AlphaProfit Newsletter: Repositioning Schedule and June Indicator Update

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AlphaProfit Newsletter: Repositioning Schedule and June Indicator Update
June 1, 2009

Dear Valued Subscriber,

The Core and Focus model portfolios will be repositioned for the evolving market environment after the markets close on Tuesday, June 30. To help you closely track the model portfolios, we will publish the Repositioning Alert by 12:00 p.m. Central Time on June 30 in the Subscriber Login area. We will notify you via e-mail when the Repositioning Alert is published on the web site.

Prior to repositioning the model portfolios, we are not making any changes to the sector and industry recommendations or the model portfolios. The current 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.

Market Developments

Equity prices gained in May extending the rally for the third straight month. Investors had to contend with negatives like rising yields on long-term treasury bonds, a falling dollar, and surging commodity prices. Supported by favorable results from the Treasury Department's bank stress tests, better-than-expected retailer earnings, and improving consumer confidence investors kept their composure. The volatility index, a measure of investor fear, trended lower through the month and dipped to levels not seen in the past eight months.

Maintaining the AlphaProfit Sector Portfolio Indicator at 'Buy on Dips'

The S&P 500 benchmark is up 36% from its March 9 bottom. The advance has pretty much been unidirectional although there were some hiccups around the middle of May. While the rally's magnitude and breadth augur well for equity prices from a multi-month perspective, the current rally is relatively mature.

From a technical perspective, the S&P 500 has significant resistance to contend with between 940 and 1,000. There is good possibility for the broad averages to be range-bound in the weeks ahead as lagging sectors catch-up and leading sectors pare their gains. We maintain the AlphaProfit Sector Portfolio Indicator reading at 'Buy on Dips' and up the recommended target to 880 on the S&P 500 for investing new money. (The S&P 500 closed at 919.14 on May 29.)

Maintaining 'Favored Buy' Rating on Transportation

While the U. S. economy remains in recession, the global economy is showing pockets of strength. Economic data from China, India, and Japan suggest that the pace of manufacturing activity is picking up. Prices of industrial commodities like copper and oil have notably strengthened too. Demand for moving products across the world again should perk up if economic recovery gains traction. This in turn will benefit transportation companies.

Transportation stocks have room to run having lagged the recent rally. We maintain the 'Favored Buy' rating on the transportation group. Fidelity Select Transportation (FSRFX) and iShares DJ Transportation Average (IYT) are preferred investments for playing the transportation thesis.

Recommendation Change

We are replacing Southwest Airlines with AirTran Holdings in AlphaProfit's Air Transportation basket recommended for ETF investors. In the most recently reported quarter, AirTran's EPS exceeded analysts' forecast by 400% while Southwest surprised investors by losing money. AirTran shares trade at a modest forward P/E of 4.7 compared to Southwest's 15.7.

Going forward, the AlphaProfit Air Transportation basket will include AirTran, Boeing, Precision Castparts, and United Parcel Service weighted 18.7%, 25.6%, 33.1%, and 22.6% respectively. Fidelity Select Air Transportation continues to remain a preferred vehicle for playing the air transport investment thesis.

Model Portfolio Performance

Model portfolio returns as of May 31, 2009 are as follows:

	May 2009	YTD*	1 Year	3 Year	5 Year	Sep. 2003 Inception
AlphaProfit Focus™ Model Portfolio	7.3%	-4.2%	-43.1%	-35.6%	1.0%	27.8%
AlphaProfit Core™ Model Portfolio	3.1%	1.8%	-39.9%	-27.6%	-5.4%	12.6%
DJ Wilshire 5000 Total Market Index	5.2%	4.7%	-32.4%	-22.2%	-5.5%	8.2%

* YTD refers to December 31, 2008 to May 31, 2009 period

Stock recommendations will be included in the June 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.