Minutes

AAII Orange County Chapter

Monthly Meeting, July 22, 2006

Oasis Senior Center

800 Marguerite

Corona del Mar, CA 92625

Reported by: Ed Sharman

Chapter President Bob Welge brought the meeting to order at 9:10 am. This was the first time for AAII in the new, larger, air-conditioned meeting room – greatly improved ambiance! Beginning with preliminary announcements, Bob drew members’ attention to the availability of Chapter contact information and handouts for today’s talk on the back table, and of coffee at the 10 o’clock break. Bob noted that Chapter elections are coming up on November 4, 2006, and displayed ballots listing the announced candidates. So far there are candidates for all offices but the SIG Leader – additional candidates, especially for SIG Leader, are welcome!

Bob next announced the schedule of future chapter meetings. On August 26, 2006, Jim Bittman will speak on How to Fit Options into Your Investing Activities. Jim, author of two books and presently Senior Instructor with the Chicago Board Options Exchange, is coming all the way from Chicago for this presentation. Joe Burns, National Investors’ Business Daily Education Expert, will speak at the Chapter’s September 30, 2006 meeting. Bob Welge will hold a SIG on Economic Indicators at his office in Fountain Valley on October 14, 2006. Future events and other Orange County Chapter information can be viewed on Bob’s website www.robertsgeneral.com, which has recently been redesigned (and thereby hopefully improved!).

Bob then introduced today’s speaker, Bud Leedom, publisher of the California Stock Report, and his presentation Spotting the Undisclosed Trends of Institutional Investors to Uncover California’s Future Growth Stocks. He began by presenting a number of keys to successful investing:

· Was your trade profitable?

· Using both fundamental and technical tools, create a universe of stocks for potential investment.

· Contact companies to create a Focus List (‘backyard investing’)

· Select stocks for investment based on detecting institutional investor activity (‘institutional bias’)

· Okay to add other ‘personal interest’ stocks

Bud discussed a five-step fundamental analysis formula (asserted to be available at marketguide.com) for individual stock selection:

· 3-5 year revenue history

· 3-5 year earnings per share

· history of meeting or beating earnings-per-share estimates

· history of raising earnings estimates

· current quarter performance

· compute a 0-5 total score of the above by assigning 0=good and 1=poor

Bud believes institutional trading activity may be predictive of future price movements because 1) Institutions have superior access to information, 2) Institutions typically act in unison, and therefore 3) Institutions move stocks. Bud introduced a proprietary indicator of institutional investing activity for individual stocks. Using his indicator, he presented examples of stock accumulation and subsequent price appreciation on the one hand – and examples of stock distribution and subsequent price declines on the other. His indicator uses two trends of trading volume – a short term ‘green’ line that responds more quickly to volume changes, and a longer term ‘blue’ line that is better at defining more persistent trends in volume. Bud’s indicator lines reminded me of moving averages of on-balance-volume. But, as was pointed out by at least one member of the audience, they could move in mysterious ways: at times, the ‘green’ line would appear to lag, while the ‘blue’ line would ‘forge ahead’ to more quickly respond to changes in volume. This behavior could not be expected from simple moving averages.

Bud wound up by presenting ten stock ‘picks,’ not all California-based companies, despite the name of his advisory service.

In summary, Bud has developed a proprietary volume-based indicator of institutional trading activity which he uses to predict future price movements of individual stocks (no guarantees, of course). He makes this indicator available to subscribers of his californiastocks.com advisory service.

As valued perks, Bud invited members of the audience to see him after the meeting for complementary tickets to the 2006 Southern California Investors Conference, to be held August 11, 2006 at the Hyatt Regency in Irvine and for a discount subscription to his California Stock Report.

Following the conclusion of Bud’s talk, Bob invited a limited number of 7-10 members to join Bud Leedom for lunch at Cocos, and then adjourned the meeting at 11am.