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AlphaProfit Newsletter: September Indicator Update
September 4, 2007

Dear Valued Subscriber,

The AlphaProfit model portfolio returns as of August 31, 2007 are as follows:

  ^* 2HTD refers to the June 30, 2007 to August 31, 2007 period.
  ^** YTD refers to the December 31, 2006 to August 31, 2007 period.

Although broad measures of the U. S. equity market finished August with a gain, the month was a challenging one for investors. The downward trend continued from July as the Dow Jones Industrial Average swooned to 12,455 on August 16, over 1,500 points lower than the all-time high set on July 19. Market volatility was high as the DJIA moved more than 200 points on seven of the 23 trading days.

Bear Stearns stated that conditions in the fixed income market were the worst in 22 years. Investors were concerned on the magnitude of losses suffered by financial institutions from sub-prime lending. To alleviate the situation, central banks from leading industrialized nations added liquidity to money markets and the Federal Reserve reduced its benchmark discount rate by 0.5%. These actions helped to stabilize the markets and the DJIA closed at 13,358.

All four of the industry-group funds included in the AlphaProfit model portfolios underperformed the Dow Jones Wilshire 5000 benchmark in August. Fidelity Select Materials (FSDPX) was essentially unchanged and Fidelity Select Gold (FSAGX) declined nearly 5%.

Sensing an increase in macroeconomic risks, investors took a cautious approach towards shares in the materials sector. Commodity prices were, to a degree, impacted by institutional investors liquidating holdings to meet redemptions. Aluminum and steel companies continued to make progress with their consolidation efforts.

Gold gained a modest $2.80 to close the month at $675.80 per ounce after trading as low as $652.20 an ounce. Shares of selected gold mining companies like Gold Fields and IAMGOLD came under substantial selling pressure following weak earnings reports.

In the software group, investors punished companies like Cognizant Technology and MasterCard even after they reported relatively robust earnings. Additionally, shares of the ‘unstoppable’ Nintendo, that had gained nearly 90% since the start of year, went in the wrong direction.

Upgrading Automotive Group to 'Favored Buy'.

July auto sales reported at the beginning of August were relatively weak. Ahead of current labor contracts expiring on September 14, negotiations between the United Auto Workers and Detroit automakers appear to be progressing reasonably well. In recent weeks, investors have largely ignored optimistic comments from Ford and General Motors managements on the long-term outlook for their companies.

Investors have bid down auto and auto-part company shares to levels where valuation metrics are quite attractive. We are now rating Fidelity Select Automotive 'Favored Buy'. With no pure-play ETFs focusing on the automotive group, ETF investors may buy shares of General Motors to play this Favored Buy recommendation.

Possibility of further weakness in auto sales and of new labor contracts not being ratified by September 14 can add to near-term volatility.

Maintaining the AlphaProfit Sector Portfolio Indicator at 'Buy'.

Central banks around the world appear to be reasonably coordinated and determined in maintaining the global economy on its growth path. We believe investors putting capital to work during this choppy phase will likely be rewarded in the period ahead. We maintain the AlphaProfit Sector Portfolio Indicator reading at 'Buy'.

In the near-term, we expect market volatility to remain at elevated levels, akin to those seen in August. Investors have bid up equity prices expecting further cuts in short-term interest rates. Whether such reductions actually materialize on schedule with the timetable envisioned by investors remains to be seen. News from the housing, home financing, and credit markets will likely remain key volatility drivers.

Presently, we are not making any changes to the model portfolios. The model portfolio compositions as well as exchange traded fund (ETF) and mutual fund recommendations are available in the Subscriber Login area of the web site.

We welcome your comments.

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 advice on investing. Before buying or selling any mutual fund, exchange-traded fund, security, or investment, read the prospectus carefully. For securities held in brokerage accounts, read the broker's specific terms and conditions which apply to trading of the securities. 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 associated with nor receives any compensation from any of the mutual fund companies, brokers or entities connected with the exchange-traded funds mentioned in the newsletter. 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.

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