AlphaProfit Sector Investors' Newsletter: July 20, 2008 Bulletin

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AlphaProfit Newsletter: July 20, 2008 Bulletin

Subject: Energy shares decline as financials rally

Dear Valued Subscriber,

The week ending July 18 brought up a shift in stock market leadership with energy and other commodities losing ground and financials surging ahead. Crude oil and natural gas prices declined nearly 11% during the week while shares of government-sponsored mortgage facilitators Fannie Mae and Freddie Mac gained nearly 31% and 18%, respectively.

While worries of demand destruction, rising petroleum inventories, and easing tensions between Iran and the U. S. contributed to the decline in energy commodity prices, a short squeeze in shares of troubled financial companies was the major driver.

The U. S. Securities and Exchange Commission issued an emergency rule on Tuesday, July 15 limiting certain types of short sales in shares of 19 financial companies including Fannie Mae and Freddie Mac. This in turn likely prompted hedge funds to cover short positions in the financial sector. The capital needed for covering the short positions came from sale of energy winners.

The case for reallocating capital from energy to financials may become less pressing in the period ahead. Under pressure from various industry groups, the SEC made its short sale restrictions less stringent on Friday, July 18. Additionally, the SEC’s short sale restrictions can last only up to 30 days from Monday, July 21.

Concerns of petroleum product demand slackening from rising prices will likely wane as prices trend lower. This is turn can allow investors to focus on the prospects for rising earnings in the oil & gas exploration and production group. Leading energy companies like Halliburton (7/22), ConocoPhillips (7/23), Occidental Petroleum (7/24), Apache (7/31), and Exxon Mobil (7/31) will soon be reporting their second quarter earnings.

All said, we believe oil & gas stocks can embark on an uneven uptrend after the current sell-off runs its course. The oil & gas exploration and production group continues to remain among our recommendations. We are maintaining our positions in the oil & gas exploration and production group in both model portfolios.

The August Indicator Update will be published on Friday, August 1.

Sincerely,
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.