From: kanth@andersen.uucp (Kanth Miriyala)
Subject: PRAGATI - November 1992
Organization: Northwestern University, Evanston, Illinois, USA
Date: Tue, 10 Nov 1992 18:29:39 GMT


PRAGATI - November 1992 issue		- BY MIRIYALAS

CONTENTS
	- INTRODUCTION
	- UPDATES
	- RECOMMENDATIONS FOR THE MONTH
	- GENERAL INFORMATION 
	(This information is mainly meant for the 
	new reader. Regular readers of PRAGATI may 
	safely skip it.)
	- DISCLAIMER

INTRODUCTION

Welcome to the November isuue of Pragati. Every month we are seeing a
continual increase in the number of our subscribers. Thanks for your
support. 

In the past few months we have received considerable feedback from our
subscribers. In response to their comments, we have refocused  Pragati to
meet the following two objectives:
a) to enable a beginner to  understand the stock market and start investing in
it, and 
b) to  evolve a strategy that will help maximize profits for our
subscribers. 

To meet the first objective, we will be including educational material with
each  issue of Pragati starting from December 1992. This material will
cover topics including basics of stocks, opening accounts with a brokerage,
reading stock tables, reading  quarterly and annual reports, selecting
stocks, buying and selling stocks.

To meet the second objective we have decided to make the following changes
to Pragati. 
a) Have a set of cardinal rules that we will follow for buying and selling
stokcs.
b) In Pragati we will try to track all important events pertaining to each
stock recommended from now on,  until the stock gets sold according to the 
rules that we have layed out. However, if you want us to track any other of
our previous recommended stock please let us know. 

THE RULES OF THE GAME

Here are two fundamental rules for buying and selling stcks.

1) Never buy a falling stock. 
2) Never sell a rising stock.

Never buy a falling stock
-------------------------

Suppose a stock at $7 has been falling and it is now at $6. The
fundamentals of the stock are good and we think that the stock price will
go up. However, we  have no way of knowing when the stock will start rising
until we actually see it rising. If we bought this stock at $6 it might
continue its downward movement and fall all the way to $4 before rising.
With $6000 we could have only bought 1000 shares at $6, but we can buy 
1500 shares at $4 for the same amount! Therefore, to minimize the chances of
the stock price falling after we buy it, we wait till we observe a definite
upward trend in the stock price. In trying to determine a definite upward
movement it is important to avoid  the meaningless swings.  For example the
pattern of downward movement for a stock could be 6  5.75  5.88  5.63  5.75
5.88 5.75 5.5 ...  Although the general trend is downwards in this pattern,
the  stock did move upwards from 5.75 to 5.88 at one point.  This slight
upward movement is called a meaningless fluctuation.

So, how do we catch it on the rise? If the meaningless fluctuation is about
5%, and the stock price has risen from $5.75 to $6.   We are still not
convinced that the definite upward  movement has started. However, if the
price rises from $5.75 to $6.25 we have much greater confidence  in the
upward trend. Here is a practical way of implementing this concept. 
If the stock price is $6, and  we believe that  if the stock price hits
$6.50 it is a definite upward trend. So, we call our broker and place
a limit buy order for $6.50. If the price rises and we buy it at $6.50 we
are happy. If it falls to $5 we simply move our limit buy order to $5.44.

Never sell a rising stock
-------------------------

Selling a stock is symmetrical to buying a stock. If the stock 
price is rising there is no point in selling and curtailing
further profits. So, use a stop-loss order to protect profits 
or limit losses. For instance, if we buy a stock for $6 and its
fluctuation is about 5%, we might want to place a stop loss order 
about 7-9% below the buying price; e.g., $5.50. So if the price
suddenly falls due to some unexpected bad news, we get sold out
and our losses are limited to less than 10% of the invested money. 
On the other hand, if the price rises, say to $7, then we rise
our stop-loss order with our broker to say $6.40 or so. 


Note that there are no guarantees in the stock market. 
Therefore the best idea is to choose the stocks you 
think are the best and take steps to minimize losses and to 
maximize profits. Use limit buy orders to buy on the rise 
and stop loss orders to sell on the downside. 

For NASDAQ stocks it may not be possible to place limit orders
or stop loss orders. Sometimes if the volume of trading is low, 
or if the spread is high, or if the market makers are unscrupulous, 
your limit order or stop loss order may be unnecesarily executed
(or skipped). So it is safer to maintain a stop-loss of your own 
and to call your broker and execute a sell order if your 
stop-loss price is reached. 


In theory (rarely in practice), a stop-loss may be
skipped even for an NYSE or AMEX stock. Suppose the stock price 
plummets from $10 to $5 on news that the company has filed for 
Chapter 11, even if your stop loss is at $8.50 there may not be 
any buyers at that price! Fortunately, by using sound 
fundamental principles, one can usually choose a company that is 
good and minimize downside risks. 

RECOMMENDATIONS FOR THE MONTH

We have two new recommendations: Coachmen Industries and Audiovox.


Name of the Company: Coachmen Industries 
Symbol: COA 
Exchange: NYSE 
Can be followed in: IBD, WSJ
Phone: (219) 262-0123
Address: 601 East Beardway Ave., (PO Box 3300) Elkhart, IN 46514  
Recommended Price: 9.88 - 10 
Recent Price: Rising from 8.88 to 10.5 in past two weeks - Closed on Monday
at 10.13
52 wk Hi Lo: (4.13, 10.5)
Description of work: 

The company is a leading manufacturer of recreational vehicles, 
ambulances, and manufactured housing. The company manufactures
and sells a wide array of recreational vehicles including
class A motorhomes, mini motorhomes, travel trailers, 
fifth-wheel trailers, camping trailers, truck campers 
and van campters. COA's recreational vehicles are sold
under the Coachmen, Viking, Shasta, sportscoach, 
Travelmaster, Clarion, Dearborn, Jimmy, Greenbriar, Saratoga, 
and Luxury brand names. Vehicles are sold through more than
950  independent and seven company-owned dealers throughout 
the US. 

All American Homes, Inc., the company's housing division with 
locations in Indiana and Iowa, supplies factory-produced 
modular housing to builders and developers. In April 1992,
the management said that the business conditions appeared favorable
for the forseeable future due to pent-up demand which had been building
for the past 3 years of poor sales, relatively low fuel prices, 
and low interest rates. COA at that time also expected 
the performance of its housing division to pickup with increase
in housing starts.  

Reasons:

- Sales increased 29% and earnings improved dramatically
for the third quarter ended September 30, 1992.
- The earnings for the third quarter ended September 30 are as follows:

					1992           1991
	Revenues		        81.3 M	       62.8 M 
	Net Earnings		        3.5 M          -1.9 M	
	EPS			        .50            -.27 	
	Avg. Shares			7.2 M           7.2 M 

- It has a Long Term Debt of $6.7 M. 
- The chairman said that they were optimistic about  the 
Company's future due to low interest rates, improved sales, 
and low fuel rates. He also felt that they were well positioned 
to take advantage of the opportunities that were likely to 
come with an improved economy. 

Name of the Company: Audiovox Corporation 
Symbol: VOX 
Exchange: AMEX 
Can be followed in: WSJ, IBD 
Phone: (516) 231-7750
Address: Audiovox Corporation, 150 Marcus Blvd., Hauppauge, New York 11788 
Recommended Price:  $5.13 to $5.25
Recent Price: In the past two weeks it has risen from $4.25 to $5.50 -
Closed on Monday at 5.13 
52 wk Hi Lo: (1.38, 5.63)
Description of work:  

Audiovox Corporation, together with its operating subsidiaries, 
markets and supplies under its own name or tradenames a diverse line of
aftermarket products which include automotive sound equipment, cellular
telephones, automotive accessories and consumer electronics products. Such
products are designed primarily for installation in cars, trucks and vans
after they have left the factory. 

The Company's products are sold through a national network covering the US
and Canada. Sales are made direcly and through approximately 550
independent distributors to new car dealers, cellular telephone accounts,
regional Bell Operating Companies, mass merchandisers, catalogue showrooms,
original equipment manufacturers, military systems and retailers. 


Reasons: 
- The results for the  quarter ending August 31, 1992 are as follows:


			1992           1991
        Net Sales       84.7 M         86.8 M
	Net Earnings    2.2 M	       -565 K
	EPS		.25	       -0.6	
	Avg. Shares	9.0 M           9.0 M 

Please note that there was an extraordinary item of 4 cents per share due
to tax loss carryforward.
Although the Revenues decreased cost cutting have resulted in increased
income. 

- Due to cost cutting measures we hope the positive results to continue. 


GENERAL INFORMATION

The abbreviations IBD and WSJ stand for The Investor's 
Business Daily and The Wall Street Journal.
We use ``K'' for thousands and ``M'' for millions. 

For each company that we recommend, we will give the
following information:



Name of the Company
Symbol
Exchange
Can be followed in
Phone
Address
Recommended Price
Recent Price
52 wk Hi Lo
Description of work
Reasons

We strongly urge a person interested in investing in a 
recommended stock to research the stock before investing in 
it. Also, it is extremely crucial to buy as close
to the recommendation price as possible. In the past
the stocks that we recommended (to ourselves) have 
gone up by 30% or more from the recommended price
in about 3 months or so. We hope (but cannot guarantee) 
that this will continue. 

If any of the stocks that you own effects or 
decides to effect a reverse split, SELL immediately. 
Reverse splits should be avoided like PLAGUE.

We only recommend low price stocks with great potential 
to move up. So these recommendations are mainly for the
small investor. Most of the stocks we recommend are below 
$3. 





DISCLAIMER: There is no guarantee that stocks recommended here
will do well. There is no guarantee that the information on 
which this article was based is correct. There is no 
guarantee that the information in this article is 
correct. Also, the companies where we work have nothing whatsoever to do 
with this newsletter.
The readers should not assume that recommendations 
in future will be as profitable as previous 
recommendations mentioned here. The security portfolio
of Miriyalas may include those mentioned in this issue
and may from time to time increase or decrease interest
in such positions.
Any opinions expressed here are statements of our judgment
as of the date of issue and are subject 
to change without notice.


SUBSCRIPTION INFORMATION: PRAGATI is issued on a monthly basis.
It usually comes out on a weekend. PRAGATI only gives BUY
recommendations, but none other (i.e., it does not give
sell or hold recommendations for example). 

If you want to receive PRAGATI every month by e-mail, 
please send your e-mail address to kanth@andersen.com
with simply the name PRAGATI in the header.
Newsgroups: misc.invest