We had hoped to get the Report out over the weekend but it didn't happen. The upside is that we have the opportunity of one more day of market action to help grab the bull by the horns, so to speak, and to throw out some stocks that we prefer not to continue owning. We seldom make so many changes but it may be important to get into winners now before they run away, as looks as if may happen.

This Report comes out ahead of the Fed's interest rate announcement, but we doubt that will mark the end of the world for great stocks. Our experience over the past few months has been that our stock selections, on balance, have done very well. Once in a while one has fallen out of bed but this will have caused serious damage only if you held only our losing selections with having corresponding winners. It is worth reminding our subscribers that on balance you make money if you have two equal holdings, one of which doubles and the other halves.

This has truly been a market of stocks as the indexes generally have been down over the past three months even as some stocks have done wonderfully. The difference between the two has sometimes occurred as a result of disappointing profits suddenly hitting even stocks that otherwise had excellent chart patterns. Among these we now have to include our holding in Hewlett Packard, which we are dumping just short of break-even. Essentially, we love the company and its stock. However, recent experience has shown that it seldom pays to pass on the opportunity to dump a failing stock early and to go into one that has a strong chart, ideally one making new highs.

Market Conditions

Regardless of what the Fed does with interest rates, it is our view that in all likelihood the bottom of the three-month correction is now in place, or not far from being in place. If we are right in assuming that stocks generally have stopped going down, then those stocks that have been strong should soar, most likely continuing higher into the New Year. Market action in our energy stocks has been quite poor. Aggressive investors may care to shift from some or all of them. It is our view, which may prove wrong, that economies forced on companies in this sector by low oil prices will lead to immense profitability even if energy prices come back quite a bit. Oil at $18 per barrel should be quite a bonanza compared with its earlier price around $10.

Stocks to Sell

We are selling the following stocks, mainly because they have been acting poorly and even more especially because we believe the capital can be better invested elsewhere:

Electronic Data Systems (EDS)
This is Ross Perrot's former company. We don't know why the stock has been acting so poorly but we cannot escape the fact that it's been a dog.

Intel (INTC)
This stock really hasn't been acting badly but we think the capital can be better invested elsewhere. We have found convincing the story in this week's Barron's that the company may be losing its competitive edge, and that it is far too richly priced relative to its expected growth rate.

IBM
Much the same goes for Big Blue, which we understand may not have the
managerial capacity to justify its current stock price. See also this week's Barron's for reviews of books on IBM.

Lucent Technology (LU)
We got into LU by way of the takeover of Ascend. The stock has not been acting well. In any case, Nortel does most of the same things and is doing far better. It sells at a very high P/E relative to its growth rate and therefore the stock could be vulnerable and/or it might continue to languish.

Fidelity Adv Korea (FAK)
Korea seems to be faltering. In order to maintain a position in developing markets, make a direct substitution into India Fund and/or Japan OTC Equity Fund, both of which are doing wonderfully.

There is a case for dumping Novell, but we suspect that it could pay off in time to hold the stock a little longer now that it is so severely oversold.

New Recommendations

It's always a challenge to keep the list of our recommendations at a manageable length because it's tempting to latch on to every next stock that is performing wonderfully. We would recommend a direct substitution of money from the stocks we are selling into one or more of the following, as well as ones marked as timely to buy on the existing list.

Data General (DGN) $23.00
This stock has just made a new high and is coming out of a base that suggests that the stock may be blasting off.

Oracle (ORCL) $46.50
By some people's standards we may be coming a bit late to this stock. However, it has the kind of chart that suggests that it could be starting another huge leg up.

Wal-Mart (WMT) $50.27
This stock has been shaping up for a while after going sideways for some time. WMT is only now really getting going in overseas markets. We think it can clean up overseas, particularly in Europe where their competitive marketing should make the company an international powerhouse like McDonalds and Coca-Cola. (Incidentally, MCD looks good but we far prefer WMT. The great thing about WMT is that it gives us an element of diversification away from high tech, health products and petroleum. We are intentionally not including any stocks in mining companies. They are
too cyclical and volatile and they seldom have really long runs. If you must buy a gold stock, look at Agnico-Eagle (AEM).

Action Ratings

The following is the legend for designating immediate action for our stock recommendations. The first code is B, meaning that the stock is timely to buy but the case for doing so right here is not overwhelming. Either the stock may have got ahead of itself and may be vulnerable to a retracement or else the stock has been performing disappointingly but may simply be regrouping. B+ and B++ indicate stocks for which there is a technical case to buy now, with plusses adding weight according to how many there are, up to a maximum of five. Stocks rated H are ones to hold, awaiting confirmation to buy more or to sell. SELL, of course, means what it says. It seldom pays to override this designation.

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

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

B 99/05/12 39.75 55.81 ADI Analog Devices
B+ 99/09/07 76.88 82.06 AMAT Applied Material
B+ 99/04/06 49.00 65.00 AMCC Applied Micro Circ (split on 99/09/10 2:1)
B 99/08/06 78.50 86.06 AMGN Amgen Co
H 99/06/14 30.63 28.63 AOG Alberta Energy Corp #
H 99/06/14 38.28 41.55 APA Apache
H 99/04/06 92.13 103.87 ASND Ascend Communications
SELL (acquired by Lucent 1.65 shares to 1)
B 99/09/07 84.94 84.13 BGEN Biogen
H 99/06/14 109.78 56.28 BPA BP Amoco Plc
H 99/09/07 57.69 53.00 BVF Biovail Corp #
H 99/08/06 26.38 29.56 CHIR Chiron Co
B++ 99/05/14 40.69 48.69 CLS Celestica #
B 99/05/12 117.50 70.50 CSCO Cisco (split on 99/06/21 2:1)
B 99/06/14 14.59 18.30 CXY Canadian Occidental Petroleum #
SELL 99/05/12 54.61 51.52 EDS Electronic Data System
B++ 99/04/06 132.13 76.50 EMC EMC (split on 99/05/28 2:1)
H 99/08/09 86.31 40.06 ENE Enron Corp (split 99/08/13 2:1)
B 99/06/14 31.13 32.31 ERICY Erickson
B+ 99/04/06 51.50 61.38 FLEX Flextronics
H 99/09/07 60.19 43.00 GENZ Genzyme
B 99/06/14 60.14 68.75 GLW Corning
H 99/08/09 48.75 39.63 HAL Halliburton Co
SELL 99/05/14 84.52 83.08 HWP Hewlett-Packard
SELL 99/05/12 220.77 119.63 IBM IBM (split on 99/05/26 2:1)
SELL 99/08/19 77.44 76.94 INTC Intel Corp
B++ 99/09/07 113.75 125.00 JDSU JDS Uniphase Cp #
H 99/04/06 60.83 63.64 LLTC Linear Tech Corp
B 99/04/06 32.75 55.63 LSI LSI Logic
H 99/05/12 25.06 17.34 NOVL Novell
B++ 99/04/06 163.19 93.81 NOK Nokia (split on 99/04/09 2:1)
B 99/04/06 65.66 53.64 NT Nortel Networks # (split on 99/08/19 2:1)
B+ 99/06/14 93.56 102.75 PHG Phillips Electronics
B++ 99/05/12 106.06 97.94 PMCS PMC Sierra (split on 99/05/14 2:1)
B 99/05/12 49.88 77.25 QLTI QTLI Phototherapeutics #
H 99/06/14 21.39 21.22 SDC Santa Fe International
H 99/06/14 35.97 48.92 SFA Scientific Atlanta
B++ 99/04/06 53.75 75.63 SLR Solectron
B 99/08/19 129.02 155.81 SNE Sony
B++ 99/04/06 130.94 96.53 SUNW Sun Microsystems (split on 99/04/06 2:1)
H 99/08/06 31.00 29.81 TLM Talisman Energy Inc #
B 99/04/06 109.48 90.34 TXN Texas Instruments (split on 99/08/16 2:1)
H 99/09/27 186.00 171.19 YHOO Yahoo!

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 6.63 8.25 FAK Fidelity Adv Korea
B++ 99/04/06 8.88 12.56 IFN India Fund
B++ 99/04/06 8.05 14.48 JOF Japan OTC Equity Fund
SELL 99/04/06 11.00 12.44 KF Korea Fund

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