Stock Picks for August 14, 2007

SAIA stock pick exited with a small gain.  We understand this was a wild ride.  We think this position could have more upside, but it has higher risk for downside and sideways action for a while.  Too many hedge funds own this stock, and with the deadline for requests for redemptions coming up, the chance for significant selling in this stock is way too high. With only 5 positions out of 20 stock picks in our portfolio, the model portfolio is 25% stock and 75% cash.  With the hedge, 30/70.  This is right where we want to be.  Sub-prime is just starting, and we still believe there is more downside.  Financials still can damage the markets when they start reducing earnings targets.  Hedge funds can sell more.  Bond liquidity is still bad.  Much more.  Smart money is right where we are.  Given the huge returns in our model portfolio over the past 9 months, a few weeks on the sidelines is more than earned. The good news?  The portfolio is outperforming the general markets handily. We are not trying to pick a bottom, we do not believe this is possible.  However, we are managing risk in our entry to new positions.  We have 9 stocks we are watching right now.  We have transitioned our screener over to 'bear' market parameters, but we are not sure that the bulls are gone.  A few more weeks will tell.  Be patient, and be aware of opportunities.  Monitor email closely, we may send new entries intraday if there is a huge 300+ point drop again.  There are a few positions we would love to get on this type of drop.