WiserTrader Industries Monthly

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February 2008                          Prescott, Arizona                     Contact Editor

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Contents

• Portfolio
• Sell Stop Settings
• Leading Sectors and Industries
• Industries Rising in Rank
• Industries Falling in Rank
• Lagging Industries

Published the 3^rd Tuesday of the month     

Subscription to Weekly Newsletter

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Top-down stock selections are based on leading industries in leading sectors with a focus on stocks that show growth in market share, earnings and sales.    

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1.0 Top-Down Portfolio

     Currently the portfolio shows a capital short fall of -7.6% for 2008, including broker fees, as summarized in Table 1A.

Table 1A

Top-Down Portfolio Performance

Top-Down Trading in 2008 ($7809.07 Initial Capital)		% Initial Capital
Closed trades in 2008 =	5
Average Trade Size =	$1,000.00
Total Closed Position Share costs =	$5,000.00
Gross Profit on Closed Positions =	-$553.32	-7.09%
Number of Open Positions =	2
Cost of Open Positions =	$2,000.00
Gross Profit on Open Positions in 2008 =	$23.30	0.30%
Total Gross Profit =	-$530.03	-6.79%
Broker Commission ($9.99/trade) =	-$59.94
Subscription Cost to date =	$0.00
Net 2008 Profit After Expenses =	-$589.97	-7.55%
Cash =	$5,454.79
Current Capital * =	$7,219.10	2/19/08

 * includes stocks bought in 2007 and sold in 2008

     Current stocks are listed in Table 1B.  TIP is an inflation-protected US Treasury ETF and FXE is a currency ETF for the Euro.  Stop loss settings are explained in Section 2. 

Table 1B

Top-Down Portfolio

Top - Down Portfolio
Stock	Begin Date	Begin Price	Last Date	Last Price	Gross P/L (%)	Status	Sell stop	Metrics
CNX	12/31/07	71.52	1/4/08	65.48	-8.4%	closed	66.22	Growth
BBY	12/31/07	52.51	1/4/08	47.48	-9.6%	closed	48.04	Growth
PBR	12/31/07	115.24	1/16/08	98.09	-14.9%	closed	106.93	Growth
SRP	12/31/07	16.98	1/22/08	14.90	-12.2%	closed	15.28	Defensive
CPD	1/16/08	17.00	1/28/08	15.27	-10.2%	closed	15.30	Defensive
TIP	12/31/07	105.26	2/19/08	106.90	1.6%	Buy	98.17	Defensive
FXE	12/31/07	146.40	2/19/08	147.53	0.8%	Buy	134.42	Defensive
As of market close on			2/19/08		Trailing Stop Settings are			Bearish
Net capital for 2008 =			-7.6%				f =	25.0%

     Sector and industry rankings are determined by the percent increase in industry composite index values over the previous 4 weeks.  Industry rank ranges from a high of 1 to a low of 215 based on a list of 215 industries in the Yahoo Finance industry classification system.  Sectors rankings based on the average monthly gain of their industries are listed in Table 1C.  The leading sector for the month was basic materials.

Table 1C

Sector Rank

S Rank	Sector *	Last	1 wk	2 wks	3 wks	4 wks	1 mo
1	Basic Materials	3.1%	4.6%	-1.9%	4.1%	5.2%	12.3%
2	Transportation	-0.2%	-0.7%	0.3%	4.1%	5.1%	9.0%
3	Consumer Cyclical	0.4%	1.1%	-1.7%	2.5%	5.3%	7.2%
4	Industrial Goods	0.7%	0.7%	-3.9%	4.1%	5.2%	6.0%
5	Energy	2.1%	4.1%	-1.2%	2.0%	0.8%	5.8%
6	Financial	-0.6%	-0.4%	-5.8%	2.4%	9.5%	5.1%
7	Services	0.0%	-0.5%	-2.7%	3.1%	4.8%	4.6%
8	Conglomerates	-0.1%	1.3%	-3.5%	2.8%	1.7%	2.2%
9	Consumer Noncyclical	0.4%	1.4%	-2.3%	1.8%	1.2%	2.0%
10	Technology	-0.8%	-0.1%	-3.4%	2.3%	0.6%	-0.7%
11	Utilities	0.2%	0.9%	-3.2%	4.1%	-2.4%	-0.8%
12	Healthcare	0.1%	0.6%	-2.2%	2.0%	-2.5%	-2.1%

     Within the basic materials sector aluminum is ranked at the top, being 3^rd out of 215 industries, as listed in Table 1D.  Nonmetallic mineral mining is next, in the 5^th position followed by industrial metals & minerals in the 6^th position.

Table 1D

Basic Materials Industries

Rank	Industry	Today	1 wk	2 wks	3 wks	4 wks	1 mo
12	Agricultural Chemicals	3.3%	4.8%	0.5%	3.7%	7.3%	17.1%	C's
3	Aluminum	1.2%	7.9%	-1.8%	9.7%	5.2%	22.3%	C's
37	Chemicals - Major Diversified	1.0%	1.9%	-1.4%	2.6%	7.4%	10.7%	C's
15	Copper	5.1%	6.5%	-0.6%	9.4%	-0.5%	15.3%	C's
110	Gold	5.2%	2.2%	0.7%	-6.0%	6.8%	3.3%	C's
6	Industrial Metals & Minerals	4.4%	8.5%	-6.7%	10.7%	7.6%	20.6%	C's
5	Nonmetallic Mineral Mining	3.0%	5.4%	-0.8%	3.4%	11.9%	21.0%	C's
152	Silver	4.7%	1.6%	1.8%	-6.3%	3.2%	0.1%	C's
62	Specialty Chemicals	1.2%	2.3%	-1.5%	4.5%	2.8%	8.2%	C's
54	Steel & Iron	3.5%	6.6%	-9.4%	10.8%	1.9%	9.0%	C's
68	Synthetics	1.1%	3.5%	-1.6%	2.4%	3.3%	7.7%	C's

     Clicking on the C’s next to aluminum brings up a list of 7 companies that can be copied and pasted into the “Companies” spreadsheet, shown in Table 1E.  Each company meets average daily volume and trading exchange requirements and most have shown a respectable gain over the past month.

Table 1E

Aluminum Companies

As of 1-19-08

				Last	% Chg	% Chg	% Chg	Rank	Rank
Symbol	Exchange	Avg. Vol.	Volume	Price	Last	1 wk	1 mo	1 wk	1 mo
AA	NYSE	12,229,500	12,825,227	$36.20	1.34%	6.3%	25.0%	6	3
ACH	NYSE	1,511,110	1,625,029	$45.26	1.53%	18.9%	12.7%	1	6
CENX	NasdaqNM	785,873	1,350,084	$61.75	-1.73%	7.7%	42.9%	4	1
KALU	NasdaqNM	203,013	1,017,684	$71.97	5.00%	12.2%	14.9%	3	5
NX	NYSE	520,449	180,324	$52.56	-0.57%	0.8%	4.7%	7	7
SPSX	NasdaqNM	277,498	494,541	$26.83	-1.69%	14.2%	41.7%	2	2
TG	NYSE	245,552	223,143	$15.22	5.99%	7.0%	15.9%	5	4

Table 1F

Aluminum Companies Market Share and Growth

 As of 1-19-08

		Mkt Share	Sales	Earnings
Stock	Company	1 Year	Growth	Growth
		Gain	1Y	1Y
AA	Alcoa, Inc. (AA)	-11.4%	1.2%	15.5%
ACH	Aluminum Corp. of China Ltd. (ACH)	12.8%	63.6%	56.6%
CENX	Century Aluminum Co. (CENX)	-0.4%	15.4%	-115.9%
KALU	Kaiser Aluminum Corporation (KALU)	-0.1%	24.6%	10.7%
NX	Quanex Corp. (NX)	-0.3%	0.8%	-14.8%
SPSX	Superior Essex Inc. (SPSX)	-0.2%	1.9%	1.3%
TG	Tredegar Corp. (TG)	-0.3%	-1.6%	-60.6%

     Although Aluminum Corp of China (ACH) gained only 12.7% over the past 4 weeks, its growth in sales, earnings and market share have been phenomenal.  So we will add ACH to the portfolio with a -10% trailing stop due to bearish market conditions.  The rest of the aluminum companies lost market share so we will not look further.  ACH gained 67% over the past 52 weeks.

     Following the same process for the nonmetallic mineral mining industry, and ignoring some of the over the counter stocks that have negligible price and volume, we find that Potash Corp. of Saskatchewan, (POT) had the highest growth in market share at 4.8% with a -2.1% decline in sales and a 22.6% growth in earnings.  POT had a 52 week price gain of 176% and is now at a 52 week high.  POT is being added to the portfolio with a -10% trailing stop.

     Following the same process for the industrial metals and minerals industry, also ignoring the many over the counter stocks that have negligible price and volume, we find that BHP Billiton Ltd. (BHP) had the highest growth in market share at 9.7% with a 22.8% growth in sales and a 39.3% growth in earnings.  BHP had a 52 week price gain of 52% and is now 16% below its 52 week high.  BHP is being added to the portfolio with a -10% trailing stop.

     Staying with what seems to have worked over the past month’s decline is another defensive position in the form of an Australian dollar ETF.  Inflation in Australia is picking up faster than it is here in the US.  Interest rate increases are likely while the US Fed is decreasing rates.  Investors seeking higher returns are likely to buy the Australian dollar and drive it up in price.  So we can add Currency Shares Australian Dollar Trust (FXA) to the portfolio, as well, with a -10% trailing stop.

2.0 Portfolio Sell Stop Settings

The trailing stop percentage T_SP for WiserTrader portfolios has been adjusted for accuracy and flexibility in keeping with the original intent.  When stocks are bought in a bullish market, an initial trailing stop percentage T_SPI = -20% is just about right.  However, the market can change.  A -20% trailing stop is too wide when the market turns bearish and a -10% trailing stop is too narrow when the market is bullish.  Also, there is the feeling that when profits grow beyond 40% (and we have seen several of these), a stock should have a progressively wider trailing stop.  So a 40% profit acts as a kind of transition point.  Each of these considerations is described graphically in Figure 1 for long positions.  The solid lines indicate the T_SP for bullish, cautious and bearish market conditions.

FIGURE 1

1. When the stock price remains within 40% of the buy price, the initial trailing stop percentage T_SPI varies according to market conditions.  For a long position,

· Bullish, T_SPI = -20%, as when the S&P 500 is above its SMA 30

· Cautious, T_SPI = -15%,  as when the S&P 500 is below its SMA 30

· Bearish, T_SPI = -10%, as when the S&P 500 SMA 30 slope is negative

     2. For a long position, when the maximum stock price is 40% or more greater than the buy price,

· T_SP is the wider of  T_SPI or

o f is the fraction of gains placed at risk,

§ Bullish, f = 0.5,  as when the S&P 500 is above its SMA 30

§ Cautious, f = 0.375,  as when the S&P 500 is below its SMA 30

§ Bearish, f = 0.25,  as when the S&P 500 SMA 30 slope is negative

o P_BUY is the buy price and

o P_MAX is the maximum price reached.

 3. The sell stop price P_SELL is,

Current Status:  Bearish

The S&P 500 is currently below its SMA 30. 

The S&P 500 SMA 30 slope is currently negative.

     Note: The signs for T_SP and T_SP1 are negative for long positions and positive for short positions.

	Bullish		Cautious		Bearish
	S&P > SMA30 SMA30 slope >0		S&P < SMA30 SMA30 slope >0		SMA30 slope <0
	Long	Short	Long	Short	Long	Short
TSP1	-20%	10%	-15%	15%	-10%	20%
f	0.5	0.25	0.375	0.375	0.25	0.5

    These settings are designed at worst to, (1) take a 20% loss, (2) break even when there is a 20% maximum gain and (3) walk away with at least half of a 40% or greater maximum gain.  At the same time the stock price is given room to vary.  Deviations from these settings for individual stocks are possible when their industry undergoes unusual activity. 

     If you follow these portfolios, keep in mind that they are only benchmarks which can not be matched exactly because of the round numbers used.  Entry prices are taken from the previous close and exit prices are taken from the close on the day that trailing stops are triggered.  You can either sell as soon as a trailing stop is triggered or wait until after the close and try to get better prices over the next few days.  Once out of a position, a stock is set aside for a period of about two months. 

3.0 Leading Industries

     The leading industries for the past month are ranked in Table 3A.  The leftmost column is the rank based on the previous 4-week percentage change.  The second column from the left is ranked by the number of positions an industry is above or below its 4-week average rank.  The third column from the left is the average of the first two columns.  Clicking on the industry name takes you to an industry summary page.  The “C’s” will display the companies in the industry.  The last three columns on the right are the percentage gains for the previous trading day, the previous week and the previous four weeks.

 Table 3A

Leading Industries

Rank [R]	Rank of Change   [C]	(R+C)/2	Industries	Companies	Last Gain	1 wk Gain	1 mo Gain
1	2	2	Wholesale, Other	C's	8.2%	13.4%	29.5%
2	1	2	Internet Service Providers	C's	-0.9%	14.0%	23.3%
3	6	5	Aluminum	C's	1.2%	7.9%	22.3%
4	190	97	Residential Construction	C's	1.4%	-3.0%	21.3%
5	14	10	Nonmetallic Mineral Mining	C's	3.0%	5.4%	21.0%
6	5	6	Industrial Metals & Minerals	C's	4.4%	8.5%	20.6%
7	213	110	Surety & Title Insurance	C's	-1.7%	-8.2%	18.9%
8	7	8	Basic Materials Wholesale	C's	1.8%	7.0%	18.7%
9	26	18	Shipping	C's	2.3%	4.0%	18.5%
10	56	33	Appliances	C's	0.7%	1.9%	18.0%
11	116	64	Toys & Games	C's	-0.3%	0.2%	17.9%
12	19	16	Agricultural Chemicals	C's	3.3%	4.8%	17.1%
13	179	96	Textile - Apparel Clothing	C's	-0.6%	-2.1%	16.0%
14	155	85	Railroads	C's	-1.0%	-1.0%	15.6%
15	9	12	Copper	C's	5.1%	6.5%	15.3%
16	166	91	Savings & Loans	C's	-1.7%	-1.5%	14.9%
17	212	115	Sporting Goods Stores	C's	-1.7%	-8.2%	14.5%
18	81	50	Music & Video Stores	C's	0.1%	1.1%	14.3%
19	109	64	Recreational Goods, Other	C's	2.3%	0.4%	14.2%
20	34	27	Lodging	C's	0.5%	3.1%	13.4%
21	90	56	Foreign Regional Banks	C's	1.9%	0.7%	13.4%
22	52	37	Building Materials Wholesale	C's	3.1%	2.1%	13.3%
23	170	97	Trucking	C's	0.1%	-1.6%	13.2%
24	201	113	Apparel Stores	C's	-1.7%	-4.6%	13.0%
25	27	26	Cement	C's	1.7%	4.0%	13.0%
26	167	97	Packaging & Containers	C's	-0.6%	-1.6%	13.0%
27	182	105	Regional - Southeast Banks	C's	-1.6%	-2.3%	12.8%
28	118	73	Office Supplies	C's	2.7%	0.1%	12.7%
29	172	101	Auto Dealerships	C's	0.3%	-1.7%	12.6%
30	39	35	REIT - Residential	C's	-0.4%	2.7%	12.3%
31	110	71	Industrial Equipment Wholesale	C's	0.8%	0.4%	12.2%
33	187	110	Printed Circuit Boards	C's	-0.5%	-2.5%	11.8%
32	4	18	CATV Systems	C's	0.2%	9.0%	11.8%
34	18	26	Rubber & Plastics	C's	-0.5%	4.9%	11.8%
35	185	110	Real Estate Development	C's	-1.9%	-2.5%	10.9%
36	107	72	Textile - Apparel Footwear & Accessories	C's	-1.6%	0.4%	10.8%
37	59	48	Chemicals - Major Diversified	C's	1.0%	1.9%	10.7%
38	10	24	Auto Manufacturers - Major	C's	3.8%	6.4%	10.6%
39	121	80	Rental & Leasing Services	C's	0.4%	0.1%	10.4%
40	89	65	General Entertainment	C's	0.3%	0.8%	10.1%

     Percentage gains for the top 20 leading industries are plotted in Figure 2.

FIGURE 2

4.0 Industries Rising in Rank

     Table 4A contains the industries that are moving up in position the fastest.  The 20 fastest rising in rank are plotted in Figure 3.

 Table 4A

Industries Advancing in Rank the Fastest

Rank [R]	Rank of Change   [C]	(R+C)/2	Industries	Companies	Last Gain	1 wk Gain	1 mo Gain
2	1	2	Internet Service Providers	C's	-0.9%	14.0%	23.3%
1	2	2	Wholesale, Other	C's	8.2%	13.4%	29.5%
53	3	28	Photographic Equipment & Supplies	C's	3.9%	10.6%	9.1%
33	4	19	CATV Systems	C's	0.2%	9.0%	11.8%
6	5	6	Industrial Metals & Minerals	C's	4.4%	8.5%	20.6%
3	6	5	Aluminum	C's	1.2%	7.9%	22.3%
8	7	8	Basic Materials Wholesale	C's	1.8%	7.0%	18.7%
54	8	31	Steel & Iron	C's	3.5%	6.6%	9.0%
15	9	12	Copper	C's	5.1%	6.5%	15.3%
38	10	24	Auto Manufacturers - Major	C's	3.8%	6.4%	10.6%
70	11	41	Oil & Gas Equipment & Services	C's	3.0%	6.3%	7.3%
127	12	70	Major Integrated Oil & Gas	C's	2.1%	5.9%	1.7%
134	13	74	Confectioners	C's	1.9%	5.7%	1.2%
5	14	10	Nonmetallic Mineral Mining	C's	3.0%	5.4%	21.0%
103	15	59	General Contractors	C's	4.0%	5.3%	4.0%
114	16	65	Metal Fabrication	C's	1.4%	5.2%	2.8%
188	17	103	Life Insurance	C's	2.0%	4.9%	-3.3%
34	18	26	Rubber & Plastics	C's	-0.5%	4.9%	11.8%
12	19	16	Agricultural Chemicals	C's	3.3%	4.8%	17.1%
55	20	38	Independent Oil & Gas	C's	2.2%	4.7%	8.8%
142	21	82	Food - Major Diversified	C's	0.0%	4.5%	0.6%
196	22	109	Heavy Construction	C's	2.0%	4.4%	-4.8%
93	23	58	Oil & Gas Refining & Marketing	C's	2.2%	4.3%	5.0%
75	24	50	Waste Management	C's	0.6%	4.2%	6.9%
97	25	61	Accident & Health Insurance	C's	0.2%	4.1%	4.4%
9	26	18	Shipping	C's	2.3%	4.0%	18.5%
25	27	26	Cement	C's	1.7%	4.0%	13.0%
45	28	37	Oil & Gas Drilling & Exploration	C's	2.6%	3.9%	9.6%
85	29	57	Technical Services	C's	1.2%	3.7%	5.6%
68	30	49	Synthetics	C's	1.1%	3.5%	7.7%
145	31	88	Multimedia & Graphics Software	C's	0.0%	3.4%	0.5%
151	32	92	Foreign Utilities	C's	0.7%	3.4%	0.1%
191	33	112	Meat Products	C's	1.1%	3.3%	-3.6%
20	34	27	Lodging	C's	0.5%	3.1%	13.4%
56	35	46	Aerospace/Defense - Major Diversified	C's	0.3%	3.0%	8.8%
153	36	95	Property & Casualty Insurance	C's	0.6%	3.0%	-0.1%
87	37	62	Broadcasting - TV	C's	-0.4%	3.0%	5.4%
86	38	62	Advertising Agencies	C's	0.0%	2.8%	5.4%
30	39	35	REIT - Residential	C's	-0.4%	2.7%	12.3%
74	40	57	Farm Products	C's	2.1%	2.6%	7.0%

FIGURE 3

5.0 Industries Falling in Rank

     A list of the industries declining in rank the fastest is given in Table 5A.  The 20 fastest declining in rank are plotted in Figure 4.

 Table 5A

Industries Declining in Rank the Fastest

Rank [R]	Rank of Change   [C]	(R+C)/2	Industries	Companies	Last Gain	1 wk Gain	1 mo Gain
193	176	185	Semiconductor - Specialized	C's	-1.9%	-1.8%	-3.7%
124	177	151	Semiconductor - Broad Line	C's	-0.3%	-1.9%	1.9%
205	178	192	Internet Information Providers	C's	-3.3%	-2.0%	-7.0%
13	179	96	Textile - Apparel Clothing	C's	-0.6%	-2.1%	16.0%
211	180	196	Technical & System Software	C's	-1.2%	-2.3%	-12.0%
199	181	190	Networking & Communication Devices	C's	-1.7%	-2.3%	-5.1%
27	182	105	Regional - Southeast Banks	C's	-1.6%	-2.3%	12.8%
190	183	187	Catalog & Mail Order Houses	C's	-0.5%	-2.3%	-3.5%
184	184	184	Telecom Services - Domestic	C's	-5.0%	-2.4%	-3.0%
35	185	110	Real Estate Development	C's	-1.9%	-2.5%	10.9%
163	186	175	Mortgage Investment	C's	-1.4%	-2.5%	-0.8%
32	187	110	Printed Circuit Boards	C's	-0.5%	-2.5%	11.8%
146	188	167	Closed-End Fund - Debt	C's	1.0%	-2.9%	0.4%
208	189	199	Specialized Health Services	C's	-0.9%	-2.9%	-9.7%
4	190	97	Residential Construction	C's	1.4%	-3.0%	21.3%
112	191	152	Regional Airlines	C's	-1.9%	-3.0%	3.1%
186	192	189	Investment Brokerage - National	C's	-2.1%	-3.0%	-3.2%
120	193	157	Auto Parts Wholesale	C's	-3.4%	-3.7%	2.0%
123	194	159	Major Airlines	C's	-2.3%	-3.8%	1.9%
122	195	159	Sporting Goods	C's	-2.0%	-4.3%	1.9%
89	196	143	Resorts & Casinos	C's	-0.2%	-4.3%	5.3%
48	197	123	Textile Industrial	C's	0.9%	-4.4%	9.3%
174	198	186	Investment Brokerage - Regional	C's	-2.7%	-4.4%	-1.4%
207	199	203	Healthcare Information Services	C's	-1.3%	-4.4%