The Stock Trader's Almanac

[Stock]

Almanac Investor Alert
FREE Lunch 2008 Is Served 12/21/2008

This “Free Lunch” strategy is only a short-term strategy reserved for the nimblest traders. It has performed better after market corrections and when there are more new lows to choose from. We just experienced the fifth worst bear market since 1900 and we suspect that we have already begun a new bull market. There are a many viable and interesting candidates this year.

However, small caps tend to underperform at the beginning of new bull markets as smaller investors and speculative hedge funds that mostly trade them are still reeling from the damage of the recently ended bear market. This has us concerned that the January Effect for small caps to outperform big caps starting in mid-December may be more muted this year if it materializes at all. This could impact our annual Free Lunch Menu of bargain stocks as many of these beaten-down issues are of the smaller variety.

Investors tend to get rid of their losers near year-end for tax purposes, often hammering these stocks down to bargain levels. Over the years the Almanac has shown that NYSE stocks selling at their lows on December 15 will usually outperform the market by February 15 in the following year.

We have come to the conclusion that the most opportune time to compile our list is on the Friday before Christmas. This allows us to capitalize on the Santa Claus Rally and it also comes immediately after quadruple witching which further depresses already distressed equities. It also gives us the weekend to evaluate the issues in greater depth and weed out any glaringly problematic stocks.

Our basic parameters are that the stock set a 52-week low on Friday December 19. Preferred stocks, funds, splits, special high dividends and new issues are eliminated. In addition, we eliminated any stocks that looked questionable or thinly traded and all those not down more than 45% from their 52-week high or down more than 95%.

If you buy these stocks, sell them as soon as you have a significant gain. The stocks all behave differently and there is no automatic trigger point to sell at. Standard trading rules do not apply for these trades. You should be out of all of these stocks between the middle of January and the middle of February. Advice a la G.M Loeb, never forget why you bought a stock. Also, be careful not to chase these stocks if they have already run away.

DISCLOSURE NOTE: Officers of the Hirsch Organization do not currently own any of the shares mentioned. However, we may participate in the Free Lunch Strategy.

As a reminder, this will be our last email Alert for 2008. The next Alert will be the Santa Claus Rally Alert on January 5, 2009. But do check the blog for any interim comments and observations.

Happy New Year & we wish you all health & prosperity in 2009!

2008 FREE Lunch Menu of Bargain Stocks
88 Friday-Before-Christmas New Lows

[52-Week 52-Week % Down 12/19/2008 Low High From High Close]

NYSE

AAV Advantage Energy 3.88 13.53 - 71.3% 4.03
AIB Allied Irish Banks Plc 4.55 47.72 - 90.5% 4.59
BXC Bluelinx Holdings 1.09 7.54 - 85.5% 1.19
CAP CAI International 2.90 20.44 - 85.8% 2.90
CT Capital Trust 3.12 38.84 - 92.0% 3.95
CSV Carriage Services 1.66 9.50 - 82.5% 1.86
EPL Energy Partners 1.67 16.50 - 89.9% 1.74
FBN Furniture Brands Intl 1.66 15.46 - 89.3% 1.66
GGC Georgia Gulf 1.15 9.00 - 87.2% 1.15
IRE Gov & Co Bank of Ireland 3.97 63.72 - 93.8% 4.07
HNR Harvest Nat Res Inc 4.30 13.43 - 68.0% 4.50
HIT Hitachi 41.27 77.33 - 46.6% 41.43
ITP Intertape Polymer 0.67 3.59 - 81.3% 0.68
KED Kayne Anderson Energy 7.04 25.62 - 72.5% 7.40
MWE Markwest Energy 8.20 38.50 - 78.7% 8.83
SNN Smith & Nephew 31.25 69.20 - 54.8% 31.56
THC Tenet Healthcare 0.99 6.88 - 85.6% 1.07
TNC Tennant Co 17.53 47.83 - 63.3% 17.82
VQ Venoco Inc. 2.05 24.38 - 91.6% 2.46
VM Virgin Mobile 0.60 9.42 - 93.6% 0.60
WNS WNS Holdings 6.31 20.00 - 68.5% 6.31
XRM Xerium Technologies 0.66 8.41 - 92.2% 0.70

AMEX

AZC Augusta Resources 0.47 6.95 - 93.2% 0.51
CXM Cardium Therapeutics 0.40 3.19 - 87.5% 0.53
CEP Constellation Energy 2.50 33.46 - 92.5% 2.52
KRU Crusader Energy 1.07 7.57 - 85.9% 1.27
DNE Dune Energy 0.12 2.30 - 94.8% 0.12
ERS Empire Resources 1.22 5.80 - 79.0% 1.35
GSX Gasco Energy 0.28 4.55 - 93.8% 0.28
HKN HKN Inc. 3.03 13.60 - 77.7% 3.50
ILE Isolagen 0.20 2.76 - 92.8% 0.22
KOG Kodiak Oil Gas 0.34 5.50 - 93.8% 0.36
RAE Rae Systems 0.50 2.89 - 82.7% 0.53
XPL Solitario Exploration 1.38 6.10 - 77.4% 1.44

NASDAQ

CIDM Access Integrated Tech 0.39 4.50 - 91.3% 0.39
ADLR Adolor 1.27 6.09 - 79.1% 1.61
AFFM Affirmative Insurance 0.85 10.58 - 92.0% 0.90
AFFY Affymax Inc. 8.75 23.38 - 62.6% 9.25
ALOG Analogic Corporation 26.36 76.93 - 65.7% 27.77
AREX Approach Resources 5.82 30.00 - 80.6% 5.87
BLTI Biolase Technology 0.82 4.64 - 82.3% 0.98
BBEP Breitburn Energy 5.25 30.36 - 82.7% 5.30
CALL Callwave 0.53 3.15 - 83.2% 0.53
CWST Casella Waste System 2.19 14.49 - 84.9% 2.40
CNVR Convera 0.20 3.89 - 94.9% 0.26
CREL Corel Corporation 2.87 11.49 - 75.0% 2.95
COSI Cosi Inc 0.20 3.24 - 93.8% 0.22
DXYN Dixie Group 1.57 9.55 - 83.6% 1.64
HILL Dot Hill Systems 0.45 4.12 - 89.1% 0.46
EROC Eagle Rock Energy 5.05 19.33 - 73.9% 5.14
FTWR Fibertower 0.15 2.45 - 93.9% 0.16
FSGI First Security Group 4.75 9.70 - 51.0% 4.75
FLML Flamel Technologies 3.60 14.40 - 75.0% 3.68
GEOY Geoeye Inc. 14.75 37.37 - 60.5% 15.02
GOOD Gladstone Commercial 7.93 18.50 - 57.1% 8.13
HYGS Hydrogenics 0.38 2.45 - 84.5% 0.38
ISSC Innovative Solutions 3.31 12.61 - 73.8% 3.52
KPPC Kapstone Paper 2.91 8.53 - 65.9% 2.99
KSW KSW Inc 1.79 7.04 - 74.6% 2.67
LUNA Luna Innovations Inc 2.00 9.90 - 79.8% 2.00
MSCS Msc.Software Corp 5.75 14.03 - 59.0% 6.14
NLST Netlist 0.24 2.33 - 89.7% 0.25
NOVC Novacea 0.89 3.40 - 73.8% 1.06
PHHM Palm Harbor Homes 3.70 13.15 - 71.9% 4.61
PDFS PDF Solutions 1.37 9.94 - 86.2% 1.53
PDLI PDL Biopharma Inc. 5.67 17.98 - 68.5% 6.75
PARD Poniard Pharmaceuticals 1.66 6.39 - 74.0% 1.73
QCCO QC Holdings Inc. 4.03 12.00 - 66.4% 4.04
RLOG Rand Logistics Inc. 3.41 6.45 - 47.1% 3.41
ROSG Rosetta Genomics 1.31 6.25 - 79.0% 1.39
SPRO Smartpros Ltd 2.25 6.19 - 63.7% 2.39
SUAI Specialty Underwrite 2.36 6.14 - 61.6% 2.42
SIVB SVB Financial Group 24.56 69.90 - 64.9% 25.06
TTWO Take-Two Interactive 8.15 27.95 - 70.8% 8.43
VNDA Vanda Pharmaceuticals 0.48 7.90 - 93.9% 0.53
VCGH VCG Holding 1.40 15.00 - 90.7% 1.42
VRAZ Veraz Networks 0.37 5.38 - 93.1% 0.38
ZIXI Zix 1.08 5.30 - 79.6% 1.11

OTCBB

ECTE Echo Therapeutics 0.23 2.15 - 89.3% 0.40
ENLU Enerlume Energy Mgmt 0.24 2.74 - 91.2% 0.26
EXOU Exousia Advanced Mat 0.25 1.01 - 75.2% 0.30
IBIN IBSG International 0.42 2.30 - 81.7% 0.42
LIVC Live Current Media I 0.35 3.48 - 89.9% 0.45
NFEI New Frontier Energy 0.35 1.38 - 74.6% 0.36
NIMU Non-Invasive Monitor 0.28 0.98 - 71.4% 0.34
OLEPF Oromin Explorations 0.31 4.10 - 92.3% 0.31
PPRG Patient Portal Tech 0.16 1.65 - 90.3% 0.29
TAMO Tamm Oil and Gas 0.80 3.14 - 74.5% 0.95


Jeffrey A. Hirsch, Editor
J. Taylor Brown, Director of Research

Stock Trader's Almanac® Almanac Investor Copyright © 2008 Wiley Periodicals, Inc., A Wiley Company.
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Pursuant to the provisions of Rule 206 (4) of the Investment Advisers Act of 1940, readers should recognize that not all recommendations made in the future will be profitable or will equal the performance of any recommendations referred to in this Email issue. The information presented in this Almanac Investor has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of the editor, its employees, or affiliated companies may, in some instances, include securities mentioned in this Almanac Investor Alert. Additional disclosures can be found at www.stocktradersalmanac.com.