Porter Stansberry’s

Investment Advisory October 2005; Volume VII; 3

How To Profit From The INSIDE THIS

MONTH’S ISSUE:
Real World Wide Web • Satisfying China’s Appetite

Here’s a safe and easy way to • Martha’s loss, your gain

• Everything’s gaining value,
make 50% this year except money
• GlaxoSmithKline’s bid
Thirty percent and still climbing… pays off

Our June issue titled “What’s Ugly About Martha Stewart” highlight-
• Probably the safest
ed the anticipated return of Martha Stewart Omnimedia’s celebrity commodities play out
founder. We said the stock was overvalued, and at the time, investors vehe- there.
mently disagreed with us. Shares in her company continued to climb.
The anticipation behind her new show, The Apprentice: Martha Stewart, had investors buying up MSO shares,
and the stock rose 22% in the month of August alone. In June, we said we believed this company would never be able
to justify a $1.3 billion market cap. Even if Martha’s new reality television show proved to be a smash hit, revenue flow-
ing into her publishing business wouldn’t produce very much in the way of profits.
Well, the show has flopped and investors are running.
It’s important to remember that the magazine publishing business is tough. It has low margins, and it’s the best
business MSO has, by far.
Publishing is a business we know very well, and Martha’s was not worth as much as the market believed.
We were patient, and our persistence paid off. We recommended that investors wait until Martha Stewart
Omnimedia (NYSE: MSO) was trading above $32 to sell short. It closed at $32.01 when you received our last issue.
It was time to short. And we certainly hope you did.
MSO just closed at $22.76. That represents a 29% gain in September alone. And we’re not through. The stock
should continue to fall. We think $15 per share represents a fair price at this point. If MSO hits the $15 mark, you
should cover your position. Use a 25% stop/loss to lock in your gains.

The Appeal of Shipping...

“I wish you would write about a tech stock!”

I’m starting to hear this more and more. The glamour of real estate seems to be losing its edge. People are ready to
move on. They’re looking for a new story, a new trend. And that makes perfect sense. It’s in our nature to evolve and
move on.
But if you pause for a moment, take a look around, and think about the world just a hundred years ago, what

1
comes to mind? Peel away the layers of technology, the The rise of shipping and the fortunes made from it,
Internet, the PC, the television… all the way down the go hand-in-hand with the rise of nations. The largest
line. What are you left with? empires in the world – Rome, Britain, the U.S. – came to
greatness thanks to this investment. Think about it. You
You have nations and their economies, war and com-
can have all the oil in the world, but it’s worthless if you
merce. These are the constants in the evolution of modern
can’t get it from point A to point B… if you can’t trans-
civilization.
port it from Kuwait to the U.S., or from Canada to let’s
In our Digital Age, in which every human desire is a say… China.
simple click and several nanoseconds away from instant
As long as the countries continue to trade, there will
gratification, something so elemental as commerce – trade
be ships on the open seas to service their needs.
between nations – seems terribly outdated and inefficient.
Everyone talks about China these days, and for good
But until we reach a stage of technological innova-
reason. China is in the midst of an industrial and informa-
tion in which the major staples of trade – things like corn,
tion revolution all at once. What took the United States
rice, soybeans, oil, in other words, basic commodities –
more than 150 years to achieve, the Chinese are accom-
can be disassembled, one molecule at a time, and instan-
plishing in a few decades. They need timber for housing,
taneously beamed to another location, our current means
steel for bridges, oil for the millions of new cars they now
for commerce will remain the most efficient.
use in lieu of bicycles.
This month’s recommendation extends from that
Most investors want a new trend, a new Internet, a
exact principle. This business connects the world in ways
new real estate bubble to cash in on. But most investors –
technology never will. Countries were built on its founda-
and most analysts too, for that matter – overlook the
tion. Some of the world’s greatest fortunes were amassed
biggest trend in the world right now – commodities – for
through its means.
the same reason they overlook shipping. They wonder
I’m talking about shipping, the transport of commodi- how can you find growth in something so basic as copper.
ties and finished goods from one port to another. One
This month’s company is every bit as potentially
might think, with lightning fast courier services, airplanes,
explosive as RFID technology or Voice Over Internet
FedEx, UPS – a whole slew of modern transport services –
Protocol (VOIP), even though it specializes in one of the
that using ships to transport cargo would be antiquated.
oldest trades known to mankind.
That’s the furthest thing from the truth.
You should expect upwards of a 50% return on your
Shipping still serves as the circulatory system of investment from this company, over the rest of this year.
global trade. Roughly 90% of the world’s exports are
transported by ship. For Once… Oil Is Not The Issue
I stumbled onto this opportunity in a roundabout
Published by Stansberry & Associates Investment Research way. A simple article detailing the effects of hurricanes and
high oil prices on businesses like Carnival Cruise Lines
Porter Stansberry, Founder George Rayburn, Group Publisher
started it all. The gist of the story goes something like this:
DESIGNERS: EDITORS:
Gabe Kushner, Webmaster Craig Walters, Managing Editor
Jack Lizmi, Online Marketing Meghan Shea, Associate Managing Editor
Stocks for major cruise line carriers tend to get ham-
Noa Coral, Graphic Designer Steve Sjuggerud, Senior Editor mered when oil prices rise. Many investors assume higher
Cadie Palmer, Graphic Designer Dave Lashmet, Editor Diligence
Dan Ferris, Editor Extreme Value energy prices drastically affect a cruise ship’s profitability.
CUSTOMER SERVICE: Graham Summers, Editor Inside Strategist This assumption certainly rings true for the airline indus-
Amita Chen, Director of Customer Service Rey Rivera, Editor Rebound Report
Michael Cottet, Director of Sales Jeff Clark, Editor S&A Short Report try. But it’s not necessarily the case for cruise ships. Fuel
Dan Ostrowski, Sales
prices only account for roughly 7%-8% of a liners operat-
105 W. Monument Street, Baltimore, MD 21201 888-261-2693 ing cost. So this got me thinking: Do investors make this
DISCLAIMER: This work is based on SEC filings, current events, interviews, corporate press releases and
what we've learned as financial journalists. It may contain errors and you shouldn't make any investment assumption for other large ships as well?
decision based solely on what you read here. It's your money and your responsibility. Stansberry and
Associates Investment Research expressly forbids its writers from having a financial interest in any security
they recommend to our subscribers. And all Stansberry & Associates Investment Research (and affiliated I found that the daily operating costs for the world’s
companies) employees and agents must wait 24 hours after an initial trade recommendation is published on
the Internet, or 72 hours after a direct mail publication is sent, before acting on that recommendation. largest shipping companies are small compared to the

2
daily rates they charge to move cargo. In other words,
shipping is a high margin business, particularly the oppor-
tunity I found this month. Its gross margins are 70% and
it trades for slightly less than book value.
The balance sheet carries loads of tangible assets. Net
income was up 36% from the first half of 2004, and that
was one of the greatest years in shipping’s history. Even
after a record setting year, the stock got hammered. But
it’s poised to make a serious comeback over the next few
months. Here’s the reason why.
Its share price fell thanks to a gross miscalculation.
Projections for a significant slowdown in the Chinese
economy proved false. This company’s success relies heavi-
ly on China’s growth. Consequently, investors abandoned
the stock earlier this year. The price is off 70% from its
52-week high. But the economic data coming out of
China looks stronger than ever. If anything, China’s econ-
omy will grow faster than the remarkable 9% it turned
out in 2004. And this stock will rebound significantly.
The 4Q has historically been shipping’s strongest, so
there’s no better time to get in than right now.
Spoon Feeding China….
The company services China’s insatiable appetite for
the world’s natural resources.
I’m sure you’ve read countless articles recounting
China’s voracious demand for crude oil. But China’s needs
certainly don’t stop there. Like countless industrial giants
before it, China has set out on a global hunt for dry bulk
commodities.
They’re consuming countless amounts of raw com-
modities. I’m talking about iron ore, coal, grain, and tim-
ber. The iron generates the steel used in their exploding
construction and automotive industries. The coal fuels the
nation’s insufficient power supply. Grain imports supple-
ment the countless fields of rice swallowed up through
industrial sprawl. And the timber will house and furnish
China’s rapidly emerging middle class.
China imported 115 million tons of iron ore in
2002, 148 million tons in 2003 and 208 million tons in
2004. They’re projected to import 246 million tons in
2005. Those imports amount to around one-third of the
world’s total iron ore production. According to a recent
report, China’s steel sector alone has added the equiva-
lent of the entire United States steel industry in the
past three years.
3
Imagine New York’s skyline, only bigger. That’s how
Shanghai will look in the next thirty years. Its population
already equals New York’s. And it’s only going to grow. The
Chinese are moving from the fields to the factories. Coastal
cities like Shanghai and Hong Kong lack the land for urban
sprawl we see here in the United States. In fact, Shanghai
sits in a marsh. So when you can’t build out, your only
option is to build up. And that requires lots of steel.
Coal imports soared 59 percent to nearly 10 million
tons in the first five months of this year alone. However,
energy supplies can’t keep pace with economic growth.
Scheduled blackouts are routine. Chinese factories are
forced to slash production because of power deficits. In
effect, energy shortages are inhibiting economic potential.
China’s insatiable thirst for power led to blackouts in 24
out of China’s 27 provinces in 2004.
Nuclear energy will solve this problem. China cur-
rently has eight new nuclear power plants slated for con-
struction this year alone. It plans to build an additional 44
nuclear facilities in the coming years. A raw commodity
fuels nuclear power as well. I’m talking about uranium.
China will begin importing massive amounts of this mate-
rial shortly. The world’s largest supplies lie in Australia and
Canada. So more ships will be required to service this crit-
ical need in the years to come.
Domestic grain supplies are running short. Demand
continues to outpace supply. Reserve stocks are being
depleted. And feeding 22% of the world’s population (1.3
billion people) with only 7% of the world’s arable land
demonstrates only part of the problem. China’s growing
middle class continues to consume more and more meat
as part of their daily diet. Raising livestock requires mas-
sive amounts of grain as feed. This will put more pressure
on domestic production. Insufficient water supplies will
also pose a significant problem. China’s now turning to
world markets to meet their domestic needs. Expect this
trend to continue.
Timber will be imported in large quantities as well.
China’s supply of natural forests is scarce. Every new
household will demand furniture. So China will continue
importing timber from as far away as Brazil, West Africa,
Indonesia, and Canada. And there’s only one way to trans-
port logs over the ocean.
There’s an easy way to profit from this booming
industry. And you don’t have to assume the great risks of
buying commodity futures. You don’t even have to invest
in Asian equities to take part. This stock trades on the
New York Stock Exchange. In fact, it’s the very first com-
pany of its class to be listed on a U.S. exchange.
Shipping: The Real Network That
Connects The World
Shipping can be broken down into three distinct cat-
egories: tankers, containers, and dry bulk. Tankers are best
known for moving the world’s oil supplies. They also
carry chemicals and liquefied natural gas. Containers are
used for finished products. Most everything we import
from China falls under this category. And dry bulk vessels
deliver the raw materials used in industrial production.
Most everything China imports falls under this category.
We’ve selected a dry bulk shipping company. Of the
three major shipping divisions, dry bulk receives the least
amount of attention. Right now, most experts concentrate
on oil. But over the last 18 months, the rates for dry bulk
carriers have soared. And we believe they’re well posi-
tioned to keep climbing.
Historically, dry bulk shipping rates increase
throughout the second half of the calendar year as indus-
tries restock inventories for next year’s
capacity. This year has been no differ-
ent. After an initial fall in the first six
months, shipping rates are on the rise
like we expected.
As I mentioned before, dry bulk
shippers deliver basic raw commodities
such as iron ore, coal, and grains. The
dry bulk markets are driven by the eco-
nomic growth in emerging markets,
specifically China and India. Southeast
Asia’s insatiable appetite for raw materi-
als, especially iron ore, continues to fuel
the demand for these shippers. As long
as these economies continue to grow,
the demand for ships to transport these goods will contin-
ue to grow as well.
Let me quickly mention a couple of reasons I chose
to analyze shipping dry bulk instead of oil. First, oil gets
all the attention these days. Every day I seem to find
another article analyzing crude oil and petroleum trans-
portation. I’m not suggesting their prospects aren’t look-
ing good. They may do very well over the next couple of
months. Demand for oil doesn’t seem to be waning any-
time soon. But I’m looking for something a little more
under the radar. I’m looking for a great stock that isn’t
4
covered by every major investment bank. That’s where I
think you’ll find the best bargain right now. That
approach led me to this month’s pick.
Shipping rates are tracked through a pricing gauge
known as the Baltic Dry Index. Experts consider the
Baltic Dry Index as the leading indicator of demand for
basic industrial commodities. Many also view the index, a
reflection of world trade, as a key barometer to the overall
health of the global economy. The index measures the cost
of shipping commodities such as coal, grain, iron ore, and
timber worldwide. As I’m sure you understand, China’s
surging industrial economy has been the direct catalyst
behind the robust demand for these resources. China’s
imports, particularly of iron ore used in steel production,
serve as the driving force behind the index’s price.
At the end of 2004, shipping rates were at an all-time
high. The index peaked at an astounding 6,208 points.
Take a look at the following chart to help put that number
in proper perspective. The BDI didn’t start its dramatic
takeoff until roughly July 2002. You’ll notice that’s roughly
not long after the end of the Asian Financial Crisis.
Baltic Dry Index
You’ll also notice that since then, the BDI has
dropped from its 2004 high to a two-year low of 1747
points on August 3. That’s roughly a 72% drop through
the first half of this year alone.
Many attribute this decline to the Chinese economy
cooling off. But that’s simply not the case. China’s econo-
my grew 9.5% in the first half of ’05. And there are no
indications of a major slowdown. It appears as if indica-
tions of a massive Chinese slowdown were over exaggerat-
ed. Speculators backed the wrong horse. Economists and
investors feared that inflation combined with an emerging
real estate bubble would spur Beijing into action. They
predicted that government officials would cool off the
Chinese economy. So far, that hasn’t been the case.
You’ll notice the BDI has rebounded quite well since
July. The doubters are changing their tune. The BDI will
make a significant push through the rest of this year, if
not beyond. The index has made significant gains since
hitting its low just a few months ago. This bodes well for
shipping companies. The market overreacted on news of
China slowing commodity imports. Consequently, the
stocks of dry bulk shipping companies got slammed. But
now these stocks are ready to make a significant 4Q
rebound. It’s time to get in.
I think I should point out that times of high demand
have produced layers of excess capacity. Shipping compa-
nies usually order too many new ships when rates are
high. And before you know it, empty ships are floating in
ports. This market overreaction eventually causes revenues
to fall and industry stock prices to recede. Historically, it’s
been an excess of supply of ships that’s spoiled the ship-
ping market, not a decrease in demand for shipping. So
assuming the growth of the world fleet doesn’t outpace
the growth in world trade, shipping companies will have
the competitive advantage of setting the market price.
That’s exactly what’s happening. The world’s shipping
fleet is projected to grow at an annual rate of 5% over the
next three years. World trade growth is well above that
number. It’s projected to maintain levels of approximately
8%. This bodes well for shipping companies.
This month’s recommendation is called Excel
Maritime Carriers Ltd. (NYSE: EXM). They exclusively
own and operate dry bulk carriers. They’re headquartered
in Greece (the home of maritime shipping), but they’re
traded here in the U.S. They are not new to the business.
In fact, they are the first pure dry bulk carrier to be listed
on a U.S. stock exchange. Excel listed on the American
Stock Exchange in 1998 with a fleet size of 5 vessels.
Since then, the business has continued to grow. With the
support of two separate stock issuances in December
2004 and March 2005, Excel has successfully expanded
their fleet to 18 ships. This allows the company to take
full advantage of the rapidly expanding dry bulk market.
The expansion also reduced the average age of the
fleet from 25 to 13.2 years. This is very significant for two
reasons. First, younger ships are less expensive to operate.
They run more efficiently and require less general mainte-
nance. Second, younger ships are more reliable.
5
It’s very important to have a dependable fleet in such
a time sensitive industry. Older ships (16 years or greater)
significantly increase the chances of breaking down en
route. Ships that aren’t moving aren’t making money for
your company. Furthermore, unreliable ships tarnish your
reputation among dry bulk producers. Suppliers need
steadfast companies to deliver their goods on time.
Imagine what would happen if the United States
Postal Service failed to promptly deliver your bills month
after month. You would naturally find another way to
complete the process. Now imagine a ship carrying over
$8 million dollars worth of iron ore calmly floating some-
where in the south Pacific while it waits for a part to be
flown in from the nearest port. Since the seller assumes
the costs for shipping the ore, you can imagine their insis-
tence that they secure a reliable carrier.
Shipping is a very capital-intensive business. Vessels
can cost upwards of $50 million a piece. Hence, the barri-
ers to entry in this business are quite high. But once you’re
in, the margins are remarkable. Companies like Excel
leverage the industry’s high entry barriers to profit hand-
somely. Just take a look at the difference between the costs
of running a ship compared to the price Excel charges its
customers. This is what makes the business so appealing.
The approximate cost of operating a dry bulk carrier
on a daily basis is somewhere between $4.5 and $5 thou-
sand dollars. The average daily rates Excel charges its cus-
tomers approximately $23.5 thousand dollars a day. That’s
a 79% profit margin.
As I mentioned before, daily shipping rates are
tracked through a pricing gauge known as the Baltic Dry
Index. Changes in the index will affect the daily rates
Excel can charge customers. Theoretically, a major crash in
the index could drive daily rates below the $5 thousand
dollar daily operating cost. But that’s very, very unlikely.
The BDI would have to fall to 888 points to reach Excel’s
breakeven point. The index currently stands at 3058, and
it’s in an up-trend. That means the index would have to
plummet nearly 70% before Excel would fail to record a
profit. In fact, the BDI has only momentarily reached
that level 4 times in the past fifteen years. That explains
why Excel, a company listed in 1998, has produced six
consecutive years of handsome profitability.
There are two main factors that could cause the BDI
to fall. Either demand for dry bulk commodities plummets
or a major increase in the supply of dry bulk vessels hits the
market. I can assure you that neither are going to happen.

Excel Maritime Break Even Point
The world’s shipping fleet is projected to grow at an
annual rate of 5% over the next three years. World trade
growth projections are well above that number. Analysts
anticipate world trade to maintain levels of approximately
8%. And China’s economy, the main driver behind dry
bulk prices, continues to steamroll forward. The IMF
projects China’s real GDP growth to average around 9
percent in 2005. Analysts project the BDI to perform well
in the second half of this year as China restocks its inven-
tories of iron, coal, and other commodities.
And it’s worth noting that shipping companies are not
totally exposed to fluctuations in the dry bulk market. They
typically split their fleet into two types of employment. We
refer to the first type as fixed employment or charter rev-
enue. Ships operating in this capacity are essentially rented
for a fixed price over a certain period of time. Those periods
tend to be either 12 or 24 months. On the upside, this
allows Excel to lock in a daily rate for assured future rev-
enues. This also hedges the potential risk against a major
drop in the BDI. On the downside, Excel can’t cash in if
the BDI shoots up while the ship is under contract.
We refer to the second type of employment as the
spot market. The spot market provides ships for immedi-
ate delivery. Assuming a ship is available, it can be imme-
diately purchased for the going market rate. This method
allows Excel to take full advantage of a bull market in dry
bulk shipping. Since operating costs are fixed (5K per
day), increases in the BDI shoot profit margins even high-
er for spot market ships.
Earlier this month, Excel successfully completed the
transition to be listed on the New York Stock Exchange
(NYSE). This is no small feat. The NYSE is the most
exclusive U.S. market. And Excel stands as the only sole
dry bulk carrier to call this home. This move will certainly
expand Excel’s profile and increase investor awareness.
6
I can assure you that Excel’s man-
agement is top notch. Their policies
are sound. They adhere to strict acqui-
sition criteria when purchasing new
vessels. They’re not reckless or greedy.
Just last Thursday, I heard Excel CEO
Christopher Georjakis reiterate his
company’s conviction. He stated that
Excel secures 30% of a vessel’s acquisi-
tion value in chartered revenue before
they even make the actual purchase.
That shows me management’s respon-
sible with their balance sheet.
Excel also stands apart from its
competition. First, its major competitors are private com-
panies based in Southeast Asia. So you could either find a
way to dip into privately-held Asian conglomerates, or you
can buy this company.
If you want to take advantage of the booming dry
bulk markets, this is pretty much your only option.
Other analysts are optimistic as well. Earnings per
share are projected to increase 25% in 2006 from $2.83 to
$3.78 per share.
Right now Excel is cheap. It’s trading at slightly
below book value with a price/earnings ratio of 5.74. As
earnings increase over the next 18 months, expect the
share price to follow suit.
Excel’s share price has dropped 43% from its high
earlier this year. Look for its stock to climb much further
in the months to come.
China will continue to grow, and the shipping busi-
ness will grow with it. I’m very optimistic on this compa-
ny’s outlook for the remainder of this year. Even if it
creeps back to half of its 52-week high from its current
price, you’ll be making a 40% return.
Buy shares of Excel Maritime Carriers Lt. (NYSE:
EXM, $15.05) up to $17. Use a 25% stop loss (not a
trailing stop loss) and be prepared to hold this posi-
tion for at least through the rest of the year. We’ll take
another serious look at the dry bulk markets at the
end of December and inform you of our analysis.
Rising Oil = Rising Inflation?
What are you paying at the pump these days?
Here in Baltimore, a gallon of regular unleaded costs
you a bit over three dollars. In fact, the cost of unleaded
rose 44% in the third quarter. Translated, it cost me money in 8 of the 14 years inflation exceeded 6%. This is
approximately $29.75 to fill up my four-door coupe three just something you may want to keep in mind. Watch oil
months ago. Today, a tank of gas runs approximately $43. prices and interest rates. No one’s ever sure what the Fed will
Rising gas prices are taking their toll. do next. But if history is any indicator, they’ve certainly
made access to money highly attainable and relatively cheap.
Oil prices affect much more than our monthly gas
bills. Higher prices have a huge impact on the economy as Graham notes two specific inflation fighters: REITs and
a whole. Every product you buy off a shelf (Wal-Mart, for TIPS. Of course, gold offers another potential hedge as well.
example) has to come from somewhere. Meaning, it has
to be shipped (sticking with this issue’s theme). How do Portfolio Notes:
we ship the majority of goods across this country? You
guessed it. We ship by truck. Higher gas prices drive the We stopped out of QLT (Nasdaq: QLTI) in early
trucking industry’s costs up. Way up. August when the share price hit $8.12. Trials of drug
Visudyne plus photodynamic therapy failed to reach its
Unlike ships, fuel accounts for 25% of the cost of two-year goal in late-stage trials involving age-related mac-
running a truck. Consequently, those costs get passed ular degeneration. Furthermore, growing competition gave
onto you, the consumer. us concern that QLT would lose market share. This set-
back was followed by CEO Paul Hastings’ resignation this
I say this for one reason. Moderate inflation may
week over differences with the board of directors.
become more of an issue in the months ahead.
On a brighter note, shares of ID Biomedical
“In inflation, everything gets more valuable except
(Nasdaq: IDBE) jumped 14.7% this month. The stock
money.” Our economy has produced low to moderate
price took off following Britain’s GlaxoSmithKline Plc
inflation over the past twenty years. Most people never
(LSE: GSK.L) bid to buy ID Biomedical for around $1.4
think about inflation. They believe inflation rates work
billion. The offer, C$35 for each ID Biomedical share,
like interest rates – meaning, they’re fixed and utterly con-
represented a 13% premium at the time of the announce-
trolled by the Federal Reserve. They know it’s there, and
ment. We’ve done the valuation, and the offer is fair.
“they know” it’s not serious. As one colleague put it: “It’s
not something that could ultimately destroy me.” We think this is a good deal for IDBE shareholders.
GlaxoSmithKline has both the experience and presence to
I agree. It won’t destroy you. But if it does occur, it
lead IDBE through the FDA process for its many promising
won’t be entirely pleasant either.
vaccines. The FDA approval process is something very diffi-
There are signs it’s already beginning. The core index, cult to negotiate. You need an experienced bigger brother to
which excludes food and energy items, rose an unexpectedly take you through it. That’s exactly what GSK offers. Shares
large 0.4%, the biggest increase since a 1.5% climb in of “No Risk” pick Nokia (NYSE: NOK) continue to rise.
October 2004. It won’t be long before the mainstream The share price jumped another 6.8% this month.
press pays the issue more attention.
But for now, lets focus solely on oil. Oil prices alone
are a great indicator of inflation. This fact has proven
true time and time again. Over the past thirty years, the
correlation between oil prices and the inflation rate have
only experienced one major separation. That took place
between 1974 and 1975. As the chart to the right indi-
cates, the price of oil has continued to rise over the past
three years without a major spike in inflation. It’s only a
matter of time before inflation catches up. Based on oil
prices alone (we’re excluding the China factor here) the
inflation rate could reach 8%. The current inflation rate
is 3.17%. I don’t think that will happen, but a moderate
rise over time wouldn’t surprise me in the least.
Benjamin Graham notes that the stock market lost

7
 Good Investing,
Christopher Hancock with Porter Stansberry
P.S. As you may have already noticed, Christopher
Hancock is the primary author of this month’s PSI
issue. Christopher has been working very closely with
Porter for some time, and is also the editor of the Asia
Strategy Report.
In future issues, he will bring his considerable busi-
ness experience and unique outlook to PSI.

Porter Stansberry’s Model Portfolio

Prices as of October 5, 2005
Ref.
“No Risk” Symbol Date Ref. Price Recent Dividend Description Action P/L
Exelon EXC Oct-02 $21.50 $51.48 $3.45 Most productive nuc. Hold 155%
Raytheon RTN Nov-02 $29.00 $36.79 $2.46 Civil aviation Hold 35%
Nokia NOK Jul-04 $14.65 $16.72 Profitable telecom Buy 14%
Digital Insight DGIN Oct-04 $13.75 $26.23 Online banking Hold 91%
ProQuest PQE Jan-05 $28.80 $36.52 $0.20 Digital publisher Buy 27%
Valhi VHI Mar-05 $16.20 $17.55 Titanium holding Co. Buy 10%
USG Corp USG Aug-05 $51.51 $66.25 Asbestos settlement Buy 29%
RadioShack RSH Sep-05 $24.59 $24.22 $0.45 Huge buybacks Buy -2%
The “Next Boom”
Walt Disney DIS Oct-03 $21.50 $24.23 Moviebeam Buy 15%
Convergys CVG Apr-04 $15.71 $14.00 Global outsourcing Buy -11%
Journal Register** JRC May-05 $16.31 $15.36 $0.02 Compounding Machine Buy -6%
Malaysia ETF EWM Aug-05 $7.49 $7.25 East Asia rebound Buy -3%
Excel Maritime EXM Oct-05 $15.05 $15.05 Dry bulk shipping Buy NEW
Medical Technology
Celgene CELG Aug-03 $18.00 $51.51 Thalidomide Hold 186%
ID Biomedical IDBE May-04 $9.40 $29.29 Vaccines Hold 212%
Antigenics* AGEN Nov-04 $6.52 $5.28 Cancer vaccines Buy -19%
Elan ELN Jun-05 $7.50 $8.21 Return of Tysabri Buy 9%
QLT QLTI Jul-05 $10.42 $7.52 Prostate therapy Stopped Out -28%
"Victim" Stocks
Martha Stewart Omn. MSO Jun-05 $31.69 $22.76 Overhyped publishing Sell Short 29%

Current PSIA Average: 41.3%

2005 S&P 500 -1.2%

Please note: our investment philosophy requires limiting risk through the use of stop losses and trailing stop losses. Unless otherwise noted in the
text, all "No Risk" recommendations use a 25% STOP LOSS. All other recommendations will follow a 25% TRAILING STOP LOSS strategy.
NEVER ENTER YOUR STOPS INTO THE MARKET. KEEP SUCH INFORMATION PRIVATE.
Prices as of market close October 5, 2005. I want to make a quick note about our recent prices. I’m using the closing price of the day a stock is recommend-
ed. I want to be clear here: this portfolio is not intended to represent the exact prices at which you could get in or out of a stock, rather, it represents the
value of our insights at the time our material is published.
PSI's Model Portfolio does not represent any actual investment result. Our reference price represents only the price of our recommended securities
at the time we wrote the recommendation. Our sell or "stopped out" price represents the closing price at the time a reasonable reader would have
had the opportunity to sell – typically the day after such a recommendation is given.
* SPECIAL SITUATION: Buy Antigenics below $10, no stop loss. Keep your position size small -- no more than 2% of your portfolio. If the price increases
by more than 100% before Oncophage results are released to the public, bank half of your shares.
** SPECIAL SITUATION: Because of its heavy debt load, Journal Register cannot be considered a "No Risk" stock, however its business model is attractive
enough to warrant a wider stop loss. Use a 25% STOP LOSS -- not a 25% trailing stop loss -- on this security.

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