Small and Mid-Cap Stocks Break Out

A month ago it was the NASDAQ index that broke out. In the meantime, we
have had a major setback in many high tech stocks and many quite different stocks have come into favor. It is remarkable how stocks that were previously acting well have generally continued to act well as long as they were acting well technically and, in addition, they were not already obscenely over-priced. Most of our selections have stood the test of the past month, but not all of them. The upside of waiting to make a decision until today is that the breakout comes at a great time to sort out some stronger and some weaker stocks. Some that were acting poorly for a while, like Northern Telecom and Seagram have come roaring back.

With the breakout in the SP Mid-Cap and the Value Line indexes confirmed today, we must shed a few selections that have been performing poorly and which, in addition, may get going again only slowly, if ever.

First the stocks to go out because they have been acting poorly and the capital can be deployed better elsewhere.

Sell: Carnival Cruises, Johnson and Johnson, Microsoft, and Staples. Also Emerging Mexico Fund has gone off the screen and we have missed what happened. It may seem strange to many that we are dumping Microsoft. This has been a must-own for so long, which is one reason why we bought it. The plain fact is, however, that there are much, much stronger charts for many other stocks. In the same general area, the case is much better to own IBM, Hewlett Packard and Motorola if you want to set a realistic objective of a 50 percent increase within a reasonable length of time.

We need to comment on some other stocks that have not performed as expected but which we are retaining. Newbridge Networks got hit on very poor earnings relative to what was forecast. It still looks as if revenue growth will be approaching 50 percentIf it comes through, then profits should also come back in line. The stock appears to be recovering from a climactic sell-off. Much the same for EMC which appears to have left behind a major island today on the daily chart. The weekly chart still looks great for both these stocks. Sun Microsystems looks a bit ambiguous for new money but we hang in for now. It could come back to life very fast. We thought there might be a problem with Nokia but it has come back strongly. It's such a great company that we were no doubt right to wait on it for a day or two.

Here is a list of new stocks that are acting exceptionally well and which are timely to buy right now with their last closing prices.

Analog Devices (ADI) $38.38

Broadcom Corp (BRCM) $92.69

Cablevision Systems (CVC) $84.88

China Fund (CHN) $9.89
Asia is recovering, or so the closed end fund charts say.

Cisco Sys (CSCO) $111.88
Great stock!

Electronic Data Systems (EDS) $55.05

IBM (IBM) $220.64
The best stocks always look expensive but it could put on another 50 percent.

Integrated Circuit Systems (ICST)

Motorola (MOT) $85.52
Great company and a particularly strong chart!

PMC Sierra (PMCS) $105.63
An old favorite.

QLT Phototheraputics (QLTI) $49.25 #
A bit speculative at current prices but it may have a cure for some cancers, as well as a product line that could drive the stock a great deal higher. Great chart!

Tyco International (TYC) $87.81
A less well-known version of Berkshire Hathaway but more in tune with current market conditions.

Novell Inc. (NOVL) $25.06
Another old favorite.

Diageo plc (DEO) $47.09
A UK wine and beer giant with mega value as well as a great chart to buy right now.

Stocks marked # are eligible for Canadian RSP funds. Otherwise there is a 20pc restriction on foreign stocks held in these accounts.

Current Recommendations:
(Entry Date, Entry Price, Last Close, Code, Name)

99/04/06 49.00 52.00 AMCC Applied Micro Circuits
99/04/06 92.13 96.25 ASCND Ascend Communications
SELL 99/04/06 50.23 43.33 CCL Carnival Cruises
99/04/06 132.13 107.25 EMC EMC
99/04/06 51.50 51.63 FLEX Flextronics
SELL 99/04/06 93.63 91.69 JNJ Johnson and Johnson
99/04/06 60.83 58.13 LLTC Linear Tech Corp
99/04/06 32.75 37.44 LSI LSI Logic
99/04/06 163.19 78.69 NOK Nokia (split on 99/04/09 2:1)
99/04/06 33.69 31.81 NN Newbridge Networks #
99/04/06 65.66 73.22 NT Nortel Networks #
SELL 99/04/06 95.19 79.88 MSFT Microsoft Corp
99/04/06 46.75 52.75 PCLE Pinnacle Sys
99/04/06 41.09 46.38 QWST Quest Communications
99/04/06 90.66 51.50 SONE S1 Corp (split on 99/05/07 2:1)
99/04/06 53.75 52.13 SLR Solectron
SELL 99/04/06 33.75 27.06 SPLS Staples
99/04/06 130.94 60.31 SUNW Sun Microsystems (split 99/04/08 2:1)
99/04/06 109.48 107.70 TXN Texas Instruments
99/04/06 52.38 59.63 VO-T Seagrams #

In addition we recommend the following Closed End Funds, based on the assumption that Third World economic downturns are not going to last forever and that their stocks are now showing superb technical strength

SELL 99/04/06 7.56 7.75 MEF Emerging Mexico Fund
99/04/06 6.63 8.69 FAK Fidelity Adv Korea
99/04/06 8.88 9.75 IFN India Fund
99/04/06 8.05 8.42 JOF Japan OTC Equity Fund
99/04/06 11.00 12.94 KF Korea Fund

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