriber Login area of alphaprofit.com.

Here is a summary of the considerations that resulted in the repositioning changes:

Overview

Recent economic data suggest that sluggishness in manufacturing and housing will likely restrain the rate of economic growth in the U. S. We believe the string of double-digit year-over-year earnings gains will likely come to an end in 2007.

At the present time, several sectors and industry groups appear as attractive as the overall market on a risk-adjusted basis. We have tried to gravitate towards selected industry groups in the technology and materials sectors that appear relatively more attractive than the overall market.

Technology

Shares in the technology sector in general appear fairly attractively priced on a valuation basis. We believe key new products, both computer software and hardware, are likely to complementarily spur each other’s sales.

Having launched its Windows Vista operating system for business customers in late 2006, Microsoft is targeting to upgrade its other key products in 2007. These include Windows Vista for consumers and Office productivity software suite. The new software imposes additional memory and speed demands on computer hardware. As such, these software upgrades will likely drive revenue not only for Microsoft but also for hardware manufacturers.

In video-gaming, both Nintendo and Sony have recently launched their Wii and PlayStation 3 consoles, respectively. Here, the new hardware has the possibility of driving gaming software demand.

Adding to investment appeal, consolidation in the software space has been occurring with some regularity as companies like IBM seek to broaden their product portfolios.

Against this backdrop, we include Fidelity Select Computers (Ticker: FDCPX, Risk Rating: Above Average) and Fidelity Select Software and Computer Services (FSCSX, Above Average) in both model portfolios.

Materials

We see two industry groups from the materials sector, paper & forest products and gold, worthy of over-weighting due to their special situation characteristics.

The inclusion of Fidelity Select Paper and Forest Products (FSPFX, Average) in both model portfolios is a play on the restructuring paper and packaging industries. To focus on core operations and shore up profitability, companies in this group are engaging in asset sales and joint ventures. As land owners, selected companies are taking advantage of a strong real-estate market and benefiting by high-grading their real estate portfolios. Meanwhile, others are coming under pressure to reorganize as REITs to enhance shareholder value.

The macroeconomic backdrop for gold-related investments remains favorable as the threat of inflation from a decline in the value of the U. S. dollar vis-à-vis foreign currencies persists. That said, fears of commodity-price driven inflation will remain at bay if the backdrop of a weakening U. S. economy keeps a lid on oil and basic metals prices. We favor including gold in modest doses as part of a diversified portfolio and therefore retain some exposure to Fidelity Select Gold (FSAGX, Above Average) in the Core model portfolio.

S&P 500 Index

Trading at a forward P/E multiple of about 15, the U. S. equity market taken in aggregate appears somewhat attractively priced. However, earnings growth appears poised to slow. Sectors and industry groups worthy of over-weighting are relatively few in number as many of them appear just as attractive as the overall market itself.

Against this backdrop, we prefer the relative safety of larger capitalization stocks and include the Fidelity Spartan 500 Index Fund (FSMKX, Below Average) to achieve a degree of diversification in the Core model portfolio. This fund seeks to track the Standard & Poor's 500 Index, a commonly used proxy for large-cap U.S. stocks.

Sector Portfolio Indicator and Market Outlook

Following the repositioning of the model portfolios, the AlphaProfit Sector Portfolio Indicator™ is rated 'Buy'. This implies current prices are generally good to trade at.

In the near-term, pent-up selling from investors seeking to defer taxable gains to 2008 may impact share prices. Offsetting this negative, merger and acquisition activity is likely to help perk things up. Looking farther out, the possibility of a weakening economy adversely impacting earnings growth forecasts poses risks.

As such, Subscribers starting to track the model portfolios as well as risk-averse Subscribers may consider spreading their investments over longer time-frames.

The AlphaProfit model portfolio returns are as follows:

  ^* Jun. 30, 2006 to Dec. 31, 2006

The investment thesis and key risks for the funds included in the model portfolios will be elaborated in the January Report due for publication on Friday, January 12.

Best regards,
Sam Subramanian
AlphaProfit Investments, LLC
Ideas. Insights. Results.
http://www.alphaprofit.com

Notes: The AlphaProfit Sector Investors' Newsletter™ is for information purposes only. AlphaProfit Investments, LLC is not soliciting any subscriber to buy or sell any security. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. Before buying any mutual fund, read its prospectus carefully. AlphaProfit Investments, LLC cannot and does not give any assurance that the present or future model portfolio changes will be profitable. Past performance is not a guarantee for future results. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind. AlphaProfit Investments, LLC is not responsible for any errors or omissions. AlphaProfit Investments, LLC neither is affiliated with nor receives any compensation from Fidelity Investments. Please review our Terms and Conditions of Use and Subscriber Agreement which is available on our website at www.alphaprofit.com; they govern your relationship with AlphaProfit Investments, LLC, including, but not by way of limitation, use of this newsletter. No part of the AlphaProfit Information may be reproduced or re-transmitted in any manner without written permission of AlphaProfit Investments, LLC.

Copyright © 2007. AlphaProfit Investments, LLC. All rights reserved.