Thomas, you've made some very valid points when you say:

> Let me deviate for a moment to talk about
> stocks that "arouse excitement".

> Some stocks are exciting. Microsoft, Yahoo,
> Oracle, Redhat. Even Coca Cola to some
> extent. These are companies everybody knows
> about, and chances are, many analysts follow
> them closely. What this means for you is
> that, chances are, it will be harder to find
> bargains amongst these stocks. It's
> definately not impossible, but it is harder.

> My preference, and this doesn't have much
> fundamental theory behind it, is to look at
> stocks that have between zero and two
> analysts looking at it. If none or only a
> small part of it is owned by institutions,
> great.

As a rule, we only buy those stocks that are either being covered by analysts, or that the big institutions have holdings in.

A good case in point is the proposed merger of AOL and Time Warner. AOL was the first stock I owned. Many investors' favourite. Several analysts know of it and cover it and many institutions own it. I did well on it and instead of selling all my shares at a nice profit, I sold half and held off on the balance because I wanted to hold some shares for the long term, take advantage of it's annual splits and just keep replaying it.

Last year when the proposed merger was announced, I watched my profits dwindle. Becuase we had a proposed announcement merger of new and old technology, and different P/E earnings for each company, analysts needed lots of time to properly evaluate the worth of the merged companies. And when they finally announced their findings, independent analysts from both companies got more than their share of press. For 2 days, this was the bulk of news that CNBC carried during it's trading hours.

And many who had dumped the stock again jumped on the bandwagon and scooped up AOL because the news was favourable. Unfortunately, I could not stand the wait and took a loss. But I'm still glad that I did, as I had no idea if/when we would ever see the high P/E that AOL is known for delivering. And of course, the merger may never go through. In which case, AOL shareholders will be thrilled at the news.

So, basically, all the stocks in my portfolio that have done well, have been those that have analysts covering them or are part of indexed funds, like the Merryl Lynch holders. The others, often the penny stocks, don't get promoted, so noone knows about them.

Investors are so fickle nowadays, do you want to be on the winning side of the fence or the other side.

I'd love to invest in some banking and mining/petroleum stocks, but they just don't get much coverage. In fact, several years ago I worked for a large gold mining group of companies and have always wanted to get back into owning some gold mining penny stocks. I did invest a few hundred in one. It's doing so poorly, I don't even look at it. I keep this loser because it's an over the counter stock, and the cost of selling would be more than the stock is worth. But who knows, the company could strike gold and my .30cents shares could be worth $40 in a few years. In my circle of friends, back in the mid-late 70s when the price of gold was going through the roof, I used to hang out with mining geologists. These guys made a killing. They bought into some of these young mining exploration cos. and many became relatively wealthy over a few years. Nowadays, we just don't see this happening in other sectors, other than tech.

Eliz.