Agora Financial’s Rude Awakening

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Laguna Beach, California

• Dow soars as pie-in-the-sky replaces market-to-market pricing,
• Sorting the wheat from the chaff in the explosive small cap universe,
• Three penny stocks that are “swinging for the fences,” and more…

Eric Fry, reporting from Laguna Beach, California…

The Dow Jones Industrial Average soared (temporarily) through 8,000 yesterday for the first time since February 10. By the close of the trading session, the Dow held on to a 216-point gain – reducing its loss for the year-to-date to single digits. The apparent inspiration for yesterday’s jubilation was the news that financial firms may resume lying about the values of the mortgage securities on their books.

Actually, it’s not technically lying anymore because it is legal. Or maybe it’s just legal lying; we’re a bit confused. In any event, here’s the skinny, according to Bloomberg News:

“The Financial Accounting Standards Board, pressured by U.S. lawmakers and financial companies, voted to relax fair-value rules that Citigroup Inc. and Wells Fargo & Co. say don’t work when markets are inactive. The changes approved today to fair-value, also known as mark-to-market, allow companies to use ‘significant’ judgment in valuing assets to reduce writedowns on certain investments, including mortgage-backed securities. Accounting analysts say the measure, which can be applied to first-quarter results, may boost banks’ net income by 20 percent or more.”

And the stock market investors be singin’, “Legalize it. Don’t criticize it. Legalize it, and I will advertise it…” (A heartfelt Rude tribute to Peter Tosh, may he rest in peace).

If the powers that be had realized that legalizing deception could revive the financial markets more effectively than trillions of dollars of bailout monies, they would certainly have legalized it long ago. In fact, after a 280-point Dow rally, deceit feels more like a virtue than a vice.

But let’s not look a gift rally in the mouth. Ample time remains to find fault. Let’s just enjoy the blessings of the day, no matter how fraudulent their source. Let’s focus on seizing the benefits of the moment. In that spirit, we’ll toss out the following observation:

The baseball player who struck out more than any other man to play the game is in the Hall of Fame? How did this happen? Was it a sympathy vote by the Baseball Writers’ Association? Probably not; the guy also hit a lot of home runs. His name is Reggie Jackson – aka, Mr. October. Jackson racked up a staggering 2,597 strikeouts during his Big League career, but homered 563 times. That home run tally is 11th on the all-time list, but would be about 6th on the all-time list, adjusted for steroid use.

Here at Agora Financial, we’ve got a line-up full of singles and doubles hitters. We like it that way. But no investment lineup would be complete without a couple of guys who can hit the long ball. Do they strike out a lot? Yes. But only because they are swinging for the fences. Fortunately, they also connect quite often.

One of our resident long-ball hitters is Greg Guenthner, who steps to the plate each day as the editor of Bulletin Board Elite. In today’s edition of the Rude Awakening, Greg outlines some of the processes he uses to identify and monitor wining investments…

— Bulletin Board Elite Presents —

Your “30-Day Retirement Plan”

One Month and…

Three “Flash Action” Market Moves Could Be…

Your Chance to Turn $500 into $14 Million

It’s happened before. It could happen again — starting as early as next week…

So will it happen to you…? Read On Here to Find Out.

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Picking Penny Stocks
By Greg Guenthner, editor of Bulletin Board Elite

The small-cap universe is packed with thousands of stocks. And we know it can be a daunting task to find just two or three solid names… In fact, readers e-mail us every single day to ask how to search for the best penny stocks.

With that in mind, here are four tools to help you find the best small-cap and penny stocks for your portfolio:

1) Stock Screeners – A stock screen is one of the most effective ways to pick up on the best stock plays the market has to offer. Brokers and analysts on Wall Street use screens to cut through the noise and find some of the best investment opportunities available.

Stock screeners are applications that look through a list of every stock on the market, and find the ones that meet your specific criteria. For example, when you ask for a stock with a price-to-earnings (P/E) ratio of less than 14, the screener searches the database and only returns the stocks whose P/E ratio is less than 14.

Once you get comfortable with some financial terminology, you can combine metrics to ask your stock screen whittle down the broader market to just a few stocks that you think are worth checking out…

You don’t have to be a Wall Street hotshot to run a screen. There are tons of free stock screeners out there that anyone can use. You can find screeners online at financial sites like Google Finance or Morningstar, or you can download desktop screeners like the aptly named Stock Screener Lite.

2) The SEC Database – The Securities and Exchange Commission is the first resource you should tap when you’re ready to research a specific stock. Almost all public companies — large and small alike — are required to file quarterly and annual reports, financials, insider trading information, and more with the SEC.

All of this information is available to anyone with an internet connection. Just go to http://www.sec.gov and click “search for company filings” under the Filings & Forms section. From there, you will navigate to a user-friendly database. It’s completely searchable by company name and/or ticker symbol.

3) What’s everyone else saying? – So you’ve run a screen. Then you have picked out what you believe to be the best stocks to research. You’ve checked with the SEC database — and printed out the companies’ most recent 10-Qs. Now, it’s time to find out what everyone else is saying.

Search the web to see what analysts and other investors think of the stock. Don’t just read message board posts written by cheerleaders who only want to boost the share price. Gather a variety of opinions and forecasts.

One great way to do this is through the social networking site Twitter. Traders and investors alike use Twitter to communicate market information to anyone who wants to follow them. On the Penny Sleuth Twitter feed, we post daily stock updates on big movers and other helpful market information you won’t find in our daily columns.

4) What are insiders buying? – Monitoring insider buying is a great way to determine how those who run a company truly feel about its prospects. When a company insider lays down his own money to buy shares in his company at market prices, chances are that there is a very good reason.

Company insiders have intimate knowledge of how their particular business operates. They know when sales are likely to rise. They know about a new marketing strategy that could boost the company’s bottom line. They know about industry conditions that may be changing for the better. And they know the company’s balance sheet like the back of their hands.

A company insider might sell shares for any number of reasons. He or she might need cash for a major purchase or decide to donate a lump sum to charity (yes, this has happened). So an insider selling shares does not necessarily mean bad news for the stock in question.

However, an insider will buy shares of his own company for only one reason: He thinks the stock is set to make him money. There is “no better tip-off to the probable success of a stock” than insider buying, according to Peter Lynch. We couldn’t agree more. That’s why we’re always monitoring insiders’ buying trends.

Here are two names that have recently come up on our radar:

First up is ViroPharma (VPHM: NASDAQ). ViroPharma’s shares were battered in February when the company announced it did not achieve its desired endpoints with a Phase 3 trial for a treatment for cytomegalovirus.

After the announcement and subsequent drop in share price, four different insiders purchased VPHM stock for $3.97–4.79 per share.

Next up is Evergreen Energy Inc. (EEE: NYSEArca). As shares sank to new lows between 30–40 cents, 10 insiders bought in. A few days later, Evergreen announced an agreement with Sumitomo Corp. to advance their joint K-Fuel project in Indonesia. The announcement sent shares soaring — the stock rose more than 100% just days after the announcement.

Of course, there was no way to know about the lucrative K-Fuel deal — unless you were a company insider with access to this kind of information. But thanks to Securities and Exchange Commission filings, we can keep tabs on insiders’ buys and sells…

The good news in late January has helped make EEE one of the few bright spots on the NYSE…shares of EEE are up 135% on the year (although the stock plummeted much of the latter half of ’08).

What do these company insiders know that we don’t? Only time will tell…

— Introducing Greg Guenthner’s Bulletin Board Elite —

The first time, I called it beginner’s luck…

When it happened again, I called it a coincidence…

But after 9 stocks in a “secret” market one ace analyst was screening JUMPED to major exchanges – and major profits – in just a 12-month span, I knew he was hunting in the right place for huge gains.

Starting RIGHT NOW, I’m offering those who respond to this dispatch a chance to turn even a small investment into a small fortune on this ace analyst’s best picks in this overlooked market

But you must act quickly: Only a few spots remain in this revolutionary services ranks.

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Did You Notice? Insider Buying at Electronic Game Card Inc. (OTCBB: EGMI)

[Ed. Note: Two days ago, Greg dispatched the following alert to the subscribers of Bulletin Board Elite:

“Another strong name in our portfolio is Electronic Game Card Inc. (OTCBB:EGMI). A couple of weeks ago, we wrote that despite EGC’s stellar fourth-quarter and full-year results, the stock price seemed to be at a standstill.

“But that’s not really the case anymore. ECG stock has quietly put together a nice little run, gaining 77% since March 12.

“Remember, we liked Electronic’s earnings — and we’re expecting a strong year thanks to new American Indian gaming revenues.

“And we’re not the only ones…

“A member of EGMI’s board bought 2 million shares over a period of two days last week. The two transactions totaled a little more than $1 million. That’s a million dollars of director Leonard Steinberg’s personal savings. He could have done whatever he wanted with this money and he chose to purchase shares in a company he knows inside and out.

“Our Electronic Game Card position is up double digits as of this morning. Since we’re now in the black, it’s time to hold onto shares and ride this new trend. EGC is growing, profitable and — in our view — undervalued. We see $1-plus in its future…”

Joel’s Note: Would you like to include a few “long hitters” in your portfolio? We’re talking a mere pittance invested in Greg’s penny stock picks that could turn into some serious wealth. Check out his Bulletin Board Elite investment service for more information.

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[Rude Endnote: Markets in Europe and Asia largely consolidated gains from earlier in the week overnight with most major indexes closing only a few basis points either side of Thursday’s global rally.

Here in Asia, Japan’s Nikkei 225 added another 0.3% to the week’s gains while Hong Kong’s Hang Seng inched higher by 0.15%. China slipped a mere 0.25% while the Aussies managed a 1.5% gain to close out the week on the All Ordinaries.

European markets, meanwhile, Germany’s DAX was performing the best of the major measures last we checked, up about 0.75%. France’s CAC was down about 0.14% while London’s FTSE had slipped by about 0.4%.

Crude gained slightly overnight, adding another thirty or so cents to fetch just shy of $53 per barrel this morning. Gold, fell again on news that the G-20 supports the IMF’s plans to liquidate up to 403 tons of gold to raise much needed capital. An ounce of the metal will fetch you $903 as of this writing.

We’ll be back with a Special Edition of your Rude Awakening tomorrow afternoon. We can’t say too much at this stage, but it promises to be, as our Pommy mates might say, one “bang-up” issue.

Until then…

Cheers,

Joel Bowman

The Rude Awakening
aussiejoel@the-rude-awakening.com