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April 8, 2005 -
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ICLUB Insider April 8, 2005
THE LATEST NEWS ON NAIC SOFTWARE BUILT BY ICLUBCENTRAL INC.

Summary


ICLUB Insider Special Issue:
Stock Tips for NAIC Investors
by Douglas Gerlach,
VP of NAIC Products, ICLUBcentral Inc.

Have you ever seen a headline like this on the cover of a popular financial magazine? "THE BEST STOCKS TO BUY FOR 2005!"

If you've done any study whatsoever on NAIC's methods for analyzing stocks and investing, you've probably learned that it's pretty near impossible to predict how stocks will perform in the short-term. However, if you have a five-year or longer horizon, the impossible becomes the possible, and individual investors can identify and buy stocks that will provide generous rewards over these long-term periods.

You might wonder just how the editors of these magazines come up with their lists each year, but you'd be missing the point. After all, the magazine business is about selling magazines -- not stocks -- and juicy headlines with lots of juicy promises about juicy profits pander to individuals with a get-rich-quick mindset who surely will never achieve their financial goals. And who ever thinks to check up on the success of those magazine's picks a year later?

This issue of the ICLUB Insider pays tribute to the manic "just buy it" headline tradition of the popular press -- but with a twist. We're not going to tell you which stocks to buy that will make you rich by next New Year's Eve; instead, we're going to introduce you to the time-tested tools and resources that ICLUBcentral provides that you put to work today to find ideas for stocks that just might help make you rich over the next five- to-ten years. If you've ever asked: "Where can I find ideas for stocks for my portfolio?", then this issue is for you.


Investor Advisory Service Beats Market for 5th Straight Year!

"The proof is in the pudding," as the old saying goes, and we've been eating some pretty tasty dessert around the ICLUBcentral offices ever since we received word of the Investor Advisory Service's 2004 performance.

As tracked by the Hulbert Financial Digest, IAS turned in a fifth consecutive year of market-beating performance, besting the Wilshire 5000's 12.6% return with our own 14.1% performance. And while we're pleased that IAS has continued its consistent performance, we're even more pleased with the long-term results of the IAS's picks. An investor following the newsletter's picks for the five years ending since January 31, 2005 could have earned a return of 79.8% on his or her investment (a 12.4% annual return), compared to a loss of 5.5% of the Wilshire 5000 Index (a -1.1% annual return) during the same period.

The IAS's longer-term performance has also been exemplary. In the nine years ending January 31, 2005, the IAS gained 14.1% a year, compared to 9.1% for the Wilshire 5000.

What's the secret to this incredible performance record? Nothing more than a solid adherence to NAIC's long-term growth stock selection manifesto. No matter what's going on in the overall market, the independent Chartered Financial Analysts of Seger-Elvekrog come up with three stocks each month that offer solid appreciation potential over the next five years.

These talented professionals bring to bear a wealth of knowledge, experience and understanding of companies and industries, and then distill this information into a two-page write-up for each stock. Each recommended company is presented with an analysis that examines the company's past and provides explanations of the reasons for each judgment item. What's more, IAS includes a completed Stock Selection Guide for each featured company. Not only do subscribers get three great ideas each month, they also get to learn much more about NAIC's stock selection methods.

After a company is recommended, IAS tracks it each month on an ongoing basis. If conditions warrant, IAS also issues sell recommendations for companies that fall off track.

But enough about the Investor Advisory Service for now. We've got to get back to work on those three great ideas we have up our sleeves for the May 2005 issue -- but you'll have to subscribe now in order to benefit from the IAS's great advice.

To subscribe to the Investor Advisory Service, download a free sample issue, or get more information, please visit http://www.iclub.com/ias/.


Need Ideas for Your Portfolio?
The "Complete Roster of Quality Companies" Has Them!

Many NAIC investors think of growth as the single most important attribute when investing in stocks. But ask any investor who bought a fast-growing company that later crashed and burned, and you'll learn that it's never a good idea to ignore the quality of a company when considering it for your portfolio.

On the Stock Selection Guide, you can consider the quality of a company by examining two areas.

First, take a look at the graph of sales and earnings in Section 1 of the SSG. It's not enough to find companies that have demonstrate growth of sales and earnings. You should consider the consistency of sales and earnings growth over the past ten years. If you can tell the difference between a straight line and a jagged line, you can determine how stable the company's growth has been in the past. The straighter the earnings line, the more predictable the company's growth, and the better the job that management has been doing in running the company. You will have far greater success forecasting the future growth for a company whose historical growth has been consistent.

The second place on the SSG where you can gain insight into the quality of a company is Section 2. It is vital that management can demonstrate its ability to control costs and maintain profit margins, so look closely at Section 2(a), the % Pre-Tax Profit on on Sales (also known as the pre-tax profit margins). These should be stable at the least, and it can be a good sign if the margins are increasing -- these are good indications that management should be able to sustain good growth into the future. If profit margins decline, on the other hand, you should be concerned -- this company probably does not have the level of quality that you should look for in any investment.

So where can you find companies that show these desirable quality attributes? One great source is "The Complete Roster of Quality Companies." Each month, ICLUBcentral scours 9,000 publicly-traded companies and identifies those few companies that meet our demanding standards of quality and includes them in "The Complete Roster of Quality Companies." Each one of these companies will show good levels of consistency in their growth of earnings and sales, and stable or increasing pre-tax profit margins.

In addition, "The Complete Roster" includes the Quality Rating of each company on a scale of 1 to 10, with 10 being those companies that will appear most attractive on the SSG. (This is the same Quality Rating used by NAIC Take Stock, by the way.) This helps you pare down the list to those few stocks that are most deserving of full-blown SSG analysis using NAIC Investor's Toolkit, NAIC Classic Plus or NAIC Stock Analyst.

Of course, even companies of the highest quality are never a good investment if the price isn't right, which brings us to the third criteria -- value. "The Complete Roster" won't tell you if a stock is right for purchase at the present price, but it does help you overcome the hurdle of knowing if a stock meets your minimum quality criteria. When you find a stock with a high Quality Rating in "The Complete Roster" that appears to be overvalued, the best thing to do is complete an SSG and then add that stocks to a watchlist in your SSG software program. Then, when the price reaches your Buy zone, you'll be ready to pounce.

If you subscribe to NAIC Take Stock, then you already receive "The Complete Roster" each month by e-mail. If not, you can still subscribe to it for $33 a year through the NAIC Investing Software Support and Maintenance Program. This subscription provides premium support and updates for any of your NAIC investing software programs along with the monthly "Complete Roster."

For more information on "The Complete Roster of Quality Companies," including a sample issue, and NAIC Investing Software Support, please visit http://www.iclub.com/isupport.


NAIC Stock Prospector Tip:
Automatically Load SSGs into Toolkit or Stock Analyst

When it comes to finding "good stocks," one of the best tools at your disposal is NAIC Stock Prospector. NAIC's official software for screening can help you search through the universe of publicly-traded stocks and identify those companies with the best chance of meeting your portfolio objectives. (Or, to put it another way, NAIC Stock Prospector can help you find stocks that look good on the Stock Selection Guide.)

The software supports both beginners with an easy-to-use Wizard interface, and experienced users with completely customizable search and report features. But no matter whether you use the screening wizard or construct your own screens, it's easy to begin your SSG analysis of the companies that meet your criteria with Stock Prospector's built-in export function.

Stock Prospector's often-overlooked export feature allows you to automatically import SSG data files into NAIC Investor's Toolkit, NAIC Classic Plus or NAIC Stock Analyst for further study.

After you have executed a screen and displayed the results in Stock Prospector's report area, select the the "File > Export records to Analysis Program" menu option (or click the Identify button on the toolbar). This will open a window where you can select some or all of the companies in the screen that you wish to analyze further, and allow you to designate the directory where the file will be saved. Click OK, and Stock Prospector will create a file called "SSGC.FLS" on your computer (which is a list of the companies and ticker symbols for the companies that you selected for export).

Note: You must be online when you select this option, since Prospector also uses NAIC's Online Premium Services (OPS) feature to download and save the SSG files on the list from OPS to your computer.

Once you have created the SSGC.FLS file, open NAIC Stock Analyst and select "File > Open > Prospector Stock List," and select the *.FLS file that was exported from Prospector. NSA will automatically import the SSGs to your database and/or to your screen. TIP: Don't try this with too many SSG files all at once, particularly if you choose to view all the SSGs on your screen. Keep the list small, to a dozen or so the first time you try this function.

If you use Investor's Toolkit, you can also import the SSGs by selecting File > Import Company > Import Several at Once > Other Data Files. Then navigate to the directory where Stock Prospector was installed (which should be C:\Program Files\NAIC Software\Stock Prospector\ by default), and select the NAICDATA folder. Select any or all of the Available SSG files, click the ">> Add >>" button to add them to the selection list, and click OK when you're done. Toolkit will ask into which portfolio you'd like to add the stocks (or if you'd like to create a new portfolio). It can be useful to create a separate portfolio each time you import screening results and name it accordingly, such as "Prospector Screen 2005-04-05." This will help you identify these companies when you start reviewing their SSGs. Note: If you already have any of these stocks in any Toolkit portfolio, the program will pause the import process and ask if you'd like to overwrite the existing SSG file. This is another good reason why it's better not to try to import dozens of stocks at one time, since you can't halt the import process once it's begun.

With NAIC Classic Plus, select File > Open > Stock Selection Guide from the menu, then click the "NAIC and NAIC Classic Datafiles" tab. Navigate to the C:\Program Files\NAIC Software\Stock Prospector\NAICDATA\ directory, and then select an SSG file to open. With NAIC Classic Plus, you'll have to import the files individually instead of all at once.

Once you've gotten a handle on how the export function works in NAIC Stock Prospector, you'll find yet another reason to make screening a regular part of your investment research process.

For more information on NAIC Stock Prospector, please visit http://www.iclub.com/prospector/.


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Copyright 2005 ICLUBcentral Inc. All rights reserved.

ICLUBcentral is licensed to use the investing methodologies and trademarked forms of the National Association of Investors Corp. (NAIC), a national nonprofit organization dedicated to investor education. NAIC assumes no liability or obligations with respect to the investment education information or other content presented in the ICLUB Insider. For more information on NAIC, please visit http://www.better-investing.org.

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