AlphaProfit Sector Investors' Newsletter: February Indicator Update

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AlphaProfit Newsletter: February Indicator Update
February 2, 2009

Dear Valued Subscriber,

The AlphaProfit model portfolio returns as of January 31, 2009 are as follows:

	Jan. 2009	1 Year	3 Year	5 Year	Sep. 2003 Inception
AlphaProfit Focus™ Model Portfolio	-10.5%	-42.4%	-42.0%	-8.4%	19.4%
AlphaProfit Core™ Model Portfolio	-7.2%	-40.5%	-34.5%	-17.0%	2.7%
DJ Wilshire 5000 Total Market Index	-8.1%	-38.7%	-31.9%	-17.4%	-5.1%

After starting the year on a positive note, heightening concerns on the state of the economy, health of financial institutions, and trend in corporate earnings caused stock prices to decline through most of January. Corporations announced layoffs in record numbers eroding investor and consumer confidence. On January 20, the Dow Jones Industrial Average declined nearly 4% to associate President Obama with the worst inauguration day decline in the index's 113-year history. A short, late-month rally stirred by excitement from plans to 'fix' the economy proved hardly adequate in reversing the damage. The DJIA ended the month with a 9% loss to make January 2009 the worst January in the history of the index.

Downgrading the AlphaProfit Sector Portfolio Indicator to 'Buy on Dips'.

The U. S. economy is mired in a deep recession. Gross domestic product is estimated to have declined at a 3.8% annualized rate during the fourth quarter of 2008. Furthermore, leading measures of economic activity suggest that a recovery is not imminent.

Meanwhile, efforts are continuing to revive the economy and restore financial order. Most recently, the House of Representatives passed an $819 billion stimulus plan. Discussions to form a FDIC-run 'bad bank' are underway in a bid to facilitate commercial banks unload toxic assets and increase lending.

Based on earnings reports released to date, corporate profits declined over 40% on a year-over-year basis during the fourth quarter of 2008. With broad U. S. indexes too falling nearly 40% in the past year, stocks trade at attractive valuation metrics based on cycle-average earnings potential. While the recovery potential in stocks presents long-term investors attractive buying opportunities, the timing on the resumption of corporate earnings growth is nebulous.

We are downgrading the AlphaProfit Sector Portfolio Indicator to 'Buy on Dips'. We believe it is prudent to put new money to work only on weakness. As a point of reference, the S&P closed at 825.88 on January 30. At this stage, we are inclined to add new money to recommended investments only below 785 on the S&P 500.

Recommendation Change.

We are replacing Accenture with Affiliated Computer Services in AlphaProfit's basket of IT Consulting & Service companies recommended for ETF investors. Both Accenture and Affiliated Computer are executing well. Looking ahead to the next few quarters, Affiliated Computer possesses a more appealing EPS growth profile. Going forward, the AlphaProfit IT Consulting & Service basket will be equally weighted in Affiliated Computer Services, Alliance Data Systems, Automatic Data Processing, and MasterCard. 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 February 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.