AlphaProfit Sector Investors' Newsletter: November Indicator Update

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AlphaProfit Newsletter: November Indicator Update
November 3, 2008

Dear Valued Subscriber,

The AlphaProfit model portfolio returns as of October 31, 2008 are as follows:

	Oct. 2008	YTD*	1 Year	3 Year	5 Year	Sep. 2003 Inception
AlphaProfit Focus™ Model Portfolio	-19.1%	-36.0%	-42.5%	-17.9%	30.3%	43.9%
AlphaProfit Core™ Model Portfolio	-18.1%	-35.9%	-40.3%	-13.5%	12.6%	21.3%
DJ Wilshire 5000 Total Market Index	-17.6%	-33.0%	-36.4%	-14.5%	4.1%	10.5%

^* YTD refers to the December 31, 2007 to October 31, 2008 period.

Market conditions in October can best be described in one word, panic. Freezing of credit availability, fears of a deep global recession, and disappointing earnings reports caused investors to pull out an estimated record amount of $70 billion from the U. S. equity market during the month.

During a portion of the month, the widely followed S&P 500 benchmark was in danger of setting a record for the largest monthly decline since 1931. A sharp 10% rebound during the final week of the month reduced the losses for this index to nearly 17%, to make it the worst month since October 1987.

The sell-off rattled markets around the globe. More than half of the world equity markets lost over 20% in October.

Maintaining the AlphaProfit Sector Portfolio Indicator at 'Buy'.

Governments, central banks, and commercial banks are working to improve liquidity in credit markets. Central banks around the world have lowered interest rates a few times after finance ministers from the G-7 nations agreed to work together to alleviate the crisis.

In the U. S., the Federal Reserve lowered short-term interest rates by 1% in October. The U. S. Treasury Department is buying equity stakes in banks to inject capital into the struggling financial system. JP Morgan Chase has stated that it will take a pause from putting more homes into foreclosure during the next 90 days.

We believe the market is in the early stage of a bottoming process. Pricing in most of the negatives, S&P 500 member companies on average trade at about 12 times 2008 estimated earnings. In the near-term, equity prices may well extend their gains as credit-easing measures are implemented and Presidential elections end political uncertainty. The likelihood of earnings declining in the upcoming quarters can however cause trouble for the equity market in the intermediate term.

We rate the AlphaProfit Sector Portfolio Indicator 'Buy'. With valuation metrics modest, the market milieu is quite attractive for investors with a multi-year time horizon. Investors with shorter time horizons may want to err on the side of caution and use periods of strength to prune exposure to equities. Regardless of the investment time horizon, we encourage investors to maintain adequate cash reserves and to have appropriate diversification across asset classes in the overall portfolio.

Recommendation Change.

We are replacing Western Union with Alliance Data Systems in the customized basket of companies recommended for ETF investors to play the IT services investment thesis. Western Union has withdrawn its long-term growth forecast making the security unsuitable for this basket. Going forward, this basket will be equally weighted in Accenture, Alliance Data Systems, Automatic Data Processing, and Visa. Fidelity Select IT Services continues to remain a preferred vehicle for playing the IT services investment thesis.

Presently, we are not making any changes to the sector and industry recommendations or the model portfolios. The model portfolio composition as well as exchange-traded fund (ETF) and mutual fund recommendations are available in the Subscriber Login area of the web site. Stock recommendations will be included in the November Report due for publication on the 12th.

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.