March 30, 2004 -

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ICLUB Insider March 30, 2004 THE LATEST NEWS ON NAIC SOFTWARE BUILT BY ICLUBCENTRAL INC. Summary Investor Advisory Service: What's New In IAS NAIC Stock Analyst: Tips and Tricks Ralph Seger: Estimating Future Growth (Part 3 of a Series) The Easiest Way to Learn: NAIC Take Stock ICLUBcentral on the Road Investor Advisory Service What's New In IAS In response to subscriber feedback, we've recently made a number of changes and added new features to the Investor Advisory Service. With the April issue (published last Friday), we're pleased to offer another small, but hopefully useful, change to the publication. In each of the three sort pages (the ranking of companies by P/E ratio, symbol and total return), you'll now find that issue's three newly recommended companies highlighted. This will enable you to quickly identify new stocks in the database and compare current recommendations to all the other companies covered by the IAS. Just scan the pages and look for the gray shading that signifies a new recommendation. If you haven't yet checked out the continually-improving Investor Advisory Service, what are you waiting for? You can learn more details or download a sample copy at: http://www.iclub.com/ias/ NAIC Stock Analyst: Tips and Tricks There's no doubt about it -- NAIC Stock Analyst is one of the most powerful tools available for NAIC-style stock analysis. But all that power means that there are plenty of features that users must master in order to put the software to use. For instance, right-clicking at different places on each form pops up various menus that allow you to set options, change judgment items or turn on parts of the display. To aid you in learning about features that are available in NAIC Stock Analyst, we've put together a two-page reference sheet that's jam-packed with tips and tricks. Sit down in front of your computer with this tipsheet and you'll quickly come up to speed on most of the functions that NSA has to offer. What's more, it's completely free! You can download the sheet in Adobe Acrobat format from the Investing Resources section of ICLUB.com: http://www.iclub.com/investing/resources.asp One suggestion that we like comes from an NSA user who printed out the pages and placed them in a clear page protector (the kind that fits in a three-ring binder). Now, whenever that user fires up the program and begins to analyze stocks or a portfolio, the tipsheet is always handy. To learn more about NAIC Stock Analyst, please visit: http://www.iclub.com/nsa Part 3 of a Series: What Is the NAIC Stock Selection Guide All About? Estimating Future Growth by Ralph Seger; President, Investor Advisory Service (Editor's Note: NAIC's Stock Selection Guide is the cornerstone of the Investor Advisory Service, and is used by Ralph Seger and the analysts at Seger-Elvekrog to select and follow each company included in the newsletter. In this issue, we are pleased to offer the third of a multi-part series of tips that delve into the basics of the SSG and how it can best be used to identify stocks for your portfolio.) The judgment you use in estimating the future rate of growth of earnings is a very important one. This judgment will affect the valuation results of your SSG, including Relative Value, US/DS ratio and potential Total Return. A number of factors must be taken into consideration in making a judgment on a company's expected future rate of growth. Is it sustainable? Look at recent years performance, as well as Value Line's "Retained to Common Equity" (the sustainable growth rate). Look at the growth rate of total annual sales or revenue. It is more reasonable to expect geometric growth from a small or moderate base than from a large base of a mature company. A sapling will easily grow into a large tree if nourished, and a child will grow into an adult. However, the growth of a larger tree is not as dramatic as a sapling, and the growth of an 18-year-old does not match the rate of growth of a pre-teenager. In the long run, it is difficult to expect internal growth of EPS to exceed the rate of growth of sales or revenue. Bottom line growth (EPS) comes from top line growth (sales or revenue). The rate of growth of EPS can exceed the growth of sales on revenue under certain conditions: The pre-tax profit margin rises. However, is this sustainable? The number of shares is reduced by buybacks. Is this sustainable? Acquisitions are made, and the P/E ratio of the acquiring company is greater than the one acquired. This tends to boost EPS growth. How long can this be maintained? The tax rate goes down. Is this sustainable? Non-recurring factors boost profits. Is this sustainable? It is wise to exclude non-operating revenue and profits from the record of actual vs. expected results because they are temporary. Use PERT to make a judgment as to what to include as sustainable operating results and what may be non-operating results. The same applies to expenses. For retail companies, it is important to consider same-store or comparable store sales growth. This is the internal growth that comes from management's efficiencies, not from adding more retail outlets. Look carefully at reported top line growth. How much is internal, derived from existing operations, and how much is from acquisitions? Remember, it is internal growth that is important to sustainable operations. Finally, be wary of companies which try to dress-up results with "pro-forma" or "one-time" accounting, or of companies that employ accounting principles that vary from GAAP (Generally Accepted Accounting Principles). Such practices may be used to shed a favorable light on results that GAAP would suggest are unacceptable. To be continued.... For more information on the Investor Advisory Service, please visit http://www.iclub.com/ias/. The Easiest Way to Learn NAIC Take Stock NAIC's new Take Stock software makes it very, very easy to learn and apply NAIC's time-tested stock-picking techniques. It's simple enough for a beginner to get started immediately and convenient enough to help even advanced investors get a quick read on a stock. Most of us know someone -- a granddaughter, nephew, neighbor, father, or friend -- whom we wish was more savvy about investing. The perfect gift for that person is NAIC Take Stock, a great first step on the path of financial independence. For more details, please call NAIC at 1-877- 275-6242, ext 0, or visit: http://www.iclub.com/takestock. ICLUBcentral on the Road Representatives from ICLUBcentral regularly travel to NAIC chapter events across the country. Here's your chance to ask us questions in person, gain valuable investment insight and see our software products in action. Here are a few of the upcoming events at which you'll find ICLUBcentral represented: Central Ohio Investors Fair Doug Gerlach Columbus, OH Saturday, April 3rd, 2004 Massachusetts Chapter NAIC Stock Analyst Computer Lab Rich Beaubien Haverhill, MA April 10, 2004 Yankee Chapter Annual Meeting Rich Beaubien Old Saybrook, CT April 13, 2004 Minneapolis/St. Paul Investors Fair Rich Beaubien Brooklyn Center, MN April 23-24, 2004 Massachusetts Investor Education Fair Rich Beaubien Needham, MA April 30 & May 1, 2004 Maine Investor Computer Education Day Rich Beaubien Bangor, ME Saturday, May 8, 2004 If your chapter would like more information on the ICLUBcentral Speakers Bureau, please contact Doug Gerlach, VP of NAIC Products, at and we'll do our best to arrange a speaker for your event. Read past newsletters, subscribe, or unsubscribe at: http://www.iclub.com/newsletters/ Copyright 2004 ICLUBcentral Inc. All rights reserved.